9.	Share-based Compensation

Stock award compensation expense is recognized on a graded vesting basis over the requisite service period of the award, which is the vesting term. For stock awards which vest more quickly than a straight-line basis, additional expense is taken in the early year(s) to ensure the expense is commensurate with the vesting schedule.

Stock Incentive Plan

The Company has various stock option and stock-based incentive plans and agreements whereby stock options and restricted stock awards were made available to certain employees, directors and others. Stock options were granted at, or above, fair market value and generally expire in three to ten years from the grant date. Restricted stock awards were granted at the fair market value on the date of grant and generally become exercisable over a period of up to four years.

In May 2014, the Company adopted the 2014 Stock Incentive Plan (the “2014 Plan”) based on shareholder approval at the Company’s 2014 Annual Shareholder Meeting. The 2014 Plan provides for the issuance of a maximum of 2.0 million shares of common stock in connection with the grant of stock-based or stock-denominated awards.

In 2007, the Company adopted the 2007 Stock Incentive Plan (the “Plan”) providing for the issuance of a maximum of 2.0 million shares of common stock in connection with the grant of stock-based or stock-denominated awards. On May 27, 2011, the Company’s stockholders approved the reservation of an additional 3.0 million shares to be issued under the Plan.

 

As of December 31, 2014, a total of 1.5 million common shares remained available for future grant under the 2014 Plan.

During the years ended December 31, 2014 and 2013, the Company granted restricted shares and stock options under the Plan and 2014 Plan.

Restricted Shares

During the years ended December 31, 2014 and 2013, the Company granted 0.0 million and 0.2 million restricted shares, which vests over a three or four year period only if the participants remain employed by the Company through the vesting date. Restricted shares entitle the holder to receive, upon meeting certain vesting criteria, a specified number of shares of the Company’s common stock. Stock-based compensation cost of restricted shares is measured by the market value of the Company’s common stock on the date of grant. Compensation cost associated with certain restricted share grants also takes into account market conditions in its measurement. The following table summarizes restricted share activity for the years ended December 31:

 

		Number of Shares (In thousands)				Weighted average grant date fair value
Unvested at December 31, 2012			568				1.87
Granted			212				1.73
Vested			(168	)			2.00
Vested shares forgone to satisfy minimum statutory withholding			(55	)			1.82
Forfeitures			(103	)			1.65
Unvested at December 31, 2013			454				1.82
Granted			—				—
Vested			(128	)			1.39
Vested shares forgone to satisfy minimum statutory withholding			(66	)			2.68
Forfeitures			(4	)			2.03
Unvested at December 31, 2014			256			$	1.78

As of December 31, 2014 there was $0.1 million of pre-tax total unrecognized compensation cost related to non-vested restricted shares, which will be adjusted for future forfeitures, if any. The Company expects to recognize such cost over the period ending in 2017.

Stock Options

The Company calculates the fair value of stock option awards using the Black-Scholes option pricing model, which incorporates various assumptions including volatility, expected term, risk-free interest rates and dividend yields. The expected volatility assumption is based on historical volatility of the Company’s common stock over the most recent period commensurate with the expected life of the stock option granted. The Company uses historical volatility because management believes such volatility is representative of prospective trends. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of the stock option awarded. The Company determines expected lives as the average of the vesting period and the contractual period. Dividend yields have not been a factor in determining fair value of stock options granted as the Company has never issued cash dividends and does not anticipate issuing cash dividends in the future.

 

During the year ended December 31, 2014, the Company granted 0.2 million stock options, of which 0.2 million were issued to Board members, at exercise prices which were a preceding five-day average price on the date of grant and a vesting period of 12-months. During the year ended December 31, 2013, the Company granted 0.2 million stock options, of which 0.1 million were issued to Board members, at exercise prices which were a preceding five-day average price on the date of grant and a vesting period of 12-months. In addition, during 2013, the Company issued 0.8 million inducement stock options outside the 2007 Plan. The following table details the various stock option and inducement stock option activity for the years ended December 31:

 

2007 Plan (Options)		Number of Authorized Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in Years)				Aggregate Intrinsic Value
Outstanding at December 31, 2012			1,375,000			$	2.21				3.62			$	—	(a)
Granted			245,000				1.52				2.69
Exercised			—				—
Forfeited			(26,666	)			2.13
Outstanding at December 31, 2013			1,593,334			$	2.11				3.09			$	53,083
Granted			245,000				2.83				1.39
Exercised			(212,949	)			2.18
Exercised shares forgone to satisfy minimum statutory withholding			(38,029	)
Forfeited			(992,356	)			2.22
Outstanding at December 31, 2014			595,000			$	2.19				1.51			$	571,717
Exercisable at December 31, 2014			397,084			$	2.03

 

(a)	No options were in-the-money as of December 31, 2012.

Aggregate Intrinsic Value = Excess of market value at December 31 over the option exercise price of all in-the-money stock options outstanding at December 31.

 

2014 Plan (Options)		Number of Authorized Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in Years)				Aggregate Intrinsic Value
Outstanding at December 31, 2013			—			$	—				—			$	—
Granted			530,000				2.69				5.00
Exercised			—
Exercised shares forgone to satisfy minimum statutory withholding			—
Forfeited			—
Outstanding at December 31, 2014			530,000			$	2.69				5.00			$	243,800
Exercisable at December 31, 2014			—			$	—

 

Aggregate Intrinsic Value = Excess of market value at December 31 over the option exercise price of all in-the-money stock options outstanding at December 31.

 

Inducement Options		Number of  Authorized Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in Years)				Aggregate Intrinsic Value
Outstanding at December 31, 2012			—			$	—				—			$	—
Granted			800,000				2.25				4.87				—
Exercised			—				—				—				—
Forfeited			—				—				—				—
Outstanding at December 31, 2013			800,000			$	2.25				4.87			$	156,000
Granted			—				—				—				—
Exercised			—				—				—				—
Forfeited			—				—				—				—
Outstanding at December 31, 2014			800,000			$	2.25				3.89			$	720,000
Exercisable at December 31, 2014			339,583			$	2.27

The following table summarizes information about stock options outstanding at December 31, 2014:

 

2007 Plan (Options):		Options Outstanding												Options Exercisable
Range of Exercise Prices		Number of Shares Outstanding				Weighted- Average Remaining Contractual Life				Weighted- Average Exercise Price				Number of Shares Exercisable				Weighted- Average Exercise Price
$1.50 - $1.75			—				2.50			$	—				171,667			$	1.52
$1.76 - $2.00			—				2.04				—				67,500				1.63
$2.01 - $3.00			595,000				1.40				2.19				157,917				2.63
Outstanding at December 31, 2014			595,000				1.51			$	2.19				397,084			$	2.03

 

2014 Plan (Options):		Options Outstanding												Options Exercisable
Range of Exercise Prices		Number of Shares Outstanding				Weighted- Average Remaining Contractual Life				Weighted- Average Exercise Price				Number of Shares Exercisable				Weighted- Average Exercise Price
$2.01 - $3.00			530,000				5.00				2.69				—				—
Outstanding at December 31, 2014			530,000				5.00			$	2.69				—			$	—

 

Inducement Options:		Options Outstanding												Options Exercisable
Range of Exercise Prices		Number of Shares Outstanding				Weighted- Average Remaining Contractual Life				Weighted- Average Exercise Price				Number of Shares Exercisable				Weighted- Average Exercise Price
$1.50 - $1.75			400,000				3.80			$	1.75				164,583			$	1.75
$2.26 - $2.75			400,000				4.01				2.75				175,000				2.75
Outstanding at December 31, 2014			800,000				3.89			$	2.25				339,583			$	2.27

 

The following is the average fair value per share estimated on the date of grant and the assumptions used for options granted during the years ended December 31:

 

Stock Options:		2014				2013
Expected volatility			48 to 54%				29% to 57%
Risk free interest rate			0.25%				0.25% to 0.45%
Expected lives at date of grant (in years)			2.39				2.89
Weighted average fair value of options granted			$2.83				$1.52

 

Inducement Stock Options:		2013
Expected volatility			56	%
Risk free interest rate			0.25	%
Expected lives at date of grant (in years)			5.34
Weighted average fair value of options granted		$	2.25

Stock-based compensation expense

The following table presents the total stock-based compensation expense, which is included in selling, general and administrative expenses for the years ended December 31 (in thousands):

 

		2014				2013
Restricted share expense		$	218			$	586
Stock option expense			358				534
Total stock-based compensation expense		$	576			$	1,120

Common Share Repurchase Program

Stock repurchases may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as our management deems to be appropriate. The timing and actual number of shares repurchased will depend on a variety of factors, including price, financing and regulatory requirements, as well as other market conditions. The program does not require us to repurchase any specific number of shares or to complete the program within a specific period of time.

During the years ended December 31, 2014 and 2013, the Company did not repurchase any shares in the open market.