STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2014

NOTE 5: STOCK-BASED COMPENSATION

The Company currently has one active stock-based compensation plan, which was approved by shareholders. The Company grants stock options to employees, consultants, and board members at the fair market value of its common stock, on the date of grant, with a term no greater than ten years. The majority of stock options vest over two or three years. Shareholders who own 10% or more of the Company’s outstanding stock are granted incentive stock options at an exercise price that may not be less than 110% of the fair market value of the Company’s common stock on the date of grant and have a term no greater than five years.

In February 2008, the Company’s Board of Directors approved the Mannatech, Incorporated 2008 Stock Incentive Plan, as amended (the “2008 Plan”), which reserves up to 200,000 shares for issuance of stock options and restricted stock to our employees, board members, and consultants, plus any shares reserved under the Company’s then-existing, unexpired stock plans for which options had not yet been issued, and any shares underlying outstanding options under the then-existing stock option plans that terminate without having been exercised in full. The 2008 Plan was approved by the Company’s shareholders at the 2008 Annual Shareholders’ Meeting and was amended at the 2012 Annual Shareholders’ Meeting to increase the number of shares of common stock subject to the plan by 100,000. At the 2014 Annual Shareholders’ Meeting, the 2008 Plan was amended again to increase the number of shares of common stock subject to the plan by 130,000. As of September 30, 2014, the 2008 Plan had 136,870 stock options available for grant before the plan expires on February 20, 2018.

The Company records stock-based compensation expense related to granting stock options in selling and administrative expenses. During the three months ended September 30, 2014 and 2013, the Company granted zero and 2,500 stock options, respectively. During the nine months ended September 30, 2014 and 2013, the Company granted 81,000 and 82,500 stock options, respectively. The fair value of stock options granted during the nine months ended September 30, 2014 ranged from $9.02 to $12.09 per share. Zero options were granted during the three months ended September 30, 2014. The Company recognized compensation expense as follows for the three and nine months ended September 30 (in thousands):

	Three months ended September 30				Nine months ended September 30
		2014		2013		2014		2013
Total gross compensation expense	$	95	$	41	$	397	$	137
Total tax benefit associated with compensation expense		20		6		101		27
Total net compensation expense	$	75	$	35	$	296	$	110

As of September 30, 2014, the Company expects to record compensation expense in the future as follows (in thousands):

	Three months ending December 31,		Year ending December 31,
	2014		2015		2016		2017		2018
Total gross unrecognized compensation expense	$	94	$	397	$	203	$	49	$	7
Tax benefit associated with unrecognized compensation expense		20		77		13		—		—
Total net unrecognized compensation expense	$	74	$	320	$	190	$	49	$	7

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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