Quarterly report pursuant to sections 13 or 15(d)

Stock Based Compensation (Tables)

Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Assumptions used to value the options granted

The Company estimates fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield. The fair value of the options granted during the nine months ended September 30, 2013 and 2012 and the related assumptions used in the Black-Scholes option model used to value the options granted were as follows:

	Outside Director Stock Options Granted
	September 30, 2013			September 30, 2012
Weighted-average fair value per share	$	1.96		$	3.55
Risk -free interest rate ⁽¹⁾		2.92	%		1.75	%
Expected volatility of stock ⁽²⁾		58.88	%		56.74	%
Dividend yield	None			None
Expected option life ⁽³⁾	10.0 years			10.0 years

⁽¹⁾

The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date over the expected term of the option.

⁽²⁾

The expected volatility is based on historical volatility from our traded Common Stock over the expected term of the option.

⁽³⁾

The expected option life is based on historical exercises and post-vesting data.

Stock-based compensation recognized for employee and director stock options

The following table summarizes stock-based compensation recognized for the three and nine months ended September 30, 2013 and 2012 for our employee and director stock options:

	Three Months Ended				Nine Months Ended
Stock Options	September 30,				September 30,
	2013		2012		2013		2012
Employee Stock Options	$	22,000	$	34,000	$	58,000	$	106,000
Director Stock Options		4,000		4,000		21,000		29,000
Total	$	26,000	$	38,000	$	79,000	$	135,000

- Definition

Tabular disclosure of the allocation of equity-based compensation costs to a given line item on the balance sheet and income statement for the period. This may include the reporting line for the costs and the amount capitalized and expensed.

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