Stock-Based Compensation. In August 2012, our stockholders approved the 2012 Equity Incentive Plan (the “2012 Plan”), which provides for the grant of equity incentives, consisting of options, stock appreciation rights, restricted stock and restricted stock units to officers, other key employees, directors and consultants. The 2012 Plan initially set aside, for the grant of equity incentives, 300,000 shares of the Company’s common stock, plus an additional 17,666 shares which was equal to the total number of shares that were then available for grants of new equity incentives under our existing stockholder approved stock incentive plans (the “Previously Approved Plans”). At the same time, those 17,666 shares ceased to be issuable under the Previously Approved Plans.

The Previously Approved Plans had provided that, if any options outstanding under any of those Plans were to expire or otherwise terminate, rather than being exercised, or if any unvested restricted shares were to be cancelled, the shares that had been subject to those options and such cancelled restricted shares would have become available for the grant of new options or other equity incentives under those Plans. However, the 2012 Plan provides, instead, that if any of those options expire or terminate for any reason or any of those unvested restricted shares are cancelled, then, the number of shares that will become available for grants or awards of equity incentives under the 2012 Plan will be increased by an equivalent number of shares, instead of becoming available for new equity incentive grants under the Previously Approved Plans. Therefore, if any equity incentives that are outstanding under the Previously Approved Plans expire, terminate or, subject to certain limitations, are reacquired by the Company, then a number of shares equal to the number of shares that had been subject to those equity incentives would become available for future grants under the 2012 Plan and those shares would cease to be available for future grants under the Previously Approved Plans. Between the date of the adoption of the 2012 Plan and June 30, 2015, a total of 308,821 shares that had been the subject of option or restricted stock grants under the Previously Approved Plans had been cancelled or forfeited and as a result, an equal number of shares had become available for grant under the 2012 Plan.

At June 30, 2015, options to purchase a total of 64,000 shares of our common stock and a total of 165,491 of unvested restricted shares were outstanding under the 2012 and Previously Approved Plans. As of that same date, 419,330 shares remained available for future equity incentive grants under the 2012 Plan.

We recognized non-cash stock-based compensation expense of $92,000 for the quarter ended June 30, 2015 and $235,000 and $124,000 for the six months ended June 30, 2015 and 2014, respectively, as a component of selling, general and administrative expenses in our condensed consolidated statements of operations.

Information Regarding Stock Options. The fair value of each outstanding option is estimated as of its date of grant using a binomial model. This model incorporates certain assumptions including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common stock.

Expected volatilities are based on the historical volatility of the Company’s common stock. The risk free interest rate is based upon market yields for United States treasury debt securities. The expected dividend yield is based upon the Company’s dividend policy and the fair market value of the Company’s shares at the time of grant. Expected lives are based on several factors, including the average holding period of outstanding options, their remaining terms and the cycle of our long range business plan.

We did not grant any stock options in the six months ended June 30, 2015 or in the six months ended 2014. As a result, no estimates of the fair market values of options were made during either of those periods.

The following table summarizes stock option activity during the six month period ended June 30, 2015:


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Average Intrinsic Value
Outstanding at January 1, 2015		101,000		$	5.31
Granted		—			—
Exercised		—			—
Forfeited		(37,000	)		7.29

Outstanding and exercisable at June 30, 2015		64,000		$	4.17		4.8 years	$	29,520

Options vested and expected (as of June 30, 2015) to vest in the future		64,000		$	4.17		4.8 years	$	29,520

The average intrinsic values set forth in the above table represent the total pre-tax intrinsic values (the average of the differences between the closing stock price of the Company’s common stock on June 30, 2015 and the respective exercise prices of the then outstanding in-the-money options) that would have been received by the option holders if all of the in-the-money options had been exercised on June 30, 2015. There were no options exercised during the first six months of 2015.

There was no unvested compensation cost related to unvested options for the six months ended June 30, 2015.

Restricted Shares. We began granting “service-contingent” restricted shares of common stock to some of our officers and other key management employees in 2010. The terms of those grants provided for those restricted shares to vest in equal annual installments over a three or four year service period following the respective dates of those awards, subject to the continued service with the Company of the recipients of such shares. In accordance with Accounting Standards Codification (ASC) 718, compensation expense for such awards is based on the fair market value of the awards on their respective dates of grant, which is recognized over those service periods. At June 30, 2015, no unvested service-contingent restricted shares were outstanding.

In 2013 and 2014, the Compensation Committee granted “performance-contingent” restricted shares to our officers and other key management employees. These performance-contingent shares vest in three annual installments, subject to the achievement by the Company of different financial performance goals for each of those years. Stock-based compensation expense with respect to each one-third of those performance-contingent shares is recognized only if and when we are able to determine that the Company’s achievement of the performance goal for the particular year has become probable. However, if any stock-based compensation expense were to be recognized based on such a determination, but the performance goal was not ultimately achieved, then any that previously recognized stock-based compensation expense would be reversed. At June 30, 2015, a total of 165,491 unvested performance-contingent restricted shares were outstanding.

A summary of the status of the Company’s restricted share activity follows:


	Shares			Weighted Average Grant Date Fair Value
Unvested restricted shares outstanding at January 1, 2015		268,985		$	3.43
Granted		—			—
Vested		(103,494	)		(3.44	)
Forfeited		—			—

Unvested at June 30, 2015		165,491		$	3.42

The intrinsic value of the 103,494 restricted shares that vested during the six months ended June 30, 2015 was approximately $370,000. A total of 9,998 of those restricted shares were cancelled in satisfaction of a total of $35,000 of tax withholding obligations of holders of those restricted shares that arose as a result of the vesting of those shares.

Unrecognized stock-based compensation expense related to the outstanding unvested restricted shares totaled approximately $384,000 at June 30, 2015. Those costs are expected to be recognized generally over weighted average period of 1.5 years measured from June 30, 2015. Of the 165,491 restricted shares that were unvested at June 30, 2015, all are expected to vest. The aggregate intrinsic value of those shares was $610,662 as of June 30, 2015.