NOTE 13.  STOCK-BASED COMPENSATION PLAN

 

Under the Company’s 2005 Stock Incentive Plan (the “2005 Plan”), the Board of Directors has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries.  The 2005 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units.  The aggregate number of shares of common stock that may be granted through awards under the 2005 Plan to any employee in any calendar year may not exceed 500 shares.  The 2005 Plan will continue in effect until June 2015 unless terminated sooner.  As of December 31, 2013, the number of shares authorized and reserved for issuance under the 2005 Plan is 5,732, subject to automatic annual increase equal to 4% of the total number of shares of the Company’s outstanding common stock.

 

Options Granted:

 

During the year ended December 31, 2013, the Company issued 628 stock options, under the Company’s 2005 Plan, to directors and employees of the Company.  Of the 628 options issued, 40 will vest in four equal consecutive quarterly tranches from the date of grant.  Five options granted will vest in three installments as follows: Two shall vest on March 31, 2015 and the remaining shares shall vest equally on March 31, 2016 and March 31, 2017.  98 options granted will vest in five installments as follows: 14 shares shall vest on December 31, 2014, 27 shares shall vest on December 31, 2015, 31 shares shall vest on December 31, 2016, 19 shares shall vest on December 31, 2017, and 7 shares shall vest on December 31, 2018.  The remaining 485 vested immediately.

 

For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

 

 

 

 

 

 

 

 

Using these assumptions, the fair value of the stock options granted during the years ended December 31, 2013, 2012, and 2011 was $2,303, $3,011, and $987, respectively, which will be amortized over the vesting period of the options.

 

Stock Awards:

 

During the year ended December  31, 2013, the Company awarded three shares of common stock to an employee.  At the date the awards were issued the common stock was valued at $7.85 per share.

 

Restricted Stock Awards:

 

During the year ended December  31, 2013, the Company awarded 90 shares of restricted stock to employees.  The vesting of 72 shares is contingent on meeting various service conditions and sales targets, which were deemed probable at the date of grant and as of December 31, 2013.   The remaining 18 shares vest in two to five years assuming the employees remain employed through the vesting date.  The fair value of the restricted stock awards granted during the year ended December 31, 2013 was $936, which is equal to the market value of the underlying shares on the date of grant.  The fair value will be recognized over the vesting period of two to five years.  If the service conditions and sales targets are not met, any recognized compensation cost will be reversed.

 

On January 17, 2011, the Company granted to Mr. Kanders a seven-year restricted stock award of 250 shares of common stock pursuant to the Company’s 2005 Plan, which award will vest on the date the Fair Market Value (as defined in the 2005 Plan) of the Company’s common stock shall have equaled or exceeded $14.00 per share for 20 consecutive trading days.  For computing the fair value of the 250 seven-year restricted stock-based awards, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the following assumptions:

 

 

 

 

Using these assumptions, the fair value of the restricted stock awards granted during the year ended December 31, 2011 was $1,567, which was amortized through December 31, 2012.

 

 

 

 

 

The total non-cash stock compensation expense related to stock options and restricted stock awards recorded by the Company was as follows:

 

 

 

 

The Company classified $221 and $2,789 of stock-based compensation costs as cost of sales and selling, general and administrative expense during the year ended December 31, 2013, respectively.   A summary of changes in outstanding options and restricted stock awards during the year ended December 31, 2013 is as follows:

 

 

 

The following table summarizes the exercise price range, weighted average exercise price, and remaining contractual lives by significant ranges for options outstanding and exercisable as of December 31, 2013:

 

 

 

The fair value of unvested restricted stock awards is determined based on the market price of our shares of common stock on the grant date.  As of December 31, 2013, there were 944 unvested stock options and unrecognized compensation cost of $2,843 related to unvested stock options, as well as 340 unvested restricted stock awards and unrecognized compensation cost of $854 related to unvested restricted stock awards.