10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2014

OR

o TRANSITION report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from  __________    to __________.

Commission file number 0-33347

Ambassadors Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization) 91-1957010 (I.R.S. Employer Identification No.)

Dwight D. Eisenhower Building 2001 South Flint Road Spokane, WA (Address of Principal Executive Offices) 99224 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (509) 568-7800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes

o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

þ Yes

o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

o Large accelerated  filer

o Accelerated filer

o Non-accelerated filer (Do not check if a smaller reporting company)

þ Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes

þ No

The number of shares outstanding of the registrant’s Common Stock, $0.01 par value, as of July 28, 2014 was 17,039,992.

AMBASSADORS GROUP, INC.

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets	1
Consolidated Statements of Operations	2
Consolidated Statements of Comprehensive Income (Loss)	3
Consolidated Statements of Cash Flows	4
Notes to Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 4. Controls and Procedures	26
PART II – OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6. Exhibits	27
SIGNATURES	28
EXHIBIT INDEX

PART I

FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of June 30, 2014 and December 31, 2013

(in thousands, except share and per share data)

	UNAUDITED		AUDITED
	June 30,		December 31,
	2014		2013
ASSETS
Current assets:
Cash and cash equivalents	$	10,412	$	9,473
Available-for-sale securities and other		47,088		36,174
Foreign currency exchange contracts		60		-
Prepaid program costs and expenses		17,918		7,069
Accounts receivable		1,421		1,792
Deferred tax assets		-		1,295
Total current assets		76,899		55,803
Property and equipment, net		14,633		18,452
Available-for-sale securities		729		719
Intangibles		3,462		3,522
Goodwill		70		9,781
Other long-term assets		85		82
Total assets	$	95,878	$	88,359
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses	$	7,145	$	3,587
Participants’ deposits		41,043		26,362
Foreign currency exchange contracts		-		244
Deferred tax liabilities		77		-
Other liabilities		103		119
Total current liabilities		48,368		30,312
Participants’ deposits		1,822		-
Foreign currency exchange contracts		-		52
Deferred tax liabilities		19		2,087
Total liabilities		50,209		32,451
Commitments and Contingencies (Note 15)
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding		-		-
Common stock, $.01 par value; 50,000,000 shares authorized; 17,038,508 and 17,040,724 shares issued and outstanding, respectively		170		170
Additional paid-in capital		1,284		411
Retained earnings		44,140		55,876
Accumulated other comprehensive gain (loss)		75		(549
Stockholders’ equity		45,669		55,908
Total liabilities and stockholders’ equity	$	95,878	$	88,359

The accompanying notes are an integral part of the consolidated financial statements.

-1-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the three and six months ended June 30, 2014 and 2013

(in thousands, except per share amounts)

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
Net revenue, non-directly delivered programs	$	18,092		$	21,183		$	18,208		$	21,183
Gross revenue, directly delivered programs		3,565			2,270			3,838			4,164
Gross revenue, internet and advertising		1,055			1,029			2,063			2,028
Total revenue		22,712			24,482			24,109			27,375
Cost of sales, directly delivered programs		2,234			1,553			2,443			2,925
Cost of sales, internet and advertising		118			126			250			255
Cost of sales, program merchandise markdown		554			-			554			-
Gross margin		19,806			22,803			20,862			24,195
Operating expenses:
Selling and marketing		6,159			7,323			13,152			15,842
General and administrative		3,510			2,938			6,650			8,604
Restructuring costs		11,664			-			11,772			-
Asset impairments		2,000			-			2,000			-
Total operating expenses		23,333			10,261			33,574			24,446
Operating income (loss)		(3,527	)		12,542			(12,712	)		(251	)
Other income:
Interest and dividend income		142			160			273			287
Foreign currency and other income		5			1			8			21
Total other income		147			161			281			308
Income (loss)  before income tax benefit (provision)		(3,380	)		12,703			(12,431	)		57
Income tax benefit (provision)		(805	)		(4,611	)		695			(24	)
Net Income (Loss)	$	(4,185	)	$	8,092		$	(11,736	)	$	33
Weighted-average common shares outstanding - basic		16,823			16,960			16,789			16,980
Weighted-average common shares outstanding - diluted		16,823			16,960			16,789			16,980
Net income (loss) per share - basic	$	(0.25	)	$	0.48		$	(0.70	)	$	0.00
Net income (loss) per share - diluted	$	(0.25	)	$	0.48		$	(0.70	)	$	0.00

The accompanying notes are an integral part of the consolidated financial statements.

-2-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

For the three and six months ended June 30, 2014 and 2013

(in thousands)

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Net income (loss)	$	(4,185	)	$	8,092		$	(11,736	)	$	33
Unrealized gain (loss) on foreign currency exchange contracts, net of income tax benefit of $69, $163, $0 and $437		229			(302	)		357			(811	)
Unrealized gain (loss) on available-for-sale securities, net of income tax benefit of $62, $126, $0 and $100		153			(235	)		267			(186	)
Comprehensive income (loss)	$	(3,803	)	$	7,555		$	(11,112	)	$	(964	)

The accompanying notes are an integral part of the consolidated financial statements.

-3-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the six months ended June 30, 2014 and 2013

(in thousands)

	Six months ended June 30,
	2014			2013
Cash flows from operating activities:
Net income (loss)	$	(11,736	)	$	33
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		2,977			2,711
Stock-based compensation		1,168			1,957
Deferred income tax benefit		(805	)		(275	)
Loss on disposition and impairment of property and equipment		2,000			7
Loss on impairment of goodwill		9,711			-
Program merchandise writedown		554			-
Excess tax shortfall from stock-based compensation		109			2,095
Change in assets and liabilities:
Accounts receivable and other assets		368			(53	)
Prepaid program costs and expenses		(11,403	)		(9,189	)
Accounts payable, accrued expenses, and other current liabilities		3,542			2,406
Participants’ deposits		16,503			23,723
Net cash provided by operating activities		12,988			23,415
Cash flows from investing activities:
Purchase of available-for-sale securities		(24,517	)		(26,844	)
Proceeds from sale of available-for-sale securities		13,861			7,329
Purchase of property and equipment		(952	)		(1,799	)
Purchase of intangibles		(146	)		(164	)
Net cash used in investing activities		(11,754	)		(21,478	)
Cash flows from financing activities:
Repurchase of common stock		(186	)		(486	)
Dividend payment to shareholders		-			(1,017	)
Proceeds from exercise of stock options		-			5
Excess tax shortfall from stock-based compensation		(109	)		(2,095	)
Net cash used in financing activities		(295	)		(3,593	)
Net increase (decrease) in cash and cash equivalents		939			(1,656	)
Cash and cash equivalents, beginning of period		9,473			6,150
Cash and cash equivalents, end of period	$	10,412		$	4,494

The accompanying notes are an integral part of the consolidated financial statements.

-4-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company

Ambassadors Group, Inc. (the “Company”, “we”, “us” or “our”) is an educational company primarily engaged in organizing and promoting differentiated worldwide travel programs for students and professionals.  In addition, we operate an education oriented research website, called BookRags.com, which provides study guides, lesson plans and other educational resources to students and teachers. These consolidated financial statements include the accounts of Ambassadors Group, Inc., and our wholly owned subsidiaries, Ambassador Programs, Inc., World Adventures Unlimited, Inc., Ambassadors Unlimited, LLC, AGI Hong Kong Limited, Beijing People to People Education Consultation Co., Ltd, Marketing Production Systems LLC, and BookRags, Inc. (“BookRags”). All significant intercompany accounts and transactions, which are of a normal recurring nature, are eliminated in consolidation.

Our operations are organized in two reporting segments, 1) “Ambassador Programs and Other,” which provides educational travel services to students and professionals through multiple itineraries and corporate overhead, and 2) “BookRags,” which provides online research capabilities through book summaries, critical essays, online study guides, lesson plans, biographies, and references to encyclopedia articles.

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being materially misleading. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2014 are not indicative of the results that may be expected for the year ending December 31, 2014.

These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013.

3. Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08). This ASU relates to discontinued operations reporting for disposals of components of an entity that represent strategic shifts that have, or will have, a major effect on the entity’s operations and financial results. The standard expands disclosures for discontinued operations and requires new disclosures related to individually material disposals that do not meet the definition of a discontinued operation. The provisions of this ASU are effective for interim and annual periods beginning after December 15, 2014. This ASU is not expected to have an impact on our financial statements or disclosures.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2017.

-5-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

4. Restructuring Costs

During the third quarter of 2013, we initiated a corporate restructuring plan aimed at streamlining our cost structure and focusing our business on our core Student Ambassador programs in order to promote the long-term health of the organization. This plan included the restructuring of operations and programs associated with Discovery Student Education and terminating the operations associated with our Beijing office. During 2013, we recorded $2.2 million to restructuring costs.

During the second quarter of 2014, we took additional measures intended to continue to streamline the organization and continue our business focus on our Student Ambassador programs.  As previously announced, we completed a workforce reduction during the second quarter of 2014 that resulted in a restructuring expense of $1.6 million.  Under the terms of executive separation agreements, we will continue to pay each terminated executive bi-weekly during the executive’s severance period until the terms have been met, the future payments having been accrued and reflected in the below table as outstanding liabilities at June 30, 2014.

At the date of our most recent annual impairment test of December 1, 2013, the estimated fair value of BookRags exceeded its carrying value by less than five percent.  Due to business changes as well as the narrow margin results of our most recent annual impairment test, we re-evaluated the carrying value of BookRags at June 30, 2014 and determined that its fair value was lower than its carrying value.  The significant assumptions used to determine fair value included projected operating revenues and expenses, growth rates, terminal value, discount rates, future cash flows and capital expenditures.  We estimated fair value weighing the results from the income approach and market approach.  As required by the impairment test, we calculated the implied fair value of the goodwill compared to its carrying value.  Our test resulted in a goodwill impairment of $9.7 million that was recorded as a restructuring cost at June 30, 2014.

Other costs recorded as restructuring during the second quarter of 2014 included accelerated depreciation of assets scheduled for replacement within the next year as well as continued transition costs from the termination of operations of our Beijing office.

We anticipate all restructuring expenses to be recognized within twelve months of the initial implementation of the restructuring plan.

The following table summarizes costs incurred as part of the restructuring plan and balance of the restructuring cost liability as of June 30, 2014 (in thousands).

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

	Restructuring Costs
	Ambassador Programs and other		BookRags		Consolidated
Contract termination fees	$	1,550	$	-	$	1,550
Separation payments		900		402		1,302
Goodwill impairment		-		9,711		9,711
Equity compensation expenses		377		120		497
Other transition costs		924		-		924
Accumulated expense at June 30, 2014		3,751		10,233		13,984
less: cash payments		2,878		33		2,911
less: non-cash expenses		377		9,831		10,208
Total restructuring liabilities at June 30, 2014	$	496	$	369	$	865

5. Asset Impairments

In April 2012, our Board of Directors approved the listing for sale of our corporate headquarters building located in Spokane, Washington. The Company intends to relocate our headquarters to a new leased location in Spokane within a year after sale. The initial listing price for the building and underlying land was $13.3 million. During the quarter ended September 30, 2013, the listing price was lowered to $11.9 million and recorded an impairment charge of $4.5 million.

Subsequent to June 30, 2014, a purchase and sale agreement was executed for the corporate headquarters building for $8.8 million.  During the second quarter of 2014, we lowered the carrying value further and recorded approximately $2.0 million in impairment charges to reflect the fair value of the building and other related assets before the effect of income taxes. These costs are classified in our consolidated statements of operations under asset impairments.

6. Investments and Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market, and we consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.

Our financial instruments are measured and recorded at fair value. Our non-financial assets, including property and equipment, intangible assets and goodwill, are measured at fair value upon acquisition, reviewed at least annually for impairment, and are fully assessed if there is an indicator of impairment. An adjustment would be made to the fair value of non-financial assets if an impairment charge is recognized.

Fair value is determined for assets and liabilities using a three-tiered hierarchy, based upon significant levels of inputs as follows:

-   Level 1 – Quoted prices in active markets for identical assets or liabilities.

-   Level 2 – Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

-   Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following tables summarize the composition of our investments at June 30, 2014 and December 31, 2013 (in thousands):

								Classification on Balance Sheet
June 30, 2014	Amortized Cost		Unrealized Gains  (Losses)			Aggregate Fair Value		Cash and cash equivalents		Short-term available-for-sale securities		Long-term available-for-sale securities
Auction rate securities (“ARS”), greater than one year	$	1,000	$	(271	)	$	729	$	-	$	-	$	729
Money market funds, ninety days or less		3,597		-			3,597		3,597		-		-
Municipal securities1
Short term municipal securities funds2		40,717		18			40,735		-		40,735		-
One year or less		921		3			924		-		924		-
After one year through three years		2,716		11			2,727		-		2,727		-
Greater than three years		2,735		(33	)		2,702		-		2,702		-
Total	$	51,686	$	(272	)	$	51,414	$	3,597	$	47,088	$	729

								Classification on Balance Sheet
December 31, 2013	Amortized Cost		Unrealized Gains  (Losses)				Aggregate Fair Value	Cash and cash equivalents		Short-term available-for-sale securities		Long-term available-for-sale securities
ARS, greater than one year	$	1,002	$	(283	)	$	719	$	-	$	-	$	719
Money market funds, ninety days or less		488		-			488		488		-		-
Municipal securities1
Short term municipal securities funds2		27,493		(143	)		27,350		-		27,350		-
One year or less		952		3			955		-		955		-
After one year through three years		3,132		20			3,152		-		3,152		-
Greater than three years		4,854		(137	)		4,717		-		4,717		-
Total	$	37,921	$	(540	)	$	37,381	$	488	$	36,174	$	719

1Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

2Amounts include short-term municipal security funds that do not have a set maturity date.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following tables detail the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at June 30, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements at Reporting Date Using
June 30, 2014	Fair Market Value		Level 1		Level 2		Level 3
Financial assets:
ARS	$	729	$	-	$	-	$	729
Money market funds		3,597		3,597		-		-
Municipal securities1		47,088		41,237		5,851		-
Foreign currency exchange contracts		89		-		89		-
Total financial assets	$	51,503	$	44,834	$	5,940	$	729
Financial liabilities:
Foreign currency exchange contracts		29		-		29		-
Total financial liabilities	$	29	$	-	$	29	$	-
			Fair Value Measurements at Reporting Date Using
December 31, 2013	Fair Market Value		Level 1		Level 2		Level 3
Financial assets:
ARS	$	719	$	-	$	-	$	719
Money market funds		488		488		-		-
Municipal securities1		36,174		27,350		8,824		-
Foreign currency exchange contracts		253		-		253		-
Total financial assets	$	37,634	$	27,838	$	9,077	$	719
Financial liabilities:
Foreign currency exchange contracts		549		-		549		-
Total financial liabilities	$	549	$	-	$	549	$	-

1 At June 30, 2014, municipal securities consisted of an 86/7/6/1 percent split between holdings in short-term municipal security funds, municipal revenue bonds, municipal general obligation bonds and certificates of deposit, respectively. At December 31, 2013, municipal securities consisted of a 76/13/11 split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. The underlying credit rating of the municipal securities at June 30, 2014 and December 31, 2013 were A+, A1 or better as defined by S&P 500 and Moody’s, respectively.

Money market funds and municipal securities are classified as Level 1 assets because market prices are readily available for these investments. Level 2 financial assets and liabilities represent the fair value of our municipal bonds and foreign currency exchange contracts that were valued using pricing models that take into account the contract terms, as well as multiple inputs where applicable, such as equity prices, interest rates, volatility and currency rates. Level 3 financial assets represent the fair value of our one auction-rate security (“ARS”), which was valued using a pricing model that takes into account the average life of the underlying collateral, the rate of return, and the spread used for similar issuances.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table details the fair value measurements of assets measured on a non-recurring basis within the three levels of the fair value hierarchy at June 30, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements at Reporting Date Using									Total Loss
June 30, 2014	Fair Market Value		Qouted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs  (Level 2)			Significant Other Unobservable Inputs (Level 3)			Three months ended June 30, 2014
Non-financal assets:
Property and equipment, net	$	8,750		$	-		$	-		$	8,750		$	2,000
Goodwill	$	-		$	-		$	-		$	-		$	9,711
			Fair Value Measurements at Reporting Date Using									Total Loss
December 31, 2013	Fair Market Value		Qouted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)			Year ended December 31, 2013
Non-financal assets:
Property and equipment, net	$	11,000		$	-		$	-		$	11,000		$	4,544

Fair value measurements on a recurring basis using Level 3 inputs consist of one available-for-sale ARS. The following table presents a reconciliation for the three and six months ended June 30, 2014 and 2013, of available-for-sale ARS measured at fair value on a recurring basis using Level 3 inputs (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2014		2013			2014		2013
Beginning balance	$	723	$	729		$	719	$	723
Total realized / unrealized losses:
Included in OCI		6		(13	)		10		(7	)
Ending balance	$	729	$	716		$	729	$	716

During the six months ended June 30, 2014, we experienced one failed ARS auction, representing principal of $1.0 million. This ARS continues to be classified as a long-term asset due to the high probability that the ARS may fail in future auctions. The next scheduled auction for this ARS is March 6, 2015. We have determined that there is no other-than-temporary impairment on this security, since we do not intend and are not required to sell this security before we have recovered the amortized cost basis, there has been no further deterioration of the credit rating of this investment, interest payments at coupon rate continue to be received, and we expect to recover the amortized cost basis of this security. We will continue to reassess liquidity in future reporting periods based on several factors, including the success or failure of future auctions, possible failure of the investment to be redeemed, deterioration of the credit rating of the investment, market risk, and other factors.

In determining the fair value of bond and ARS investments we consider the individual ratings of each holding. With regard to bonds, we consider the following: the underlying rating of the issuer irrespective of the insurance; the performance of the issuer; the term of the bond; and the quality of bond insurance provided by the rating of the bond insurer. With regard to valuation of our ARS, which is comprised of student loans, we consider the underlying credit quality of comparable student loan portfolios and the average life of the underlying student loan assets and apply a discount related to the illiquidity of our ARS due to past failed auctions. Based on these inputs, we have applied a discount of 321.0-basis points to the London interbank offered rate resulting in a valuation of $0.7 million from a costs basis of $1.0 million as of June 30, 2014. At the reporting dates and in the future, we recognize that this investment is subject to general credit, liquidity, market and interest rate risks. The fair value of this investment accordingly will continue to change and we will continue to evaluate its carrying value.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

7. Derivative Financial Instruments

The majority of our travel programs take place outside of the United States, and most foreign suppliers require payment in currency other than the U.S. dollar. Accordingly, we are exposed to foreign currency risk relative to changes in foreign currency exchange rates between those currencies and the U.S. dollar for our non-directly delivered programs. We use forward contracts that allow us to acquire foreign currency at a fixed price for a specified point in time to provide a hedge against foreign currency risk. All of our derivatives are cash flow hedges and at June 30, 2014, all contracts qualified for cash flow hedge accounting.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income or loss and reclassified into earnings in the same period during which the hedged transaction is recognized in earnings; this is primarily during the second and third quarters of the year when our student travel programs occur. Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

At June 30, 2014, the following forward contracts were outstanding (in thousands):

	Notional Amount		Matures
Forward contracts:
Australian dollar		3,200	July 2014 - May 2015
Euro		2,860	July 2014
British pound		200	July 2014

The fair value of our forward contracts were as follows (in thousands):

	June 30, 2014
	Derivatives designated as hedging instruments				Total Net
	Assets		Liabilities		Assets
Forward contracts	$	89	$	29		$	60
	December 31, 2013
	Derivatives designated as hedging instruments				Total Net
	Assets		Liabilities		Liabilities
Forward contracts	$	253	$	549		$	296

The net asset and liability derivatives at June 30, 2014 and December 31, 2013 are reported in the consolidated balance sheet as current and long-term foreign currency exchange contracts.

-11-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

8. Accumulated Other Comprehensive Income (Loss)

Unrealized gains or losses related to derivative securities are recorded in accumulated other comprehensive income (“AOCI”). The change in unrealized gains or losses related to derivative securities are recorded in other comprehensive income net of income taxes in the period the change occurred. When derivative securities designated as cash flow hedges are used to pay vendors, the effective portion of the hedge is reclassified into the income statement and recorded in net revenue, non-directly delivered programs.

Unrealized gains or losses related to available-for-sale securities are recorded in AOCI. The change in unrealized gains or losses related to available-for-sale securities are recorded in other comprehensive income net of income taxes in the period the change occurred. When securities are sold and a realized gain or loss is recognized, the amount is reclassified from AOCI to the income statement and recorded in interest and dividend income. During the three and six months ended June 30, 2014 and 2013, the Company recognized net realized losses of $25 thousand and $67 thousand, respectively, due to the sale of investments.

For the three months ended June 30, 2014 and 2013, a summary of AOCI balances and gains (losses) recognized in OCI are as follows (in thousands):

	Accumulated Other Comprehensive Income (Loss)
	Derivative Securities						Available-for-sale securities
	Three months ended						Three months ended
	June 30,						June 30,
	2014			2013			2014			2013
Balance, beginning of period	$	(65	)	$	35		$	(243	)	$	(132	)
Change before reclassification		185			(398	)		83			(368	)
Reclassification into net revenue, non-directly delivered programs		(25	)		(67	)		-			-
Reclassification into interest and dividend income		-			-			8			8
Effect of incomes taxes		69			163			62			126
Other comprehensive income (loss), net of income taxes		229			(302	)		153			(234	)
Balance, end of period	$	164		$	(267	)	$	(90	)	$	(366	)

For the six months ended June 30, 2014 and 2013, a summary of AOCI balances and gains (losses) recognized in OCI are as follows (in thousands):

	Accumulated Other Comprehensive Income (Loss)
	Derivative Securities						Available-for-sale securities
	Six months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
Balance, beginning of period	$	(192	)	$	544		$	(357	)	$	(180	)
Change before reclassification		381			(1,081	)		259			(294	)
Reclassification into net revenue, non-directly delivered programs		(25	)		(167	)		-			-
Reclassification into interest and dividend income		-			-			8			8
Effect of incomes taxes		-			437			-			100
Other comprehensive income (loss), net of income taxes		356			(811	)		267			(186	)
Balance, end of period	$	164		$	(267	)	$	(90	)	$	(366	)

-12-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

9. Income Taxes

We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. A significant piece of objective negative evidence we evaluated was our cumulative loss incurred over the three-year period ended June 30, 2014. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. As a result, we determined that the negative evidence outweighed the positive evidence as of June 30, 2014 and recorded a one-time, non-cash charge to income tax expense of approximately  $0.7 million to establish a valuation allowance against our total U.S. deferred tax assets, net of U.S. deferred tax liabilities. This accounting treatment has no effect on our  ability to utilize deferred tax assets such as loss carryforwards and tax credits to reduce future cash tax payments. We will continue to assess the likelihood that the deferred tax assets will be realizable at each reporting period and the valuation allowance will be adjusted accordingly.

10. Stock-Based Compensation

Under our Equity Participation Plan (the “Plan”), we may grant stock-based incentive compensation awards to eligible employees (including officers), non-employee directors and consultants in the form of distribution equivalent rights, incentive stock options, non-qualified stock options, performance share awards, performance unit awards, restricted stock awards, restricted stock units awards, stock appreciation rights, tandem stock appreciation rights, unrestricted stock awards or any combination of the foregoing.  As of June 30, 2014, we had 1,896,120 shares authorized under the Plan available for future stock-based compensation.

Stock Options

Under the terms of the Plan, options to purchase shares of our common stock are granted at a price set by the Compensation Committee of the Board of Directors (the “Compensation Committee”). The price is not to be less than the fair market value of the stock on the date of grant. The Compensation Committee establishes the vesting period of the awards, which is generally set at 25 percent per year for four years. Options may be exercised any time after they vest for a period up to 10 years from the grant date.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of options. Option valuation models require the input of highly subjective assumptions, particularly for the expected term and stock price volatility. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and our experience. Our employee stock options do not trade on a secondary exchange; therefore, employees do not derive a benefit from holding stock options unless there is an appreciation in the market price of our stock above the grant price. Such an increase in stock price would benefit all shareholders commensurately.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the three and six months ended June 30, 2014 and 2013.

	Three months ended  June 30, 2014		Three months ended  June 30, 2013		Six months ended  June 30, 2014		Six months ended  June 30, 2013
Expected dividend yield	-	%	-	%	-	%	1.37	%
Expected stock price volatility	59.43	%	52.68	%	59.43	%	54.66	%
Risk-free interest rate	2.02	%	2.10	%	2.02	%	2.08	%
Expected life of options	4.64	Years	4.53	Years	4.64	Years	4.56	Years
Estimated fair value per option granted	$1.68		$1.61		$1.68		$1.63

-13-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The dividend yield is based on expected quarterly cash dividends paid to our shareholders. Expected stock price volatility is based on historical volatility of our stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. Additionally, an annualized forfeiture rate of 15.2 percent is used as a best estimate of future forfeitures based on our historical forfeiture experience. Stock-based compensation expense will be adjusted in later periods if the actual forfeiture rate is different from the estimate.

A summary of option activity under the Plan as of June 30, 2014, and the changes during the six months then ended is presented below:

	Stock Options	Weighted-Average  Exercise Price		Weighted-Average Remaining Contractual Life (years)
Outstanding at December 31, 2013	907,945	$	6.54
Granted	64,239		3.76
Forfeited / Expired	(113,012)		7.60
Exercised	-		-
Outstanding at June 30, 2014	859,172	$	6.19	4.24
Exercisable at June 30, 2014	577,316	$	6.99	2.02

During the three and six months ended June 30, 2014, the total intrinsic value of stock options exercised was zero and the total fair value of options which vested was $0.7 million. During the three and six months ended June 30, 2013, the total intrinsic value of stock options exercised was zero and the total fair value of options which vested was $1.0 million. The aggregate intrinsic value of outstanding and exercisable stock options was $0.1 million, based on our $4.61 closing stock price at June 30, 2014. Compensation expense recognized in the consolidated statement of operations for stock options was $0.3 million and $0.1 million for the three months ended June 30, 2014 and 2013, respectively, before the effect of income taxes. Compensation expense recognized in the consolidated statement of operations for stock options was $0.4 million and $1.0 million for the six months ended June 30, 2014 and 2013, respectively, before the effect of income taxes. As of June 30, 2014, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $0.3 million, which is expected to be recognized over approximately 3.8 years.

Restricted Stock Grants

Restricted stock awards and restricted stock units may be granted under the Plan by the Compensation Committee. The Compensation Committee also establishes the vesting period of the awards, which is generally set at 100 percent at the conclusion of one to four years for restricted stock awards. Restricted stock units generally vest pro rata at 25 percent each year over a four year vesting period. Our key employees who have been granted awards are typically subject to a four year vesting period, while members of our Board of Directors who have been granted awards are subject to a one year vesting period. The fair value of restricted stock awards and restricted stock units is based on the market price of our shares on the grant date.

-14-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

A summary of the activity of non-vested restricted stock awards and restricted stock units under the Plan as of June 30, 2014, and the changes during the six months then ended is presented below:

	Restricted Stock Awards				Restricted Stock Units
	Restricted Stock Awards	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual  Life (years)	Restricted Stock  Units	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Life (years)
Balance at December 31, 2013	285,435	$	5.24		28,123	$	3.88
Granted	51,704		3.72		28,398		4.37
Forfeited	(10,944)		5.46		(8,660)		3.98
Vested	(185,258)		4.87		-		-
Balance at June 30, 2014	140,937	$	5.16	1.82	47,861	$	4.15	2.00

At June 30, 2014, the aggregate value of non-vested restricted stock awards and restricted stock units was $0.6 million and $0.2 million, respectively, before applicable income taxes, based on a $4.61 closing stock price at June 30, 2014. During the three months ended June 30, 2014 and 2013, the weighted-average grant date fair value of restricted stock awards, which vested was $0.9 million and $0.1 million, respectively. During the six months ended June 30, 2014 and 2013, the weighted-average grant date fair value of restricted stock awards, which vested was $1.0 million and $2.0 million, respectively. Compensation expense recognized in the consolidated statement of operations for restricted stock awards and units was $0.5 million and $0.1 million for the three months ended June 30, 2014 and 2013, respectively, before the effect of income taxes. Compensation expense recognized in the consolidated statement of operations for restricted stock awards and units was $0.6 million and $1.0 million for the six months ended June 30, 2014 and 2013, respectively, before the effect of income taxes. As of June 30, 2014, total unrecognized stock-based compensation expense related to restricted stock awards and units was approximately $0.4 million and $0.2 million, respectively, which is expected to be recognized over approximately 3.8 years.

Performance Stock Awards

Under the terms of the Plan, performance stock awards may be granted by the Compensation Committee to key executive employees. Performance stock awards are based on achieving key internal metrics measured at the end of each fiscal year over a three year performance period. If performance objectives are achieved as determined by the Compensation Committee, common stock is granted. The fair value of these awards is determined on the date of grant based on our share price. Compensation expense related to performance stock units is evaluated quarterly to determine the likelihood that performance metrics will be achieved during the performance period.

A summary of the activity of performance stock units under the Plan as of June 30, 2014, and the changes during the six months then ended is presented below:

	Performance Stock  Units	Weighted-Average Grant Date Fair Value		Weighted-Average  Remaining Contractual Life (years)
Balance at December 31, 2014	114,560	$	4.41
Granted	-		-
Forfeited	(78,514)		4.41
Vested	-		-
Balance at June 30, 2014	36,046	$	4.41	2.51

During the three and six months ended June 30, 2014, no performance stock units were granted. Performance stock units outstanding on June 30, 2014 are payable upon the achievement of certain internal metrics over a performance period of January 1, 2014 through December 31, 2016. As of June 30, 2014, there was no unrecognized compensation expense related to performance share unit awards.

-15-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

11. Net Income (Loss) per Share

The following table presents a reconciliation of basic and diluted income (loss) per share computations (in thousands, except per share data and anti-dilutive stock option counts):

	Three months ended  June 30,					Six months ended  June 30,
	2014			2013		2014			2013
Numerator:
Net income (loss)	$	(4,185	)	$	8,092	$	(11,736	)	$	33
Denominator:
Weighted-average shares outstanding		16,823			16,727		16,789			16,683
Effect of unvested restricted stock awards      considered participating securities		-			233		-			297
Weighted-average shares outstanding – basic		16,823			16,960		16,789			16,980
Effect of dilutive common stock options		-			-		-			-
Weighted-average shares outstanding – diluted		16,823			16,960		16,789			16,980
Net income (loss) per share - basic	$	(0.25	)	$	0.48	$	(0.70	)	$	0.00
Net income (loss) per share - diluted	$	(0.25	)	$	0.48	$	(0.70	)	$	0.00
Cash dividends declared per share1	$	-		$	-	$	-		$	0.06
Stock options and restricted stock units excluded from the calculation of diluted earnings per share  because their effect would have been anti-dilutive		774,000			1,395,000		799,000			1,635,000

1The Company suspended quarterly dividend payments during the second quarter of 2013.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

12. Segment Reporting

Ambassador Programs and Other’s gross margin is comprised of gross receipts less direct program costs, including accommodations, transportation, speakers, facilitators, and event costs. BookRags’ gross margin is comprised of content and subscription and advertising revenues via www.BookRags.com, less affiliate commissions and amortization of intangible assets directly associated with sales.

Segment information for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):

	Three months ended June 30, 2014												Three months ended June 30, 2013
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	21,657		$	1,055		$	22,712		$	23,453		$	1,029		$	24,482
Gross margin	$	18,869		$	937		$	19,806		$	21,900		$	903		$	22,803
Depreciation and amortization	$	1,490		$	180		$	1,670		$	1,255		$	131		$	1,386
Operating income (loss)	$	6,304		$	(9,831	)	$	(3,527	)	$	12,165		$	377		$	12,542
Income tax benefit (provision)	$	(1,815	)	$	1,010		$	(805	)	$	(4,442	)	$	(169	)	$	(4,611	)
Net income (loss)	$	4,635		$	(8,820	)	$	(4,185	)	$	7,884		$	208		$	8,092

							Six months ended June 30, 2014						Six months ended June 30, 2013
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	22,046		$	2,063		$	24,109		$	25,347		$	2,028		$	27,375
Gross margin	$	19,049		$	1,813		$	20,862		$	22,422		$	1,773		$	24,195
Depreciation and amortization	$	2,624		$	353		$	2,977		$	2,419		$	292		$	2,711
Operating income (loss)	$	(3,217	)	$	(9,495	)	$	(12,712	)	$	(960	)	$	709		$	(251	)
Income tax benefit (provision)	$	(259	)	$	954		$	695		$	265		$	(289	)	$	(24	)
Net income (loss)	$	(3,196	)	$	(8,540	)	$	(11,736	)	$	(387	)	$	420		$	33
Total additions to property and equipment, net	$	711		$	241		$	952		$	1,600		$	189		$	1,789
Total additions to intangibles	$	-		$	146		$	146		$	-		$	164		$	164
Intangibles	$	-		$	3,462		$	3,462		$	-		$	3,540		$	3,540
Total assets	$	89,360		$	6,518		$	95,878		$	108,061		$	15,409		$	123,470

1Ambassador Programs and Other include all travel programs as well as corporate overhead.

Any intercompany sales or services provided are eliminated upon consolidation.

13. Supplemental Disclosures of Consolidated Statements of Cash Flows

Our non-cash investing and financing activities during the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):

	June 30, 2014		June 30, 2013
Unrealized income (loss) on foreign currency exchange contracts	$	356	$	(1,248)
Unrealized income (loss) on available-for-sale securities	$	267	$	(286)
Property and equipment	$	-	$	(10)

14. Line of Credit

The Company's credit agreement with Wells Fargo expired on June 1, 2014 and was not renewed.

-17-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

15.  Commitments and Contingencies

On May 7, 2014, Anthony F. Dombrowik, our former interim Chief Executive Officer and Chief Financial Officer, was terminated by the Board of Directors.  In connection with Mr. Dombrowik’s departure, we entered into a separation agreement effective May 7, 2014.  Under the terms of the separation agreement, cash payouts of approximately $0.4 million are to be made to Mr. Dombrowik, all of which was  fully expensed during the second quarter of 2014 although , approximately $0.4 million remained to be paid during the  8 months following June 30, 2014.  Additionally, the separation agreement called for the immediate vesting of stock options and stock grants for Mr. Dombrowik in the amount of $0.2 million.

We are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business, the outcome of which we believe will not have a material adverse effect on our business, financial condition, cash flows or results of operations.

We are subject to the possibility of various loss contingencies, including claims, suits and complaints, arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted and whether new accruals are required.

Under our Bylaws, our directors and officers have rights to indemnification by us against certain liabilities that may arise by reason of their status or service as directors or officers. We maintain director and officer insurance, which covers certain liabilities arising from our obligation to indemnify our directors and officers and former directors in certain circumstances. No material indemnification liabilities were accrued at June 30, 2014.

-18-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q.

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may appear throughout this report, including without limitation, statements in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. For a detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements, please refer to Item 1A Risk Factors disclosure in our Annual Report on Form 10-K filed on March 27, 2014. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Introduction

Ambassadors Group, Inc. is a leading provider of educational travel experiences and online education research materials primarily engaged in organizing and promoting worldwide educational travel programs for students through a direct to consumer revenue model. We operate student and adult travel programs primarily using the People to People brand under a long-term exclusive license agreement. We have been traveling students on People to People programs for over 50 years and have over 500,000 alumni. We believe that our association with that brand and experience in the educational travel industry give us both a strong awareness in the market and a high level of credibility.

Our core program offering under the People to People brand is international destination trips for U.S. students in the 11 to 17 year old age group (“Student Ambassador Program”). Student Ambassador Programs make up the majority of our program offerings and are the center of our strategic focus. However, under the People to People brand, we also offer domestic destination travel programs for U.S. students and international students focused on leadership and education (“Leadership Ambassador Program”), as well as professional travel programs for adults (“Citizen Ambassador Program”).

Lastly, we operate BookRags (www.bookrags.com), an education oriented research website, which provides study guides, lesson plans and other educational resources to students and teachers. The site attracts students and teachers each month to its millions of pages of content, which includes internally developed material, licensed material, and user-generated content.

Our operating results depend primarily on the number of travelers who attend our programs (“travelers” or “delegates”), the fees we are able to charge for each traveler, net of pass-through expenses associated with non-directly delivered programs such as airfare and third-party tour operator fees (“total revenue”), and the direct costs associated with the traveler’s itinerary on directly delivered programs including airfare, hotel charges, meal costs, event and location fees, chaperone costs, tour manager fees, and the cost of in-country travel (“cost of sales”). Our business is highly seasonal, and our gross revenue and cost of sales are typically at their highest levels in the second and third quarters. Our marketing and sales efforts are conducted year-round and expenses are recognized when incurred.  Revenue associated with these marketing and sales expenses are generally recognized in the second and third quarter of the following fiscal year upon delegate travel.

-19-

Executive Summary

Our strategy is to maintain our high quality and unique out-of-classroom educational experiences while increasing our volume of business through multi-channel marketing and sales initiatives. In order to grow our business, our operating plans include the following: further integrating digital and social marketing into our methodology, introducing new conversion channels while refining existing avenues; building and preserving high quality customer relationships; engaging our customers year-round while offering a wider range of product offerings; and managing our cost structure to protect profitability.

Our second quarter of 2014 results reflect several initiatives intended to streamline the organization and continue our business focus toward our core Student Ambassadors programs.  During the quarter we evaluated the carrying value of BookRags and determined that its fair value was lower than its carrying value, resulting in a goodwill impairment of $9.7 million that has been recorded in restructuring costs.  In addition, we recorded an expense of $1.6 million related to the workforce reduction previously announced, and took an additional impairment charge of $2.0 million on our corporate headquarters building.  A purchase and sale agreement relating to the building was executed subsequent to the balance sheet date; therefore, pending the finalization of the sale  the carrying value will be reclassed to an asset held for sale during the third quarter of 2014.

Our summer travel season was delivered successfully from a customer perspective, and customer satisfaction continues to be very high.  Our marketing season for 2015 travel is underway with significant digital marketing, direct mail and local meetings taking place from August to November of this year.  In order to grow our Student Ambassadors traveler base, we are focused on web-based services integration into our traditional direct marketing channels intended to drive higher attendance at our information meetings, the targeting of qualified prospects, the conversion of generated leads and in improving our retention rate.

We are driving changes to our business and to our infrastructure in order to deliver a more efficient cost structure and improved financial results.  We believe that these changes, as well as our strong People to People brand, will ultimately deliver profitability, a stronger balance sheet and long-term shareholder value.

-20-

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2014 with the Three and Six Months Ended June 30, 2013

Consolidated financial results for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):

	Three Months Ended June 30,
	2014		2013		$ Change		% Change
Total revenue	$	22,712	$	24,482	$	(1,770)	-7%
Cost of goods sold		2,906		1,679		1,227	73%
Gross margin		19,806		22,803		(2,997)	-13%
Selling and marketing expenses		6,159		7,323		(1,164)	-16%
General and administrative expenses		3,510		2,938		572	19%
Restructuring costs		11,664		-		11,664	100%
Asset impairments		2,000		-		2,000	100%
Operating income (loss)		(3,527)		12,542		(16,069)	-128%
Other income		147		161		(14)	-9%
Income (loss) before income tax provision		(3,380)		12,703		(16,083)	-127%
Income tax provision		(805)		(4,611)		3,806	-83%
Net income (loss)	$	(4,185)	$	8,092	$	(12,277)	-152%
	Six Months Ended June 30,
	2014		2013		$ Change		% Change
Total revenue	$	24,109	$	27,375	$	(3,266)	-12%
Cost of goods sold		3,247		3,180		67	2%
Gross margin		20,862		24,195		(3,333)	-14%
Selling and marketing expenses		13,152		15,842		(2,690)	-17%
General and administrative expenses		6,650		8,604		(1,954)	-23%
Restructuring costs		11,772		-		11,772	100%
Asset impairments		2,000		-		2,000	100%
Operating loss		(12,712)		(251)		(12,461)	4965%
Other income		281		308		(27)	-9%
Income (loss) before income tax benefit (provision)		(12,431)		57		(12,488)	-21909%
Income tax benefit (provision)		695		(24)		719	-2996%
Net income (loss)	$	(11,736)	$	33	$	(11,769)	-35664%

During the second quarter of 2014, we traveled 8,720 delegates compared to 9,228 delegates during the prior year quarter primarily due to lower delegates traveled on our core Student Ambassadors programs.  The prior year period includes Discovery Student Adventures traveled students affecting year-over-year comparability given our decision during the third quarter of 2013 to no longer operate these programs in 2014. Total revenue of $22.7 million declined 7.2 percent from $24.5 million in the prior year quarter driven by lower travel-related revenue. Gross margin for the quarter was $19.8 million compared to $22.8 million in the second quarter of 2013, and gross margin percentage was 34.2 percent compared to 36.5 percent in the prior year period.  The lower current period gross margin percentage is reflective of higher foreign exchange rates negatively impacting land vendor program costs year-over-year, as well as an inventory write-down of $0.6 million in the current period.  Year-over-year, the Company experienced a decrease of approximately $1.2 million in Student Ambassadors program gross margin, excluding the impact of the decline in delegates traveled year-over-year, $0.8 million of which is due to unfavorable Euro and British Pound rates hedged for 2014 travel compared to hedged rates for 2013 travel.

During the six months ended June 30, 2014, we traveled 8,903 delegates compared to 9,800 delegates during the same period in the prior year.  Total revenue of $24.1 million declined 11.9 percent from $27.4 million in the same period last year driven by the decline in travel-related revenue.  Gross margin for the six months ended June 30, 2014 was $20.9 million, down from $24.2 million in the same period last year, with gross margin percentage at 35.1 percent compared to the prior year at 37.0 percent.  The lower current period gross margin percentage is reflective of higher foreign exchange rates as well as an inventory write-down in the current period.

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Selling and marketing expenses decreased approximately $1.2 million during the three months ended June 30, 2014 compared to the same period in 2013 mainly due to a reduction in total personnel costs as a result of the June 2014 reduction in staffing levels, as well an overall reduction in marketing spend.  General and administrative expenses increased approximately $0.6 million during the three months ended June 30, 2014 compared to the same period in 2013, primarily due to incurred expenses related to the separation of a former executive in the second quarter of 2014.  Additionally, we incurred approximately $11.7 million in restructuring charges and $2.0 million in asset impairments during the three months ended June 30, 2014 as discussed above.

Selling and marketing expenses decreased approximately $2.7 million during the six months ended June 30, 2014 compared to the same period in 2013 due to a purposeful reduction in marketing spend reflecting primarily a smaller winter and spring marketing campaign compared to one year ago, as well as lower personnel expenditures. General and administrative expenses decreased approximately $2.0 million during the six months ended June 30, 2014 compared to the same period in 2013, primarily due to lower separation and other related benefit expenses year over year.  Additionally, we incurred approximately $11.8 million in restructuring charges and $2.0 million in asset impairments during the six months ended June 30, 2014.

During the second quarter of 2014, we recorded a valuation allowance against our  deferred tax asset due to the loss recorded during the first six months of 2014.  This allowance resulted in a net income tax benefit of  approximately $0.7 million recorded for the first six months of 2014.  For additional information, see Note 9 to Consolidated Financial Statement 8.  For the first six months of 2013, we recorded an income tax provision using an effective income tax rate of 42.1 percent applied to pre-tax income. The difference from the statutory rate of 34 percent during 2013 was primarily due to the impact of tax exempt interest income on projected net loss for the year ending December 31, 2013.

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Results of Operations by Segment

Segment results of operations for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):

	Three months ended June 30, 2014									Three months ended June 30, 2013
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	21,657		$	1,055		$	22,712		$	23,453		$	1,029		$	24,482
Cost of goods sold		2,788			118			2,906			1,553			126			1,679
Gross margin		18,869			937			19,806			21,900			903			22,803
Selling and marketing expenses		5,827			332			6,159			6,948			375			7,323
General and administrative expenses		3,307			203			3,510			2,787			151			2,938
Restructuring costs		1,431			10,233			11,664			-			-			-
Asset impairments		2,000			-			2,000			-			-			-
Operating income (loss)		6,304			(9,831	)		(3,527	)		12,165			377			12,542
Other income		146			1			147			161			-			161
Income (loss) before income tax benefit (provision)		6,450			(9,830	)		(3,380	)		12,326			377			12,703
Income tax benefit (provision)		(1,815	)		1,010			(805	)		(4,442	)		(169	)		(4,611	)
Net income (loss)	$	4,635		$	(8,820	)	$	(4,185	)	$	7,884		$	208		$	8,092
	Six months ended June 30, 2014									Six months ended June 30, 2013
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	22,046		$	2,063		$	24,109		$	25,347		$	2,028		$	27,375
Cost of goods sold		2,997			250			3,247			2,925			255			3,180
Gross margin		19,049			1,813			20,862			22,422			1,773			24,195
Selling and marketing expenses		12,499			653			13,152			15,051			791			15,842
General and administrative expenses		6,228			422			6,650			8,331			273			8,604
Restructuring costs		1,539			10,233			11,772			-			-			-
Asset impairments		2,000			-			2,000			-			-			-
Operating income (loss)		(3,217	)		(9,495	)		(12,712	)		(960	)		709			(251	)
Other income		280			1			281			308			-			308
Income (loss) before income tax benefit (provision)		(2,937	)		(9,494	)		(12,431	)		(652	)		709			57
Income tax benefit (provision)		(259	)		954			695			265			(289	)		(24	)
Net income (loss)	$	(3,196	)	$	(8,540	)	$	(11,736	)	$	(387	)	$	420		$	33

1Ambassador Programs and Other include all travel programs as well as corporate overhead.

Key Performance Non-GAAP Financial Indicators

We analyze our performance on a net income, cash flow and liquidity basis in accordance with GAAP as well as on a non-GAAP operating, cash flow and liquidity basis referred to below as “non-GAAP operating results” or “non-GAAP cash flows and liquidity measures.” These measures and related discussions are presented as supplementary information in this analysis to enhance the readers’ understanding of, and highlight trends in, our core financial results. Any non-GAAP financial measure used by us should not be considered in isolation or as a substitute for measures of performance or liquidity prepared in accordance with GAAP.

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Net Enrollments

Net enrollments on a forward looking basis consist of all active participants, which we define as those who have enrolled in our programs, including travel that has already been completed, less those who have already withdrawn for the travel year referenced. This is a point in time measurement that we use as an indication of expected future gross revenues for our travel programs.

	As of July 28, 2014 and 2013
	Delegates
Enrollment detail for travel year	2014	2013	Change	% Change
Student Ambassadors	12,256	13,849	(1,593)	-11.5%
Total, all programs	16,126	17,283	(1,157)	-6.7%

Deployable Cash

We use deployable cash as a liquidity measure, which is calculated as the sum of cash, cash equivalents, short-term available-for-sale securities and prepaid program costs and expenses, less the sum of accounts payable, accrued expenses and other short-term liabilities (excluding deferred taxes) and participant deposits. We believe the deployable cash measurement is useful in understanding cash available to deploy for current and future business opportunities, as it represents an estimate of excess cash available for capital deployment. This non-GAAP measure is based on conservative assumptions, such as all participants’ deposits being forfeited, and should not be construed as the maximum amount of cash sources available to run our business.

 Deployable Cash Reconciliation (in thousands)

	June 30,						December 31,
	2014			2013			2013
Cash, cash equivalents and short-term available-for-sale securities	$	57,500		$	55,852		$	45,647
Prepaid program cost and expenses		17,918			26,354			7,069
Less: Participants’ deposits		(42,865	)		(49,458	)		(26,362	)
Less: Accounts payable / accruals / other liabilities		(7,248	)		(6,745	)		(3,706	)
Deployable cash	$	25,305		$	26,003		$	22,648

Free Cash Flow

Free cash flow is calculated as cash flow from operations less the purchase of property, equipment and intangible assets. Management believes this non-GAAP measure is useful to investors in understanding the cash generated or distributed within the current period for future use in operations.

   Free Cash Flow Reconciliation (in thousands)

	Six months ended June 30,
	2014			2013			$ Change
Net cash provided by operating activities	$	12,988		$	23,415		(10,427	)
Purchase of property, equipment and intangibles		(1,098	)		(1,963	)	865
Free cash flow	$	11,890		$	21,452		(9,562	)

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Liquidity and Capital Resources

Total assets at June 30, 2014 were $95.9 million, of which 60.0 percent, or $57.5 million, were cash, cash equivalents and short-term available-for-sale securities. At that date, we also had long-lived assets totaling $19.0 million primarily related to our office building, technology hardware and systems used to deliver our services, and intangible assets almost exclusively related to our BookRags segment.  During the second quarter of 2014, we recognized restructuring and other asset reduction charges that resulted in the impairment of goodwill recorded from the purchase of BookRags of $9.7 million, as well as an additional write-down of $2.0 million to the carrying value of our corporate headquarters building.  Total liabilities at June 30, 2014 were $50.2 million, including $42.9 million in participant deposits for future travel.

Net cash provided by operations was $13.0 million during the six months ended June 30, 2014 compared to net cash provided by operations of $23.4 million during the six months ended June 30, 2013. This $10.4 million decrease was primarily due to lower net income and a $7.2 million unfavorable change in participant deposits due to a lower delegate count compared to 2013.

Net cash used in investing activities was $11.8 million during the first six months of 2014 compared to $21.5 million during the first six months of 2013. The decline in cash used in investing activities during the current period was primarily due to a reduction in the net purchases of available-for-sale securities, as well as lower spend on capital projects.

Net cash used in financing activities was $0.3 million and $3.6 million during the six months ended June 30, 2014 and 2013, respectively.  The prior year period included excess tax benefits associated with the cancellation of expired stock compensation benefits and the repurchase of our common stock through buybacks and share surrenders of $2.6 million compared to $0.2 million in the current year period.  In addition, the prior year period included $1.0 million paid in stockholder dividends that did not recur in 2014.

On June 1, 2014, our credit agreement with Wells Fargo Bank, National Association, expired and was not renewed.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported disclosures of assets, liabilities, revenue and expenses. Our estimates are based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business.  We consider that our most critical accounting estimates are related to the valuation of available-for-sale securities, valuation of goodwill, intangible assets, and long-lived assets, foreign currency exchange contracts, revenue recognition, and contingencies and litigation as they require us to make assumptions that may be highly uncertain at the time the accounting estimates were made and changes in them are reasonably likely to occur from period to period.  There are other items within our consolidated financial statements that require estimation but are not deemed to be critical.  Changes in estimates used in these and other items could have a material impact on our consolidated financial statements. For a more complete discussion, please refer to our consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K filed on March 27, 2014.

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Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

As of June 30, 2014, the end of the period covered by this report, our interim chief executive officer and principal financial officer reviewed, evaluated and concluded that our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) were effective.  These controls and procedures are designed to ensure information required to be disclosed in our Form 10-Q filed or submitted under the Exchange Act is recorded, processed, summarized, and reported on a timely basis, and has been accumulated and communicated to our management including our interim chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting

In the six months ended June 30, 2014, there was no change in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On various dates between May 2004 and May 2011, our Board of Directors authorized the repurchase of shares of our Common Stock in the open market or through private transactions (the “Repurchase Plan”). During the quarter ended June 30, 2014, there were no shares repurchased under the Repurchase Plan. As of June 30, 2014, approximately $13.1 million was available to repurchase shares of our Common Stock under the Repurchase Plan.

Item 6. Exhibits

10.1	Employment Agreement by and between the Company and Philip B. Livingston, incorporated by reference to the Company’s Form 8-K filed May 19, 2014.
10.2	Real Property Purchase and Sale Agreement and Escrow Instructions by and between Ambassadors Group, Inc., Northwest Farm Credit Services, FLCA and First American Title Insurance Company dated as of August 6, 2014. (1)
31.1	Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)
31.2	Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)
32.1	Certification under Section 906 of the Sarbanes-Oxley Act of 2002. (2)

(1) Filed herewith.

(2) This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section.  Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 AMBASSADORS GROUP, INC.

Date: August 12, 2014	By:	/s/ PHILIP B. LIVINGSTON
		Philip B. Livingston,
		Interim Chief Executive Officer (Principal Executive Officer)

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EXHIBIT INDEX

10.1	Employment Agreement by and between the Company and Philip B. Livingston, incorporated by reference to the Company’s Form 8-K filed May 19, 2014.
10.2	Real Property Purchase and Sale Agreement and Escrow Instructions by and between Ambassadors Group, Inc., Northwest Farm Credit Services, FLCA and First American Title Insurance Company dated as of August 6, 2014. (1)
31.1	Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)
32.1	Certification under Section 906 of the Sarbanes-Oxley Act of 2002. (2)

(1) Filed herewith.

(2) This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section.  Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

EX-31.1

EXHIBIT 31.1

Certification required by Rule 13a-14(a) or Rule 15d-14(a) and under Section 302 of the Sarbanes-Oxley Act of 2002.

I, Philip B. Livingston, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 of Ambassadors Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 12, 2014

/s/ Philip B. Livingston

Philip B. Livingston

Interim Chief Executive Officer

(Principal Executive Officer)

EX-32.2

EXHIBIT 31.2

Certification required by Rule 13a-14(a) or Rule 15d-14(a) and under Section 302 of the Sarbanes-Oxley Act of 2002.

I, Lisa N. Netz, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 of Ambassadors Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 12, 2014

/s/ Lisa N. Netz

Lisa N. Netz

Vice President, Finance

(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ambassadors Group, Inc., (the "Company") on Form 10-Q for the period ending June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Philip B. Livingston, interim chief executive officer of the Company and Lisa N. Netz, Vice President, Finance, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2014

/s/ Philip B. Livingston

Philip B. Livingston

Interim Chief Executive Officer

(Principal Executive Officer)

/s/ Lisa N. Netz

Lisa N. Netz

Vice President, Finance

(Principal Financial Officer)

EX-10.2

Exhibit 10.2

REAL PROPERTY PURCHASE AND SALE AGREEMENT

AND ESCROW INSTRUCTIONS

THIS REAL PROPERTY PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (“Agreement”) is made by and between AMBASSADORS GROUP, INC., a Delaware corporation (“Seller”), NORTHWEST FARM CREDIT SERVICES, FLCA, a federal land credit association, and/or its assigns (“Buyer”), and FIRST AMERICAN TITLE INSURANCE COMPANY (“Escrow Agent” or “Title Company”).

Seller is the owner of the following (collectively, the “Property”):

A.           Fee simple title to the real property consisting of approximately eleven and 7/100 (11.07) acres, and generally located  at 2001 S. Flint Road, in Spokane County, Washington, as more particularly described on the attached Exhibit A (“Real Property”);

B.           All structures and improvements on the Real Property together with all warranties relating thereto to the extent transferable, if any (collectively, the “Improvements”);

C.           Any and all rights and easements appurtenant to the Real Property;

D.           The tangible personal property owned by Seller and used in the operation of the Real Property and Improvements, together with all warranties relating thereto, as more particularly set forth in the attached Exhibit B (“Personal Property”);

E.           All licenses, permits, land use designations, approvals, various waivers or consents applicable to the Real Property (collectively, the “Permits”), to the extent transferable, issued or subject to the laws of the United States, the State of Washington, Spokane County, or the City of Spokane, other authority, department, commission board, bureau, agency, unit, or instrumentality, (collectively, the “Governmental Authorities” and each, a “Governmental Authority”); and

F.           All site plans, surveys, soil and substrata studies, environmental reports, engineering plans and studies, floor plans, landscape plans and other plans, diagrams, or studies of any kind with respect to the Real Property or Improvements.

Buyer desires to purchase and Seller desires to sell the Property, upon the terms and conditions hereinafter outlined.

NOW, THEREFORE, it is mutually agreed by and between the parties as follows:

1.Agreement

.  Seller agrees to sell and convey the Property to Buyer, and Buyer agrees to purchase and accept the Property from Seller, upon the terms and conditions set forth in this Agreement.

2.Earnest Money

 Within three (3) Business Days following the date that is the day the last of Seller and Buyer execute this Agreement (“Mutual Execution”), Buyer shall deliver to Escrow Agent the sum of Two Hundred Fifty Thousand Dollars ($250,000.00) (the “Earnest Money”) in the form of an executed promissory note attached hereto as Exhibit C (the “Earnest Money Note”), to be applied for the account of Buyer as a credit against the Purchase Price (as defined in Section 3, below) following conversion of the Earnest Money Note to cash in accordance with this Section 2.  Provided that this Agreement has not been terminated prior to the expiration of the Feasibility Period (as defined in Section 4.1, below) and Buyer delivers to Seller the Approval Notice (as defined in Section 4.8, below), within two (2) Business Days following the expiration of the Feasibility Period, Buyer shall replace the Earnest Money Note held by Escrow Agent with cash and the Earnest Money Note shall be canceled and returned to Buyer.  Escrow Agent hereby agrees to hold and disburse all Earnest Money as provided for in this Agreement.  Once converted to cash, the Earnest Money will, at the option of Buyer, be invested in an interest-bearing account. When Escrow Agent disburses the Earnest Money as provided for in this Agreement, any and all interest that has accrued thereon shall be disbursed to the party entitled to the Earnest Money. After Buyer delivers its Approval Notice, the Earnest Money will be nonrefundable to Buyer except as otherwise provided in this Agreement. As used in this Agreement, the term “Business Day” means any day other than: (i) a Saturday, (ii) a Sunday, or (iii) days on which branches of national banks located in Spokane, Washington are closed.

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3.Purchase Price

The purchase price for the Property is Eight Million Seven Hundred Fifty Thousand Dollars ($8,750,000.00) (“Purchase Price”), together with Buyer’s share of closing costs and prorations, as set forth in this Agreement. At Closing (as defined in Section 6.1, below), the Earnest Money will be credited to the Purchase Price and the remainder of the Purchase Price and any fees and closing costs which Buyer is obligated to pay pursuant to this Agreement will be paid in Current Funds.  As used in this Agreement, the term “Current Funds” means wire transfers, certified funds, or a cashier’s check in a form acceptable to Escrow Agent that would permit Escrow Agent to immediately disburse such funds.  The parties acknowledge and agree that Fifty Thousand Dollars ($50,000.00) of the Purchase Price will be allocated to Personal Property at Closing.

4.Due Diligence Inspections and Title Review

.

4.1Feasibility Period

. As used in this Agreement, the term “Feasibility Period” means that period of time commencing on Mutual Execution and expiring at 5:00 p.m., local time in Spokane, Washington, sixty (60) days thereafter, or upon earlier termination of this Agreement.

4.2Review of Diligence Materials

To the extent not previously provided to Buyer, Seller shall within five (5) Business Days following Mutual Execution (or, in the case of the items set forth in subclauses (g), (j), (k), (l), (m) and (n), as promptly as practicable following Mutual Execution) make available for Buyer’s inspection copies of all items that relate to the Property (to the extent the same are in Seller’s possession or control),  including, without limitation, the following: (a) all airport impact studies; (b) a completed seller disclosure statement, as required by Revised Code of Washington 64.06; (c) operating/financial statements regarding Seller’s ownership of the Property for calendar years 2012, 2013 and 2014 year-to-date; (d) existing environmental assessment reports; (e) surveys; (f) all as-built construction plans; (g) copies of approved building permits; (h) copies of all contracts affecting the Property, including, without limitation, copies of all service contracts, equipment/furniture leases and maintenance agreements; (i) utility bills for the past six (6) months and a list of all utility deposits or bonds; (j) zoning documents; (k) planning and/or engineering plans, studies or reports; (l) soils investigation reports; (m) seismic studies; (n) any Permits; (o) valuation notices and invoices for real property taxes, personal property taxes, special assessments and any other fees, dues and taxes applicable to the Property for the past three (3) years; (p) copies of any pending or threatened Claims (as defined in Section 4.3, below) or actions relating to the Property; (q) governmental notices regarding uncured violations of laws or regulations; and (r) any contracts and any other binding legal agreements, leases (including the files, amendments, riders, licenses and guarantees, if any) and similar agreements (collectively, the “Current Diligence Materials”). Prior to the expiration of the Feasibility Period, Buyer may, in Buyer’s sole and absolute discretion and at Buyer’s sole cost and expense, obtain the following: (i) a Phase I environmental report relating to the Property (an “Environmental Report”); (ii) a survey of the Property (“Survey”); and/or (iii) except as otherwise provided in this Agreement, any additional studies, reports or surveys that Buyer may elect, in Buyer’s sole and absolute discretion (collectively, the “Additional Studies”). The Current Diligence Materials, the Environmental Reports, the Survey, and the Additional Studies are collectively referred to as the “Diligence Materials” in this Agreement.  Seller shall cooperate in good faith with Buyer in connection with Buyer’s inspection, review and procurement of the Diligence Materials.

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4.3Entry on Property

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(a)Inspections

 Up to and through the Closing Date, if this Agreement has not been terminated, Buyer, and Buyer’s agents, employees and subcontractors, will have the right during normal business hours (upon not less than twenty-four (24) hours prior written notice to Seller, with notice to be given by any permissible method delineated in Section 15.3 of this Agreement) to enter the Property to conduct such surveys, inspections, investigations and/or studies (collectively, “Inspections”) with respect to the Property as Buyer may elect.  Buyer may not, however, obtain a Phase II environmental inspection or conduct any intrusive, destructive or invasive testing, including soil borings, and sampling of materials as part of any Environmental Reports, without first obtaining the prior written consent of Seller, which consent shall be in Seller’s sole and absolute discretion, provided however, that if the results of any initial Environmental Report recommend additional, invasive or destructive testing, either as part of an environmental Phase II or otherwise, and Seller refuses to consent to such additional testing, then Seller shall be obligated to reimburse Buyer for the costs Buyer incurs in connection with obtaining all Environmental Reports, but only if Buyer elects to terminate the transaction contemplated by this Agreement prior to the expiration of the Feasibility Period.  Seller shall cooperate in good faith with Buyer in connection with Buyer’s physical inspection of the Property.

(b)Insurance

Prior to conducting any Inspections, Buyer shall provide Seller with certificate(s) of insurance evidencing: (i) worker’s compensation and employer’s liability insurance in accordance with the laws of the State of Washington, (ii) commercial general liability, and (iii) commercial auto insurance, to the extent of leased or owned vehicles. The commercial general liability policy shall (y) include insurance against assumed or contractual liability under this Agreement, with respect to all of Buyer’s activities in, or about the Property, in form reasonably acceptable to Seller, naming Seller as an additional insured; and (z) provide limits for bodily injury and property damage of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate.  To the extent Buyer or its representatives, agents or consultants (collectively, “Consultants”) own or lease vehicles, the commercial auto policy shall provide coverage for all owned, leased, hired and non-owned automobiles with a combined single limit for bodily injury and property damage of at least One Million Dollars ($1,000,000) per accident. The required limits may be satisfied through a combination of primary and umbrella policies. Umbrella policies must follow form of the underlying policies.

 (c) Indemnification

 Buyer shall indemnify, defend and hold Seller, its officers, directors, employees, agents and affiliates and the Property free and harmless from and against any and all debts, duties, obligations, liabilities, suits, claims, demands, causes of actions, damage, losses, costs and expenses (including, without limitation, reasonable legal expenses and attorneys’ fees with respect to the same or to enforce this indemnity) (collectively, “Claims”) incurred by reason of or in connection with such entry or such surveys, inspections, investigations or studies; provided, however, that Buyer’s indemnification obligation will not extend to any Claims or liabilities arising out of the discovery of any preexisting conditions of the Property.  Buyer agrees to repair any and all damage caused to the Property due to Buyer’s (or its employees or Consultants’) entry thereon and to otherwise restore the Property to its original condition existing prior to such entry. The obligations of Buyer under this Section 4.3 will survive Closing or earlier termination of this Agreement.

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4.4No Liens or Interference

 Buyer shall not permit, and shall indemnify, defend and hold harmless Seller for, from and against any and all Claims incurred by reason of or in connection with, any construction, mechanics or materialmen’s liens or any other liens that attach to the Property or any portion thereof by reason of the performance of any work or the purchase of any materials by Buyer or any other party in connection with Buyer’s inspection of the Property. The provisions of this Section will survive Closing or earlier termination of this Agreement.

4.5Review of Title

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(a)Title Report

 Within three (3) Business Days of Mutual Execution, Seller shall cause the Title Company to deliver a commitment for the Title Policy (as defined in Section 4.6, below) to Buyer. The commitment shall be accompanied by copies of all documents referred to in Schedule B of the commitment (the commitment and the documents are collectively referred to in this Agreement as the “Title Report”).

(b)Objections

 Buyer shall review the Title Report and may, on or prior to the date that is twenty (20) days from the date that Buyer receives a complete Title Report (the “Title Review Period”), provide Seller and Title Company with written notice of the title exceptions that are objectionable to Buyer, in Buyer’s sole and absolute discretion (each such objectionable matter or exception considered a “Disapproved Matter”). If Buyer timely notifies Seller and Title Company of any Disapproved Matter(s) on or prior to the expiration of the Title Review Period, Seller shall, within ten (10) days following Seller’s receipt of Buyer’s written notice of Disapproved Matter(s) (the “Seller Title Response Period”), notify Buyer and Escrow Agent that: (i) Seller will remove or correct such Disapproved Matter as of or before the Closing, or (ii) Seller will not remove or correct any or certain Disapproved Matter(s). If Seller does not respond within the Seller Title Response Period, Seller shall be deemed to have elected option (ii) above. If Seller elects, within its sole discretion, not to eliminate those objections with reference to such Disapproved Matter(s), in form and substance acceptable to Buyer, in Buyer’s sole and absolute discretion, Buyer may either (y) terminate this Agreement by delivery of written notice to Seller and Escrow Agent, or (z) give written notice to Seller and Escrow Agent, agreeing to accept title to the Property subject to such Disapproved Matters, in which case such Disapproved Matters shall be Permitted Exceptions (as defined in Section 4.5(d), below). If Buyer fails to deliver written notice in accordance with (y) or (z) above, Buyer shall be deemed to have elected option (y) above, in which case this Agreement shall terminate on the day that is five (5) Business Days after at the expiration of the Seller Title Response Period.

(c)Supplements; Amendments

  If the Title Company issues a supplement or amendment to the Title Report showing additional title exceptions (each, an “Amended Report”), Buyer will have ten (10) days from the date of receipt of each Amended Report and a copy of each document referred to in the Amended Report in which to give notice of its acceptance of or objection to additional Disapproved Matter(s). If Buyer provides Seller and Escrow Agent with notice of the basis of objection of the status of Seller’s title as shown on the Amended Report, Seller will have the option to cure such Disapproved Matters within five (5) days thereafter or prior to Closing, whichever is sooner. If Seller elects, within its sole discretion, not to timely eliminate the additional Disapproved Matters on or before Closing, in form and substance acceptable to Buyer, in its sole and absolute discretion, Buyer may either (i) terminate this Agreement by delivery of written notice to Seller and Escrow Agent, or (ii) give written notice to Seller and Escrow Agent, agreeing to accept title to the Property subject to such additional Disapproved Matters. If Buyer fails to deliver written notice in accordance with (i) or (ii) above, Buyer shall be deemed to have elected option (i) above, in which case this Agreement shall terminate on the day that is the earlier to occur of (y) five (5) days after the date of receipt of the latest Amended Report, or (z) the scheduled Closing Date.

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(d)Failure to Provide Written Acceptance

  Any title matter that Buyer accepts in writing will be a “Permitted Exception.” Notwithstanding the foregoing, Buyer will not be required to disapprove or object to, and Seller covenants to remove as an encumbrance against title to the Property on or prior to Closing, any deeds of trust, monetary liens or monetary encumbrances (except for real property taxes and assessments not delinquent), and any exceptions for claims of liens for labor or materials furnished or supplied to the Property or any portion of the Property. If Buyer does not provide written acceptance of an exception to title as disclosed by the Title Report or an Amended Report within the applicable time period, Buyer will be deemed to have objected to such matter. If this Agreement is terminated due to Seller’s failure or inability to cure any Disapproved Matters under this Section 4.5, Escrow Agent shall immediately remit the Earnest Money to Buyer, together with any other funds, documents or instruments that Buyer has deposited with Escrow Agent, and neither party will have any further obligation to the other, except those obligations that expressly survive the termination of this Agreement.

4.6Title Policy

At the Closing, Seller shall convey to Buyer marketable and insurable fee simple title to the Real Property, subject only to the Permitted Exceptions, by duly executed and acknowledged statutory warranty deedin the form attached as Exhibit D (“Deed”).   Evidence of delivery of marketable and insurable fee simple title will be the issuance by Title Company to Buyer of an ALTA extended owner’s policy of title insurance (or if Buyer does not elect, in Buyer’s sole discretion, to obtain an ALTA extended owner’s policy, then the issuance of a standard ALTA owner’s policy of title insurance) in the amount of the Purchase Price, insuring fee simple title to the Real Property in Buyer, subject only to Permitted Exceptions (“Title Policy”).

4.7Contracts; Sale-Leaseback Lease

 Prior to the expiration of the Feasibility Period, Buyer shall notify Seller of any contracts affecting the Property which Buyer will agree to assume at Closing, as determined by Buyer in Buyer’s sole and absolute discretion.  Seller must, on or before Closing, terminate any such contracts not expressly agreed to be assumed by Buyer, and Seller shall give notices of termination for all contracts not agreed to be assumed by Buyer no later than the Closing.  During the Feasibility Period, the parties shall use commercially reasonable efforts to negotiate a customary form lease to be entered into by the parties at Closing for purposes of providing Seller with additional time to relocate its business and vacate the Improvements and the Real Property (the “Sale-Leaseback Lease”), provided that the failure of the parties to agree upon a form Sale-Leaseback Lease prior to the expiration of the Feasibility Period shall in no way be construed to be a condition requiring satisfaction prior to the parties being obligated to close the transaction contemplated by this Agreement, and if the parties cannot timely agree upon a form Sale-Leaseback Lease, Seller shall, subject to its unilateral right to extend the Closing Date (as described in Section 6.1), be obligated to vacate the Property prior to Closing.  Other than the Sale-Leaseback Lease, Seller shall terminate any and all leases affecting the Property, if any, as of the Closing Date.

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4.8Right to Terminate Prior to Expiration of Feasibility Period

 Notwithstanding anything contained in this Agreement to the contrary, Seller acknowledges and understands that Buyer may, prior to the expiration of the Feasibility Period, notify Seller in writing that Buyer elects to terminate this Agreement as a result of any matter or no matter as determined by Buyer, in Buyer’s sole and absolute discretion. Seller acknowledges that Buyer has the right to so terminate this Agreement, regardless of whether Seller would be willing or able to cure any matter to which Buyer has objected. If Buyer elects, in its sole and absolute discretion, to proceed with this transaction, Buyer shall send a written approval notice to Seller and Escrow Agent on or before the expiration of the Feasibility Period (the “Approval Notice”).  If Buyer fails to send an Approval Notice to Seller and Escrow Agent by the expiration of the Feasibility Period, Buyer will be deemed to have elected to terminate this Agreement.  Buyer may also terminate this Agreement by sending written notice of termination to Seller on or before the expiration of the Feasibility Period.  If this Agreement is terminated as provided in this Section, Escrow Agent shall immediately remit the Earnest Money to Buyer and neither party will have any further obligation to the other, except those obligations that expressly survive the termination of this Agreement. After the Approval Notice is sent by Buyer, the Earnest Money will not be refundable to Buyer unless (i) Seller defaults under the terms and conditions of this Agreement, (ii) a condition to Closing for the benefit of Buyer is not satisfied or waived in writing by Buyer, or (iii) any other event occurs which entitles Buyer to the Earnest Money pursuant to the terms of this Agreement.

5.Conditions Precedent

.  Notwithstanding any provision of this Agreement to the contrary, Buyer’s obligation to close under this Agreement shall be subject to and conditioned upon the fulfillment of each and all of the following conditions precedent:

5.1           All of the documents required to be delivered by Seller to Buyer or Escrow Agent at Closing pursuant to the terms and conditions hereof shall have been delivered;

5.2           Each of the representations of Seller set forth in Section 7 shall be true in all respects as of the Closing Date;

5.3           At Closing, and subject only to Buyer’s payment of the applicable additional premium, if any, the Title Company shall be irrevocably committed to issue the Title Policy in the form described herein;

5.4           Buyer has timely delivered the Approval Notice;

5.5           Neither the Property, Seller, nor Buyer shall be subject to any court or other similar action preventing, restraining, enjoining, or otherwise prohibiting the consummation of the transaction contemplated by this Agreement;

5.6           The due performance by Seller of each and every undertaking and agreement to be performed by Seller hereunder;

5.7           No Condemnation Event (as defined in Section 11, below) shall have occurred with respect to the Property following Buyer’s delivery of the Approval Notice; and

5.8           There has been no spill of Hazardous Substances on the Property that occurred after the expiration of the Feasibility Period.

If any condition specified in this Section 5 is not satisfied on or before Closing, Buyer may, at its option, (i) waive such condition on or before the Closing Date and proceed to Closing, (ii) terminate this Agreement by written notice thereof to Seller and receive a refund of the Earnest Money, or (iii) if the failure of the condition is due to a breach by Seller hereunder, pursue any of its remedies under Section 13 of this Agreement. By Closing the transaction contemplated hereby, Buyer shall be conclusively deemed to have waived the benefit of any remaining unfulfilled conditions set forth in this Agreement, except for any obligation of Seller which specifically survives the Closing under the terms of this Agreement.

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6.Closing

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6.1Closing Date and Location

  The consummation of the transaction contemplated in this Agreement (“Closing”) shall occur at the offices of Escrow Agent on the day (“Closing Date”) that is sixty (60) days following the date on which Buyer delivers the Approval Notice, or at such earlier time and place as may be agreed to by the parties in writing.  Notwithstanding anything in this Agreement to the contrary, if the parties are unable to agree upon a form Sale-Leaseback Lease prior to the expiration of the Feasibility Period, then Seller shall have the unilateral right to extend the Closing Date to a date that is no later than March 31, 2015 (the “Outside Closing Date”), provided however, that in order for Seller to properly avail itself of such extension right Seller must provide Buyer with written notice at least thirty (30) days prior to the Closing Date of Seller’s intention to so extend the Closing Date to a date that is no later than the Outside Closing Date.

6.2Closing Costs and Prorations

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(a)Closing Fees

  At Closing, Seller and Buyer shall each pay one-half (1/2) of the escrow fees.  Any recording fees, Spokane County transfer tax, real estate excise tax, or similar property transfer taxes and fees will be the sole responsibility of Seller.  Buyer shall be solely responsible for and shall pay any sales and use taxes applicable to the Personal Property.  Each party must pay its own attorneys’ fees incurred with respect to this transaction.

(b)Title Policy

 For the Title Policy, Seller shall pay the cost of an ALTA standard owner’s title policy, and Buyer shall pay the additional cost necessary for any ALTA extended policy Buyer elects to acquire. Buyer shall also pay the cost of any and all endorsements to the Title Policy unless provided by Seller to clear a Disapproved Matter, in which case Seller shall be responsible for the cost of such endorsements.

(c)Taxes and Fees

 Real estate taxes for the year of Closing and annual municipal or special district assessments (on the basis of the actual fiscal tax years for which such taxes are assessed), lienable water and sewer rentals, license, or permit and inspection fees, if any, will be apportioned as of the Closing Date between Buyer and Seller. If the tax bill for the real estate tax year in which the Closing occurs has not been issued on or before the day prior to the Closing Date, the apportionment of taxes will be computed based upon the most recent tax bill available, and then reconciled after Closing based on the actual taxes due. If, on the day prior to the Closing Date, bills for the real estate taxes imposed upon the Property for the real estate tax year in which Closing occurs have been issued but have not been paid, such taxes shall be paid at the time of Closing.

(d)Other Apportionments

 Amounts payable, or prepaid, under the contracts assumed by Buyer and other Property operation and maintenance expenses and other recurring costs will be apportioned as of the Closing Date.  Seller shall pay all sums due in connection with the termination of any contracts not expressly assumed by Buyer, and any and all leases.  Seller shall be entitled to a refund of any deposits posted by Seller in connection with any contracts assumed by Buyer.

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(e)Utility Readings

 Seller shall use reasonable efforts to obtain readings of the utility meters on the Property to a date no sooner than two (2) Business Days prior to the Closing Date. At or prior to Closing, Seller shall pay all charges based upon such meter readings. However, if after reasonable efforts Seller is unable to obtain readings of any meters prior to Closing, Closing will be completed without such readings and upon the obtaining of such readings after Closing, Seller shall promptly pay the pre-Closing charges as reasonably determined by Seller and Buyer based upon post-Closing readings.

(f)Preliminary Closing Adjustment

Seller and Buyer shall cooperate with Escrow Agent to prepare a preliminary closing statement (“Closing Statement”) at least two (2) Business Days prior to the Closing Date. All apportionments and prorations provided for in this Section 6.2 to be made as of the Closing Date will be made, on a per diem basis, as of 11:59 p.m. on the Closing Date.  The preliminary Closing Statement and the apportionments or prorations reflected therein will be based upon actual figures to the extent available. If any of the apportionments or prorations cannot be calculated accurately based on actual figures on the Closing Date, then (other than with respect to determination of real estate taxes that will be computed as set forth in subsection 6.2(c)) they will be calculated based on Seller’s and Buyer’s good faith estimates thereof, subject to reconciliation as provided in the following Section.

(g)Post-Closing Reconciliation

 If there is an error on the preliminary Closing Statement or, if after the actual figures are available as to any items that were estimated on the preliminary Closing Statement (including, without limitation, real estate taxes), it is determined that any actual proration or apportionment varies from the amount thereof reflected on the final Closing Statement, the proration or apportionment will be adjusted based on the actual figures as soon as feasible. Either party owing the other party a sum of money based on such subsequent proration(s) shall promptly pay said sum to the other party.

(h)Other Costs and Survival

 All other costs not addressed within this Section 6.2 shall be paid in accordance with the custom in Spokane County. The provisions of this Section 6.2 shall survive Closing.

6.3Deliveries at Closing

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(a)Deliveries by Seller

At Closing, Seller shall execute and deliver all documents reasonably necessary to effect and complete the Closing, including, but not limited to, the following:

(1)The Deed.

(2)A non-foreign affidavit for purposes of compliance with Section 1445(b)(2) of the Internal Revenue Code of 1986, as amended (“Code”), and the regulations adopted thereunder.

(3)A counterpart original of the Bill of Sale for the Personal Property, in the form attached to this Agreement as Exhibit E.

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(4)A counterpart original of the Assignment and Assumption Agreement in the form attached to this Agreement as Exhibit F for the Permits, and the contracts Buyer agreed to assume pursuant to Section 4.7, if any.

(5)A counterpart original of the Sale-Leaseback Lease, if agreed upon by the parties prior to the expiration of the Feasibility Period.

(6)Any and all original contracts and Permits affecting the Property being assigned to Buyer, if any.

(7)All keys and/or means to operate all locks and alarms on or in the Real Property or Improvements.

(8)An owner’s affidavit and such other documentation as Escrow Agent may reasonably require in order for the Title Policy to provide mechanics lien coverage, or may otherwise be required to close the escrow and consummate the purchase of the Property in accordance with the terms of this Agreement.

(b)Deliveries by Buyer

.  On the Closing Date, Buyer shall execute and deliver all documents reasonably necessary to effect and complete the Closing, including, but not limited to, the following:

(1)The amounts required under Sections 3 and 6.2 in Current Funds.

(2)A counterpart original of the Bill of Sale for the Personal Property, in the form attached to this Agreement as Exhibit E.

(3)A counterpart original of the Assignment and Assumption Agreement in the form attached to this Agreement as Exhibit F.

(4)A counterpart original of the Sale-Leaseback Lease, if agreed upon by the parties prior to the expiration of the Feasibility Period.

(5)Such documentation as Escrow Agent may reasonably require, or may otherwise be required to close the escrow and consummate the purchase of the Property in accordance with the terms of this Agreement.

(c)Actions of Escrow Agent

.  When the foregoing provisions of this Section have been consummated, at the Closing the Escrow Agent shall:

(1)Prepare the Closing Statement and obtain signed copies from Seller and Buyer.

(2)Record the Deed.

(3)Deliver the balance of the Purchase Price in Current Funds to Seller, net of Seller’s costs, fees, and prorates.

(4)Issue and deliver the Title Policy to Buyer.

(5)Deliver the above referenced documents to the applicable party.

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7.Representations and Warranties of Seller

In addition to the representations and warranties contained in other sections of this Agreement, Seller makes the representations and warranties to Buyer set forth in this Section 7.  Each representation and warranty: (i) is material and relied upon by Buyer; (ii) is true in all respects as of Mutual Execution; (iii) will be true in all respects on the Closing Date; and (iv) will survive Closing for a period of twelve (12) months.  For purposes of this Section 7, the phrase “Seller’s knowledge” and similar phrases shall mean and refer to the actual knowledge of Lisa Netz and Ben Erickson without investigation.

7.1Binding Agreements/Authority/Conflicts

 This Agreement and all exhibits and documents to be delivered by Seller pursuant to Section 6.3(a) of this Agreement have been duly executed and delivered by Seller and constitute the valid and binding obligations of Seller, enforceable in accordance with their terms. Seller has all necessary authority, and has taken all action necessary to enter into this Agreement, to consummate the transactions contemplated hereby, and to perform its obligations hereunder. The execution, delivery, and performance of this Agreement by Seller will not conflict with or constitute a breach or default under (i) the organizational documents of Seller; (ii) any material instrument, contract, or other agreement to which Seller is a party which affects the Property; or (iii) any statute or any regulation, order, judgment, or decree of any court or Governmental Authority.

7.2Non-foreign Status

 Pursuant to § 1445 of the Code, Seller is not a foreign person or nonresident alien as defined within that Code section.  Seller understands that the Buyer may disclose this warranty to the Internal Revenue Service.

7.3Proceedings and Litigation

 There are no existing suits, claims, proceedings or actions with respect to any aspect of the Property nor, to Seller’s knowledge, have any such actions, suits, proceedings or claims been threatened or asserted.

7.4Condemnation; Access

There is no pending or, to Seller’s knowledge, threatened condemnation affecting the Property. There is no pending or, to Seller’s knowledge, threatened proceeding that would adversely affect access to the Property.

7.5Seller Sole Owner

Seller is the sole fee owner of the Personal Property and has good and marketable title thereto.

7.6No Contracts or other Sale Commitments

 Except for this Agreement, with respect to the Property, Seller is not a party to any other contract or agreement providing for the sale or other conveyance of any of the Property, or any portion thereof.

7.7Seller’s Performance

Seller is not in default under any contract, lease or other agreement affecting the Property to which Seller is a party, and no event, condition or occurrence exists which, after notice or lapse of time, or both, would constitute such a default by Seller of any of the foregoing. Seller has furnished or made available to Buyer true and correct copies of all documents required to be delivered by Seller to Buyer pursuant to this Agreement.

7.8No Liens on Personal Property

 As of the Closing Date, the Personal Property will be free and clear of all liens, encumbrances, claims, rights, demands, easements, leases, agreements, assessments, covenants, conditions, and restrictions of any kind or character (including, without limitation, liens or claims for mortgages, or other title retention agreements, deeds of trust, security agreements, and pledges) except for the Permitted Exceptions.

7.9Governmental Consents

 No violations are or have been recorded in respect of any Permits and no proceedings are pending or otherwise threatened, concerning the revocation or limitation of any such Permit. There is no governmental or public action pending or threatened in writing, or, to Seller’s knowledge, otherwise threatened that would limit or affect operation of the Property.

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7.10Governmental Compliance

Seller has not received written notice of any violation of any statute, law, ordinance or regulation of any Governmental Authority that would require remedial action by Seller or would require repairs or alterations to the Property or any portion of the Property. To Seller’s knowledge, the Property is not in violation of any statute, law, ordinance or regulation of any Governmental Authority.

7.11Environmental/Hazardous Substances

 To Seller’s knowledge, and except for normal quantities of cleaning and maintenance materials commonly used in connection with the operation and maintenance of properties similar to the Property, no Hazardous Substances (defined below) have been discharged or stored on, under or about the Property. To Seller’s knowledge, Seller has not received written notice of violation, administrative complaint, judicial complaint, or other notice (i) alleging that conditions on the Property are or have been in violation of any Environmental Law, (ii) informing Seller that the Property is subject to investigation or inquiry regarding the presence of Hazardous Substances on or about the Property, or (iii) alleging the potential violation of any Environmental Law.

As used in this Agreement, the term “Environmental Law” means any federal, state or local law, statute, ordinance, or regulation pertaining to health, industrial hygiene, or environmental conditions, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901, et seq.; the Toxic Substances Control Act of 1976, 15 U.S.C. § 2601, et seq.; the Superfund Amendments and Reauthorization Act of 1986, Title III, 42 U.S.C. § 1101, et seq.; the Clean Air Act, 41 U.S.C. § 7401, et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251, et seq.; The Safe Drinking Water Act, 41 U.S.C. § 300f, et seq.; the Solid Waste Disposal Act, 42 U.S.C. § 3251, et seq.; and any other federal, state or local law, statute, ordinance, or regulation now in effect or hereinafter enacted which pertains to health, industrial hygiene, or the regulation or protection of the environment, including without limitation, ambient air, soil, groundwater, surface water, or land use.

As used in this Agreement, the term “Hazardous Substance” means any chemical, material, waste, substance, controlled substance, pollutant, object, condition, contaminant, living organisms or any combination thereof which may or could pose a risk of injury or threat to health or the environment, including, without limitation: (i) those substances included within the definitions of “hazardous substance”, “hazardous waste”, “hazardous material”, “toxic substance”, “solid waste”, or “pollutant or contaminant” in or otherwise regulated by, any Environmental Law; (ii) those substances listed in the United States Department of Transportation Hazardous Materials Table (49 C.F.R. 17.101, including appendices and amendments thereto), or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 C.F.R. Part 302 and amendments thereto); (iii) such other substances, materials, or wastes which are or become regulated or classified as hazardous or toxic under any Environmental Law; and (iv) any material, waste, or substance which is (A) petroleum or refined petroleum products; (B) asbestos in any form; (C) polychlorinated biphenyls; (D) flammable explosives; (E) radioactive materials; (F) radon; (G) lead; or (H) Mold. As used in this Agreement, the term “Mold” means any mold, mildew or fungi (living or dead) or their mycotoxins, spores or other byproducts present in a quantity, of a type, or in such manner, as to pose a potential risk to human health or a potential violation of any Environmental Laws or to indicate significant impairment to the structure where the mold, mildew, fungi or their mycotoxins, spores or other byproducts exist.

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7.12Bankruptcy or Insolvency

Seller is not insolvent, and Seller has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by Seller’s creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of Seller’s assets, (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Seller’s assets, (v) admitted in writing its inability to pay its debts as they become due, or (vi) made an offer of settlement, extension or composition to its creditors generally.

7.13Anti-Terrorism Laws

 Neither Seller nor any of its shareholders, officers or directors, is a “Prohibited Person” or “Specifically Designated National and Blocked Person” under the Anti-Terrorism Laws (hereinafter defined). As used herein, the term “Anti-Terrorism Laws” means any and all present and future judicial decisions, statutes, ruling, rules, regulations, permits, certificates, orders and ordinances of any Governmental Authority relating to terrorism or money laundering including, without limiting the generality of the foregoing, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Pub. L. No. 107-56); the Trading with the Enemy Act (50 U.S.C.A. App. 1 et seq.); the International Emergency Economic Powers Act (50 U.S.C.A. § 1701-06); Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (relating to “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism”) and the United States Treasury Department’s Office of Foreign Assets Control list of “Specifically Designated National and Blocked Persons” (as published from time to time in various mediums).

7.14Brokers

.Except as set forth in Section 14, no real estate broker or any other commission agent(s) are owed fees or commissions with respect to the sale(s) transaction contemplated in this Agreemen

8.Covenants of Seller

.

8.1Normal Operations

 From and after Mutual Execution, Seller shall not: (i) execute, modify, terminate or approve any contracts or commitments of any kind affecting the Property or any interest therein without Buyer’s written approval, which may be granted or withheld in Buyer’s sole and absolute discretion, except that Seller shall be entitled to enter into a new contract without Buyer’s written approval in an emergency situation, provided that such contract is at a market rate and is terminable without cause and without penalty on not more than thirty (30) days’ notice; (ii) execute any leases affecting the Property; or (iii) encumber the Property with any liens, encumbrances or other instruments which appear on title or which secure a monetary obligation. Until possession is delivered to Buyer, Seller agrees, at its sole cost and expense, to maintain and keep the Property in not less than the same order and condition as on Mutual Execution, and to operate the Property in the same manner as prior to Mutual Execution as if Seller were retaining the Property.

8.2Insurance

 Until the Closing Date, Seller shall maintain substantially the same liability, casualty, and all other insurance on the Property, if any, as is in effect as of the date of Mutual Execution.

8.3Indemnification

 Except as specifically stated herein, Seller hereby agrees to indemnify, protect, defend, save and hold Buyer and, as the case may be, its partners, trustees, managers, members, officers, employees and agents (“Buyer Indemnified Parties”) harmless from and against any and all Claims made by a third party not affiliated with Seller against any Buyer Indemnified Parties (i) arising from leases, contracts or other agreements entered into during Seller’s ownership of the Property and resulting from an occurrence prior to the Closing; (ii) arising from the ownership, operation, maintenance and management of the Property during Seller’s ownership and resulting from an occurrence prior to the Closing; and (iii) resulting from a breach by Seller of representations and warranties expressly made by Seller in this Agreement.  The provisions of this Section 8.3 will survive Closing or the earlier termination of this Agreement.

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8.4Continuing Representations and Warranties

 Until the Closing Date, promptly upon the occurrence of, or upon Seller becoming aware of an impending or threatened occurrence of, any event which would cause or constitute a material breach of this Agreement, or which would have caused or constituted a breach had such event occurred prior to the date hereof, of any of the representations or warranties of Seller contained in or referred to in this Agreement or in any exhibit to this Agreement, Seller shall give detailed written notice thereof to Buyer and shall use its reasonable efforts to prevent or promptly remedy the same.

9.Buyer’s Representations and Warranties

 In addition to the representations and warranties contained in other sections of this Agreement, Buyer makes the representations and warranties to Seller set forth in this Section 9.  Each representation and warranty: (i) is material and relied upon by Seller; (ii) is true in all respects as of Mutual Execution; (iii) unless noticed by Buyer to Seller, will be true in all respects on the Closing Date; and (iv) will survive Closing for a period of twelve (12) months.

9.1Authority/Binding Agreements

  This Agreement and all exhibits and documents to be delivered by Buyer pursuant to this Agreement have been duly executed and delivered by Buyer and constitute the valid and binding obligations of Buyer, enforceable in accordance with their terms. Buyer has the legal right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance of this Agreement have been duly authorized and no other action by Buyer is requisite to the valid and binding execution, delivery and performance of this Agreement. The execution, delivery and performance of this Agreement by Buyer will not conflict with or constitute a breach or default under (i) the organizational documents of Buyer, (ii) any material instrument, contract or other agreement to which Buyer is a party; or (iii) any statute or any regulation, order, judgment or decree of any court of Governmental Authority.

9.2Anti-Terrorism Laws

 Neither Buyer nor any of its shareholders, officers or directors, is a “Prohibited Person” or “Specifically Designated National and Blocked Person” under the Anti-Terrorism Laws.

9.3Brokers

  Except as set forth in Section 14, no real estate broker or any other commission agent(s) are owed fees or commissions with respect to the sale(s) transaction contemplated in this Agreement.

10.AS IS  Except for the representations and warranties of Seller set forth in this Agreement, the Deed and in any document executed and delivered by Seller in connection with the transactions contemplated in this Agreement, Buyer is purchasing the Property AS IS, WHERE IS, AND WITH ALL FAULTS and, except as specifically stated herein, without any representations or warranties of any kind whatsoever, express or implied, by Seller, including any representations regarding the use, condition or value of the Property or any implied warranties of merchantability, habitability and/or fitness for a particular purpose.

11.Damage or Destruction; Condemnation

 Risk of loss resulting from any condemnation or eminent domain proceeding that is commenced or has been threatened before the Closing, and risk of loss to the Property due to fire, flood, or any other cause before Closing, will remain with Seller.  If before Closing the Property or any portion thereof is damaged in an amount aggregating in excess of Two Hundred Fifty Thousand Dollars ($250,000), or if the Property or any portion thereof is subjected to a threat of condemnation or becomes the subject of any proceedings, judicial, administrative, or otherwise, with respect to the taking by eminent domain or condemnation, then Buyer may terminate this Agreement by written notice to Seller sent within fifteen (15) days after Buyer learns of the damage or taking, in which event the Earnest Money will be returned to Buyer, and no party will have any further obligation to the other, except those obligations that expressly survive the termination of this Agreement.  If the Closing Date is within the fifteen (15) day period, then Closing will be extended to the next Business Day following the end of the fifteen (15) day period.  If no such election is made by Buyer, (i) this Agreement will remain in full force and effect, (ii) the purchase of the Property, less any interest taken by eminent domain or condemnation, will be effected with no further adjustment, (iii) upon Closing, Seller shall assign to Buyer all of the right, title, and interest of Seller in and to any awards that have been or may thereafter be made for such taking, and (iv) Seller shall assign to Buyer any insurance proceeds that may thereafter be made for such damage or destruction, giving Buyer a credit at Closing for any deductible under the relevant insurance policies.

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12.Default by Buyer; Liquidated Damages

 SHOULD THE PURCHASE AND SALE TRANSACTION CONTEMPLATED IN THIS AGREEMENT FAIL TO BE CONSUMMATED ACCORDING TO THE TERMS OF THIS AGREEMENT SOLELY BY REASON OF ANY DEFAULT OF BUYER, SELLER WILL BE RELIEVED OF ANY OBLIGATION TO SELL THE PROPERTY TO BUYER, SELLER WILL NOT HAVE ANY RIGHT TO SEEK OR OBTAIN SPECIFIC ENFORCEMENT OF THIS AGREEMENT, AND, AS SELLER’S SOLE AND EXCLUSIVE REMEDY AT LAW OR IN EQUITY FOR SUCH DEFAULT, THE EARNEST MONEY WILL BE IMMEDIATELY DISBURSED AND RETAINED BY SELLER AS LIQUIDATED DAMAGES AND AS CONSIDERATION FOR SELLER KEEPING THE PROPERTY OFF OF THE MARKET FOR SALE TO OTHERS.  BUYER AND SELLER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO FIX THE ACTUAL DAMAGES THAT SELLER MIGHT SUFFER IN THE EVENT OF BUYER’S DEFAULT HEREUNDER. BUYER AND SELLER AGREE THAT THE AMOUNT OF LIQUIDATED DAMAGES PROVIDED FOR IN THIS SECTION IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES.

  Seller’s Initials:  /s/ PBL     Buyer’s Initials:  /s/ PSD

13.Default by Seller; Remedies

If Seller is unable to convey title, subject to and in accordance with this Agreement, Buyer may, at its election (i) obtain a prompt refund of the Earnest Money and be promptly reimbursed by Seller of all of Buyer’s actual documented out-of-pocket costs it incurs with respect to its pursuit of the Property in an aggregate amount not to exceed Fifty Thousand Dollars ($50,000); or (ii) bring an action for specific performance. Buyer’s remedies are non-cumulative and the exercise of one remedy by Buyer will preclude the exercise of any other remedy.

14.Brokerage

 Seller has engaged Gary Griff of Cushman & Wakefield, Inc. as Seller’s broker in this transaction (“Seller’s Broker”).  Buyer has engaged Chris Siemens of Windermere Real Estate/City Group LLC (“Buyer’s Broker”).  Seller will be solely responsible for any commission or other sum due or owing to Seller’s Broker and Buyer’s Broker at Closing pursuant to the Listing Agreement between Seller and Seller’s Broker dated September 11, 2013, which commission shall be equally split between Seller’s Broker and Buyer’s Broker.  Seller and Buyer hereby agree to indemnify and hold each other harmless for, from and against any and all Claims incurred by reason of or in connection with any claim for fees, compensation, or other charges relating in any way to the transaction contemplated in this Agreement, or the consummation thereof, which may be made by any other person, firm, or entity as the result of any acts or the acts of Seller or Buyer or their respective representatives.

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15.Miscellaneous

.

15.1Attorneys’ Fees

 Should any party hereto bring any action against any other party related in any way to this Agreement, the substantially prevailing party will be awarded its or their reasonable attorneys’ fees and costs incurred for prosecution, defense, consultation, hiring of experts or advice in connection with such action, and any such attorneys’ fees or costs executing upon or appealing any judgment.

15.2Escrow Agent

 Escrow Agent hereby accepts its designation as Escrow Agent under this Agreement and agrees to hold and disburse the Earnest Money as provided in this Agreement. The provisions hereof will constitute joint instructions to the Escrow Agent to consummate the purchase in accordance with the terms and provisions hereof; provided, however, that the parties shall execute such additional escrow instructions, not inconsistent with the provisions hereof, as may be deemed reasonably necessary to carry out the intentions of the parties as expressed herein. The provisions of this Section will survive the Closing or termination of this Agreement.

15.3Notices

All notices or other written communications hereunder shall be deemed to have been properly given (i) upon delivery, if delivered in person or by facsimile transmission with receipt of an electronic confirmation thereof, (ii) upon email transmission, provided a copy of any notice given by email transmission is also subsequently mailed to the receiving party in accordance with the terms of this Section 15.3, (iii) one (1) Business Day after having been deposited for overnight delivery with any reputable overnight courier service, or (iv) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the U.S. Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

If to Buyer:	Northwest Farm Credit Services, FLCA Attn:  Stacy D. Lavin, Esq. 1700 S. Assembly Street P.O. Box 2515 Spokane, WA 99220-2515 Fax:  509.340.5702 Email: Stacy.Lavin@northwestfcs.com
with a copy to:	Lukins & Annis, P.S. Attn: Tyler J. Black, Esq. 717 W. Sprague Avenue, Suite 1600 Spokane, Washington  99201 Fax:  509.363.2487 Email:  tblack@lukins.com
If to Seller:	Ambassadors Group, Inc. Attn:  Lisa Netz Dwight D. Eisenhower Building 2001 S. Flint Road Spokane, WA 99224 Fax:  509.590.4349 Email: lisa.netz@peopletopeople.com
And to:	Ambassadors Group, Inc. Attn:  Marie Rice Dwight D. Eisenhower Building 2001 S. Flint Road Spokane, WA 99224 Fax:  509.590.4349 Email:  marie.rice@peopletopeople.com
with a copy to:	Bartlit Beck Herman Palenchar & Scott LLP Attn:  Thomas R. Stephens, Esq. 1899 Wynkoop Street, Suite 800 Denver, Colorado 80202 Fax:  303.592.3140 Email:  thomas.stephens@bartlit-beck.com
If to Escrow Agent:	First American Title Insurance Company Attn: Dawn McClenahan 40 E. Spokane Falls Boulevard Spokane, WA 99202 Fax:  509.690.8931 Email: dmcclenahan@firstam.com

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15.4Governing Law/Venue

The laws of the State of Washington govern the enforcement, and interpretation of this Agreement.  The venue for any action related to this Agreement shall be in Spokane County, Washington.

15.5Integration; Modification; Waive

 This Agreement, exhibits, and closing documents executed and delivered pursuant to this Agreement constitute the complete and final expression of the agreement of the parties relating to the Property. This Agreement cannot be modified, or any of the terms hereof waived, except by an instrument in writing (referring specifically to this Agreement) executed by the parties.

15.6Counterpart Execution

This Agreement may be executed in several counterparts, and delivered via facsimile or other electronically transmitted means, each of which will be fully effective as an original and all of which together will constitute one and the same instrument.

15.7Headings; Construction

 The headings used throughout this Agreement have been inserted for convenience of reference only and do not constitute matters to be construed in interpreting this Agreement. Words of any gender used in this Agreement will be construed to include any other gender, and words in the singular number will be construed to include the plural, and vice versa, unless the context requires otherwise. The words “herein,” “hereof,” “hereunder,” and other similar compounds of the word “here” when used in this Agreement refer to the entire Agreement and not to any particular provision or section.

15.8Deadlines and Dates

 Any deadline, unless otherwise set forth in this Agreement, will expire at 5:00 p.m., local time in Spokane, Washington. Should any deadline or date in this Agreement fall on a day other than a Business Day, such deadline or date will be extended until 5:00 p.m., local time in Spokane, Washington, on the next Business Day; provided that, if a Closing would be scheduled to occur on a Saturday, Sunday or holiday or the first Business Day after a Saturday, Sunday or holiday, that Closing shall be delayed until the second Business Day after such Saturday, Sunday or holiday. The time periods in this Agreement shall be computed by excluding the first day of such period and including the last day of such period.

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15.9Severability

 If for any reason any provision of this Agreement, or the applicability of any such provision to a specific situation, is determined by a tribunal of competent jurisdiction to be legally invalid or unenforceable, the validity of the remainder of the Agreement will not be affected and such provision will be modified or deemed modified to the minimum extent necessary to make such provision valid and enforceable with applicable law and, in its modified form, such provision will then be enforceable and enforced.

15.10Time of the Essence

 Time is of the essence of this Agreement and of the obligations of the parties to purchase and sell the Property, it being acknowledged and agreed by and between the parties that any delay in effecting a closing pursuant to this Agreement may result in loss or damage to the party in full compliance with its obligations hereunder.

15.11Binding Effect

 This Agreement is binding upon and inures to the benefit of Seller and Buyer, and their respective successors and permitted assigns.

15.12Further Acts

 In addition to the acts recited in this Agreement to be performed by Seller and Buyer, Seller and Buyer agree to perform or cause to be performed at the Closing or after the Closing any and all such further acts as may be reasonably necessary to consummate the transactions contemplated in this Agreement.

15.13Assignment

 Neither party may assign its right or obligations under this Agreement without first obtaining the prior written consent of the other party, which consent may be granted or withheld in the non-requesting party’s sole and absolute discretion.

15.141031 Exchange

 The parties agree to cooperate with each other in all reasonable matters necessary to effect a tax-deferred exchange pursuant to Code Section 1031; provided that any such exchange shall not delay Closing. Seller and Buyer will not incur any additional liability or financial obligation as a consequence of such other party’s contemplated exchange, and Buyer and Seller agree to defend and hold each other harmless for, from and against any Claims that may arise from the participation therein.

15.15Sole Discretion

Where either party hereto is given the right to exercise its sole and absolute discretion, neither the other party nor any court, arbitrator, third party, or board will have the right to challenge said exercise, whether reasonable or unreasonable, on any grounds whatsoever.

15.16Disclaimer – Preparation of Agreement

  This Agreement has been negotiated by the parties.  Buyer and Seller agree that no presumption will apply in favor or against any party in respect of the interpretation or enforcement of this Agreement.  Each party is advised to have this Agreement reviewed by independent legal and tax counsel prior to its execution. By executing this Agreement, each party represents that: (i) it has read and understands this Agreement; (ii) it has had the opportunity to obtain independent legal and tax advice regarding this Agreement; and (iii) it has obtained such independent advice or has freely elected not to do so.

[signature page follows]

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IN WITNESS WHEREOF, the parties have executed the foregoing Agreement as of the date written on this signature page.

BUYER:   NORTHWEST FARM CREDIT SERVICES, FLCA, a federal land credit association       By:           /s/ Phil DiPofi Name:  Phil DiPofi Its:           President Chief Executive Officer   Date:           August 5, 2014         SELLER:   AMBASSADORS GROUP, INC., a Delaware corporation       By:            /s/ Philip B. Livingston Name:            Philip B. Livingston Its:            Interim CEO     Date:            August 6, 2014          

This Real Property Purchase and Sale Agreement with Escrow Instructions, together with the earnest money deposit, is hereby acknowledged and accepted and the escrow is opened as of August 7, 2014.  Escrow Agent hereby agrees to act as “the person responsible for closing” the purchase and sale transaction contemplated in this Agreement within the meaning of Section 6045(e) of the Internal Revenue Code of 1986, as amended, and to file all forms and returns required thereby.

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FIRST AMERICAN TITLE INSURANCE COMPANY

By:           /s/ Dawn R. McClenahan                                                      

Name:           Dawn R. McClenahan

Title:           LPO, Commercial Title Officer                                                      

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EXHIBIT A

REAL PROPERTY

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EXHIBIT B

LIST OF PERSONAL PROPERTY

·   All fitness equipment

·   All lunchroom tables and chairs

o   (32) 3x3 tables

o   (7) 3x6 tables

o   (4) 3x5 oval tables

o   (200) black chairs

·   All installed/attached audio/visual equipment

·   All patch panels and cabling

·   All equipment racks in data center and data/phone closets

·   All building access control equipment

·   All back-up power equipment including generators, UPS, and transfer switches

·   All data center cooling equipment

·   Toyota forklift

·   Norlift forklift

·   Hydraulic maintenance stand

·   All mailroom worktables and shelving

·   All mailroom mobile carts

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EXHIBIT C

EARNEST MONEY NOTE

$250,000.00                                                  August ___, 2014                                                                                         Spokane, WA

THIS PROMISSORY NOTE (“Note”) is made and effective as of the date hereof, by NORTHWEST FARM CREDIT SERVICES, FLCA, a federal land credit association (“NFCS”), in favor of AMBASSADORS GROUP, INC., a Delaware corporation (“Ambassadors”).

FOR VALUE RECEIVED, NFCS promises to pay to Ambassadors, or order, the sum of Two Hundred Fifty Thousand Dollars ($250,000.00), together with interest thereon, all as hereinafter provided.  All defined terms used in this Note but not otherwise defined will have the meanings ascribed to them in that certain Real Estate Purchase and Sale Agreement and Escrow Instructions between NFCS, as Buyer, and Ambassadors, as Seller (the “Purchase Agreement”).

1.Interest.  All sums from time to time owing hereon shall bear interest from the date hereof at the rate of 36/100 percent (.36%) per annum, compounded annually.

2.Payment.  Provided that NFCS sends Ambassadors the Approval Notice, the entire principal and all accrued interest shall be due and payable as a balloon payment into escrow in full within two (2) Business Days of the expiration of the Feasibility Period (the “Maturity Date”).

3.Prepayment.  All or any part of the principal may be prepaid, together with interest accrued thereon, at any time without penalty; provided, however, that any partial prepayment will not shorten the term of this Note.

4.Ambassador’s Remedies on Default.  If NFCS fails to pay the installment required hereunder within three (3) Business Days from the Maturity Date, an event of default shall exist hereunder, and Ambassadors may, without further notice or demand: (i) declare the entire principal then unpaid, together with interest accrued thereon, immediately due and payable, or (ii) terminate the Purchase Agreement by written notice to NFCS, in which event neither party will have any further obligation to the other under the Purchase Agreement, except those obligations that expressly survive its termination.

5.Costs and Expenses; Judgment Interest.  NFCS shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Ambassadors: (i) as a result of any event of default described in Section 4 of this Note; or (ii) in connection with the enforcement or collection of this Note; together with interest thereon.

6.Security.  This Note is unsecured.

7.Miscellaneous and Procedure.

7.1Application of Payments.  All payments under this Note shall be applied first to the payment of costs and charges due in connection with this Note, then to the payment of accrued but unpaid interest, and then to reduction of the outstanding principal balance.

7.2Notice.  All notices or other written communications required or permitted under this Note must be in writing and will be deemed to have been properly given (i) upon delivery, if delivered in person or by facsimile transmission with receipt of an electronic confirmation thereof, (ii) one (1) Business Day after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the U.S. Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

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If to NFCS: Northwest Farm Credit Services, FLCA

Attn:  Stacy D. Lavin, Esq.

1700 S. Assembly Street

P.O. Box 2515

Spokane, WA 99220-2515

Fax:  509.340.5702

If to Ambassadors: Ambassadors Group, Inc.

Attn:  Lisa Netz

Dwight D. Eisenhower Building

2001 S. Flint Road

Spokane, WA 99224

Fax:  509.590.4349

With a copy to: Ambassadors Group, Inc.

Attn:  Marie Rice

Dwight D. Eisenhower Building

2001 S. Flint Road

Spokane, WA 99224

Fax:  509.590.4349

7.3Delay and Waiver.  The rights and remedies of Ambassadors under this Note are cumulative and may be exercised singularly or concurrently and the exercise of any one or more of them will not be deemed a waiver of any other.  No delay or omission in the exercise of any right or remedy of Ambassadors under this Note on any default by NFCS shall impair such a right or remedy, or be construed as a waiver.

7.4Commercial Purpose.  NFCS represents that the indebtedness evidenced by this Note is solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

7.5Attorney’s Fees.  Should legal action be required to enforce or interpret any of the provisions of this Note, the prevailing party shall be entitled to all costs and reasonable attorney’s fees incurred in connection therewith from the nonprevailing party.

7.6Severability.  If for any reason any provision of this Note is determined by a tribunal of competent jurisdiction to be legally invalid or unenforceable, the validity of the remainder of the Note will not be affected and such provision will be deemed modified to the minimum extent necessary to make such provision consistent with applicable law and, in its modified form, such provision will then be enforceable and enforced.

7.7Venue.  Any action brought to enforce or interpret this Note, at the option of Ambassadors, may be brought in Spokane County, Washington.

7.8Governing Law.  This Note shall be construed in accordance with the laws of the state of Washington.

[signature page follows]

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ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

“NFCS”:

NORTHWEST FARM CREDIT SERVICES, FLCA, a federal land credit association

By:           Exhibit – Do Not Execute                                                      

Name:  Phil DiPofi

Its:           President

Chief Executive Officer

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EXHIBIT D

STATUTORY WARRANTY DEED

Filed for Record at Request of and

copy returned to:

Lukins & Annis, P.S.

717 W. Sprague Avenue, Suite 1600

Spokane, WA 99201

Attn:  Tyler J. Black, Esq.

Abbreviated Legal Description:

Assessor’s Parcel Number:

STATUTORY WARRANTY DEED

The Grantor, AMBASSADORS GROUP, INC., a Delaware corporation, for and in consideration of Ten Dollars ($10.00) in hand paid, conveys and warrants to ____________________________, the following real estate legally described on Exhibit A attached hereto and by this reference incorporated herein, situated in the County of Spokane, State of Washington; subject only to the permitted exceptions described on Exhibit B attached hereto.

DATED this ___ day of _______________, 201__.

AMBASSADORS GROUP, INC., a Delaware corporation

By:            Exhibit – Do Not Execute                                                      

Name:                                                                 

Its:                                                                 

Exhibit A: Legal Description

Exhibit B: Permitted Exceptions

[Insert appropriate notarial jurat here]

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Exhibit A

To

Statutory Warranty Deed

Legal Description

To be agreed upon prior to the expiration of the Seller Title Response Period.

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Exhibit B

To

Statutory Warranty Deed

Permitted Exceptions

To be agreed upon prior to the expiration of the Seller Title Response Period.

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EXHIBIT E

BILL OF SALE

Pursuant to that certain Real Property Purchase and Sale Agreement and Escrow Instructions (the “Agreement”), executed and delivered by AMBASSADORS GROUP, INC., a Delaware corporation (“Seller”), and NORTHWEST FARM CREDIT SERVICES, FLCA, a federal land credit association (“Buyer”), and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller does hereby sell, transfer, convey and assign to Buyer, the following Personal Property (as that term is defined in the Agreement) owned by Seller and described on the attached Schedule 1.

Seller warrants that Seller has, and hereby conveys, good and marketable title to all of said Personal Property subject to no security interest, mortgage, pledge, lien, encumbrance or charge.  Seller further warrants that Seller has the full right to sell and convey said property to Buyer and that Seller will warrant and defend the conveyance hereby made unto Buyer.

Buyer has inspected the Personal Property conveyed hereunder and is purchasing the same “as is” in its present condition, and Seller makes no warranty with respect to the condition thereof, including, without limitation, no warranty of merchantability of fitness for a particular use.

Dated effective this ___ day of _________________, 201__.

SELLER:

AMBASSADORS GROUP, INC., a Delaware corporation

By:                      Exhibit – Do Not Execute                                           

Name:                                                                

Its:                                                                

BUYER:

NORTHWEST FARM CREDIT SERVICES, FLCA, a federal land credit association

By:                      Exhibit – Do Not Execute                                           

Name:                                                                

Its:                                                                

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EXHIBIT F

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment”) is made as of _____________, 201__ (the “Effective Date”), by and between AMBASSADORS GROUP, INC., a Delaware corporation (“Assignor”), and NORTHWEST FARM CREDIT SERVICES, FLCA, a federal land credit association (“Assignee”).

Assignor and Assignee entered into that certain Real Property Purchase and Sale Agreement and Escrow Instructions dated August ___, 2014 (the “Agreement”), providing for, among other things, the conveyance to Assignee of certain real property and improvements (the “Property”), as more particularly described in the Agreement.

Assignor is a party to certain Permits and contracts related to the operation, use, and maintenance of the Property as defined in the Agreement.

Assignor desires to transfer, assign, and convey to the Assignee all its right, title, and interest in, to, and under the Permits and those contracts delineated on the attached Exhibit A (the “Contracts”) on the following terms and conditions.

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Assignor and the Assignee agree as follows:

1.Assignment.  Assignor hereby assigns, conveys, transfers, and sets over unto Assignee all of Assignors’ right, title, and interest in the Permits and Contracts, without warranty or recourse, except as specifically set forth in the Agreement.

2.Assumption.  Assignee assumes and agrees to pay all sums, and perform, fulfill, and comply with all covenants and obligations, which are to be paid, performed, and complied with by the Property owner under the Permits and Contracts from and after the Effective Date.

3.Cross Indemnity.  Assignor shall indemnify, defend and hold harmless Assignee from and against any and all claims, losses, costs, damages, and obligations arising from any breach or alleged breach under the Permits or Contracts on or before the Effective Date.  Assignee shall indemnify, defend and hold harmless Assignor from and against any and all claims, losses, costs, damages, and obligations arising from any breach or alleged breach under the Permits and Contracts after the Effective Date.

4.Binding Effect.  This Assignment will inure to the benefit of and will be binding upon the parties hereto and their respective successors and assigns.

5.Counterparts.  This Assignment may be executed in several counterparts, each of which will be fully effective as an original and all of which together will constitute one and the same instrument.

[signature page follows]

-29-

IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered this Assignment as of the Effective Date.

ASSIGNOR:

AMBASSADORS GROUP, INC., a Delaware corporation

By:                      Exhibit – Do Not Execute                                           

Name:                                                                

Its:                                                                

ASSIGNEE:

NORTHWEST FARM CREDIT SERVICES, FLCA,

a federal land credit association

By:                      Exhibit – Do Not Execute                                           

Name:                                                                

Its:                                                                

-30-

Exhibit A

To

Assignment and Assumption Agreement

Contracts:

[insert, if any, otherwise state “None”]

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Net Income (Loss) per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Numerator [Abstract]
Net income (loss)	$ (4,185)		$ 8,092		$ (11,736)		$ 33
Denominator [Abstract]
Weighted-average shares outstanding (in shares)	16,823,000		16,727,000		16,789,000		16,683,000
Effect of unvested restricted stock awards considered participating securities (in shares)	0		233,000		0		297,000
Weighted-average shares outstanding - basic (in shares)	16,823,000		16,960,000		16,789,000		16,980,000
Effect of dilutive common stock options (in shares)	0		0		0		0
Weighted-average shares outstanding - diluted (in shares)	16,823,000		16,960,000		16,789,000		16,980,000
Net income (loss) per share - basic (in dollars per share)	$ (0.25)		$ 0.48		$ (0.70)		$ 0
Net income (loss) per share - diluted (in dollars per share)	$ (0.25)		$ 0.48		$ (0.70)		$ 0
Cash dividends declared per share (in dollars per share)	$ 0	[1]	$ 0	[1]	$ 0	[1]	$ 0.06	[1]
Stock Options and Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options and restricted stock units excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive	774,000		1,395,000		799,000		1,635,000

[1] The Company suspended quarterly dividend payments during the second quarter of 2013.

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Asset Impairments (Details) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2014	Sep. 30, 2013	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Apr. 30, 2012
Asset Impairments [Abstract]
Initial listing price for land and building						$ 13,300,000
Changed listing price for land and building		11,900,000
Purchase and sale agreement amount for land and building	8,800,000			8,800,000
Asset impairment charges	$ 2,000,000	$ 4,500,000	$ 0	$ 2,000,000	$ 0

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Financial Instruments [Abstract]

Foreign currency contracts, by maturity

At June 30, 2014, the following forward contracts were outstanding (in thousands):

	Notional Amount		Matures
Forward contracts:
Australian dollar		3,200	July 2014 - May 2015
Euro		2,860	July 2014
British pound		200	July 2014

Forward contracts, by hedging designation

The fair value of our forward contracts were as follows (in thousands):

	June 30, 2014
	Derivatives designated as hedging instruments				Total Net
	Assets		Liabilities		Assets
Forward contracts	$	89	$	29		$	60
	December 31, 2013
	Derivatives designated as hedging instruments				Total Net
	Assets		Liabilities		Liabilities
Forward contracts	$	253	$	549		$	296

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Commitments and Contingencies (Details) (Anthony F. Dombrowik [Member], USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Anthony F. Dombrowik [Member]
Related Party Transaction [Line Items]
Cash payments remained to be paid	$ 0.4
Cash payouts to be made under separation agreements	0.4
Number of months under terms of agreement	8 months
Vesting of stock options	$ 0.2

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Income Taxes [Abstract]
Deferred Taxes, Income Tax Expense	$ 0.7

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Basis of Presentation

6 Months Ended

Jun. 30, 2014

Basis of Presentation [Abstract]

Basis of Presentation

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being materially misleading. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2014 are not indicative of the results that may be expected for the year ending December 31, 2014.

These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013.

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Financial information by reporting segment

Segment information for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):

	Three months ended June 30, 2014												Three months ended June 30, 2013
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	21,657		$	1,055		$	22,712		$	23,453		$	1,029		$	24,482
Gross margin	$	18,869		$	937		$	19,806		$	21,900		$	903		$	22,803
Depreciation and amortization	$	1,490		$	180		$	1,670		$	1,255		$	131		$	1,386
Operating income (loss)	$	6,304		$	(9,831	)	$	(3,527	)	$	12,165		$	377		$	12,542
Income tax benefit (provision)	$	(1,815	)	$	1,010		$	(805	)	$	(4,442	)	$	(169	)	$	(4,611	)
Net income (loss)	$	4,635		$	(8,820	)	$	(4,185	)	$	7,884		$	208		$	8,092

							Six months ended June 30, 2014						Six months ended June 30, 2013
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	22,046		$	2,063		$	24,109		$	25,347		$	2,028		$	27,375
Gross margin	$	19,049		$	1,813		$	20,862		$	22,422		$	1,773		$	24,195
Depreciation and amortization	$	2,624		$	353		$	2,977		$	2,419		$	292		$	2,711
Operating income (loss)	$	(3,217	)	$	(9,495	)	$	(12,712	)	$	(960	)	$	709		$	(251	)
Income tax benefit (provision)	$	(259	)	$	954		$	695		$	265		$	(289	)	$	(24	)
Net income (loss)	$	(3,196	)	$	(8,540	)	$	(11,736	)	$	(387	)	$	420		$	33
Total additions to property and equipment, net	$	711		$	241		$	952		$	1,600		$	189		$	1,789
Total additions to intangibles	$	-		$	146		$	146		$	-		$	164		$	164
Intangibles	$	-		$	3,462		$	3,462		$	-		$	3,540		$	3,540
Total assets	$	89,360		$	6,518		$	95,878		$	108,061		$	15,409		$	123,470

1Ambassador Programs and Other include all travel programs as well as corporate overhead.

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Net Income (Loss) per Share (Tables)

6 Months Ended

Jun. 30, 2014

Net Income (Loss) per Share [Abstract]

Reconciliation of basic and diluted income per share computations

The following table presents a reconciliation of basic and diluted income (loss) per share computations (in thousands, except per share data and anti-dilutive stock option counts):

	Three months ended  June 30,					Six months ended  June 30,
	2014			2013		2014			2013
Numerator:
Net income (loss)	$	(4,185	)	$	8,092	$	(11,736	)	$	33
Denominator:
Weighted-average shares outstanding		16,823			16,727		16,789			16,683
Effect of unvested restricted stock awards      considered participating securities		-			233		-			297
Weighted-average shares outstanding – basic		16,823			16,960		16,789			16,980
Effect of dilutive common stock options		-			-		-			-
Weighted-average shares outstanding – diluted		16,823			16,960		16,789			16,980
Net income (loss) per share - basic	$	(0.25	)	$	0.48	$	(0.70	)	$	0.00
Net income (loss) per share - diluted	$	(0.25	)	$	0.48	$	(0.70	)	$	0.00
Cash dividends declared per share1	$	-		$	-	$	-		$	0.06
Stock options and restricted stock units excluded from the calculation of diluted earnings per share  because their effect would have been anti-dilutive		774,000			1,395,000		799,000			1,635,000

1The Company suspended quarterly dividend payments during the second quarter of 2013.

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Supplemental Disclosures of Consolidated Statements of Cash Flows (Tables)

6 Months Ended

Jun. 30, 2014

Supplemental Disclosures of Consolidated Statements of Cash Flows [Abstract]

Non-cash investing and financing activities

Our non-cash investing and financing activities during the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):

	June 30, 2014		June 30, 2013
Unrealized income (loss) on foreign currency exchange contracts	$	356	$	(1,248)
Unrealized income (loss) on available-for-sale securities	$	267	$	(286)
Property and equipment	$	-	$	(10)

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The Company (Details)	6 Months Ended
	Jun. 30, 2014 Segment
The Company [Abstract]
Number of reporting segments	2

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The Company

6 Months Ended

Jun. 30, 2014

The Company [Abstract]

The Company

1. The Company

Ambassadors Group, Inc. (the “Company”, “we”, “us” or “our”) is an educational company primarily engaged in organizing and promoting differentiated worldwide travel programs for students and professionals.  In addition, we operate an education oriented research website, called BookRags.com, which provides study guides, lesson plans and other educational resources to students and teachers. These consolidated financial statements include the accounts of Ambassadors Group, Inc., and our wholly owned subsidiaries, Ambassador Programs, Inc., World Adventures Unlimited, Inc., Ambassadors Unlimited, LLC, AGI Hong Kong Limited, Beijing People to People Education Consultation Co., Ltd, Marketing Production Systems LLC, and BookRags, Inc. (“BookRags”). All significant intercompany accounts and transactions, which are of a normal recurring nature, are eliminated in consolidation.

Our operations are organized in two reporting segments, 1) “Ambassador Programs and Other,” which provides educational travel services to students and professionals through multiple itineraries and corporate overhead, and 2) “BookRags,” which provides online research capabilities through book summaries, critical essays, online study guides, lesson plans, biographies, and references to encyclopedia articles.

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Restructuring Costs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Restructuring Cost and Reserve [Line Items]
Period in which restructuring costs will be recognized			12 months
Additional restructuring cost incurred	$ 11,664	$ 0	$ 11,772	$ 0
Restructuring cost liability [Roll Forward]
Restructuring costs			13,984		2,200
less: cash payments			2,911
less: non-cash expenses			10,208
Total restructuring liabilities at June 30, 2014	865		865
Contract Termination Fees [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			1,550
Separation payments [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			1,302
Goodwill impairment [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			9,711
Equity compensation expense [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			497
Other transition costs [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			924
Ambassador Programs and Other [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			3,751
less: cash payments			2,878
less: non-cash expenses			377
Total restructuring liabilities at June 30, 2014	496		496
Ambassador Programs and Other [Member] | Contract Termination Fees [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			1,550
Ambassador Programs and Other [Member] | Separation payments [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			900
Ambassador Programs and Other [Member] | Goodwill impairment [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			0
Ambassador Programs and Other [Member] | Equity compensation expense [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			377
Ambassador Programs and Other [Member] | Other transition costs [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			924
BookRags [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			10,233
less: cash payments			33
less: non-cash expenses			9,831
Total restructuring liabilities at June 30, 2014	369		369
BookRags [Member] | Contract Termination Fees [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			0
BookRags [Member] | Separation payments [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			402
BookRags [Member] | Goodwill impairment [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			9,711
BookRags [Member] | Equity compensation expense [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			120
BookRags [Member] | Other transition costs [Member]
Restructuring cost liability [Roll Forward]
Restructuring costs			$ 0

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Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013		Dec. 31, 2013
Segment Reporting Information [Line Items]
Total revenue	$ 22,712		$ 24,482		$ 24,109		$ 27,375
Gross margin	19,806		22,803		20,862		24,195
Depreciation and amortization	1,388		1,386		2,977		2,711
Operating income (loss)	(3,527)		12,542		(12,712)		(251)
Income tax benefit (provision)	(805)		(4,611)		695		(24)
Net income (loss)	(4,185)		8,092		(11,736)		33
Total additions to property and equipment, net					952		1,789
Expected dividend yield					146		164
Intangibles	3,462		3,540		3,462		3,540		3,522
Total assets	95,878		123,470		95,878		123,470		88,359
Ambassador Programs and Other [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	21,657	[1]	23,453	[1]	22,046	[1]	25,347	[1]
Gross margin	18,869	[1]	21,900	[1]	19,049	[1]	22,422	[1]
Depreciation and amortization	1,207	[1]	1,255	[1]	2,624	[1]	2,419	[1]
Operating income (loss)	6,304	[1]	12,165	[1]	(3,217)	[1]	(960)	[1]
Income tax benefit (provision)	(1,815)	[1]	(4,442)	[1]	(259)	[1]	265	[1]
Net income (loss)	4,635	[1]	7,884	[1]	(3,196)	[1]	(387)	[1]
Total additions to property and equipment, net					711	[1]	1,600	[1]
Expected dividend yield					0	[1]	0	[1]
Intangibles	0	[1]	0	[1]	0	[1]	0	[1]
Total assets	89,360	[1]	108,061	[1]	89,360	[1]	108,061	[1]
BookRags [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	1,055		1,029		2,063		2,028
Gross margin	937		903		1,813		1,773
Depreciation and amortization	181		131		353		292
Operating income (loss)	(9,831)		377		(9,495)		709
Income tax benefit (provision)	1,010		(169)		954		(289)
Net income (loss)	(8,820)		208		(8,540)		420
Total additions to property and equipment, net					241		189
Expected dividend yield					146		164
Intangibles	3,462		3,540		3,462		3,540
Total assets	$ 6,518		$ 15,409		$ 6,518		$ 15,409

[1] Ambassador Programs and Other include all travel programs as well as corporate overhead.

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 10,412	$ 9,473
Available-for-sale securities and other	47,088	36,174
Foreign currency exchange contracts	60	0
Prepaid program costs and expenses	17,918	7,069
Accounts receivable	1,421	1,792
Deferred tax assets	0	1,295
Total current assets	76,899	55,803
Property and equipment, net	14,633	18,452
Available-for-sale securities	729	719
Intangibles	3,462	3,522
Goodwill	70	9,781
Other long-term assets	85	82
Total assets	95,878	88,359
Current liabilities:
Accounts payable and accrued expenses	7,145	3,587
Participants' deposits	41,043	26,362
Foreign currency exchange contracts	0	244
Deferred tax liabilities	77	0
Other liabilities	103	119
Total current liabilities	48,368	30,312
Participants' deposits	1,822	0
Foreign currency exchange contracts	0	52
Deferred tax liabilities	19	2,087
Total liabilities	50,209	32,451
Commitments and Contingencies (Note 15)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding	0	0
Common stock, $.01 par value; 50,000,000 shares authorized; 17,038,508 and 17,040,724 shares issued and outstanding, respectively	170	170
Additional paid-in capital	1,284	411
Retained earnings	44,140	55,876
Accumulated other comprehensive gain (loss)	75	(549)
Stockholders' equity	45,669	55,908
Total liabilities and stockholders' equity	$ 95,878	$ 88,359

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) [Abstract]
Unrealized gain (loss) on foreign currency exchange contracts, income tax benefit	$ 69	$ 163	$ 0	$ 437
Unrealized gain (loss) on available-for-sale securities, income tax benefit	$ 62	$ 126	$ 0	$ 100

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Derivative Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified				6 Months Ended
	Jun. 30, 2014 Designated as Hedging Instrument [Member]	Dec. 31, 2013 Designated as Hedging Instrument [Member]	Jun. 30, 2014 Australian Dollar [Member] Forward Contracts [Member]	Jun. 30, 2014 Australian Dollar [Member] Forward Contracts [Member] Minimum [Member]	Jun. 30, 2014 Australian Dollar [Member] Forward Contracts [Member] Maximum [Member]	Jun. 30, 2014 Euro [Member] Forward Contracts [Member]	Jun. 30, 2014 British Pound [Member] Forward Contracts [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts			$ 3,200			$ 2,860	$ 200
Derivative maturity date range				Jul. 31, 2014	May 31, 2015	Jul. 31, 2014	Jul. 31, 2014
Derivatives, Fair Value [Line Items]
Forward contracts, assets	89	253
Forward contracts, liabilities	29	549
Total net forward contracts	$ 60	$ 296

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies [Abstract]

Commitments and Contingencies

15.  Commitments and Contingencies

On May 7, 2014, Anthony F. Dombrowik, our former interim Chief Executive Officer and Chief Financial Officer, was terminated by the Board of Directors.  In connection with Mr. Dombrowik’s departure, we entered into a separation agreement effective May 7, 2014.  Under the terms of the separation agreement, cash payouts of approximately $0.4 million are to be made to Mr. Dombrowik, all of which was  fully expensed during the second quarter of 2014 although , approximately $0.4 million remained to be paid during the  8 months following June 30, 2014.  Additionally, the separation agreement called for the immediate vesting of stock options and stock grants for Mr. Dombrowik in the amount of $0.2 million.

We are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business, the outcome of which we believe will not have a material adverse effect on our business, financial condition, cash flows or results of operations.

We are subject to the possibility of various loss contingencies, including claims, suits and complaints, arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted and whether new accruals are required.

Under our Bylaws, our directors and officers have rights to indemnification by us against certain liabilities that may arise by reason of their status or service as directors or officers. We maintain director and officer insurance, which covers certain liabilities arising from our obligation to indemnify our directors and officers and former directors in certain circumstances. No material indemnification liabilities were accrued at June 30, 2014.

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Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance, beginning of period			$ (549)
Reclassification into net revenue, non-directly delivered programs	18,092	21,183	18,208	21,183
Reclassification into interest and dividend income	142	160	273	287
Effect of incomes taxes, Derivative Securities	(69)	(163)	0	(437)
Effect of income taxes, Available-for-sale securities	(62)	(126)	0	(100)
Balance, end of period	75		75
Realized gain (loss) on sale of investments	25			67
Derivative Securities [Member] | Foreign Currency Exchange Contracts [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance, beginning of period	(65)	35	(192)	544
Change before reclassification	185	(398)	381	(1,081)
Reclassification into net revenue, non-directly delivered programs	(25)	(67)	(25)	(167)
Reclassification into interest and dividend income	0	0	0	0
Effect of incomes taxes, Derivative Securities	69	163	0	437
Other comprehensive income (loss), net of income taxes	229	(302)	356	(811)
Balance, end of period	164	(267)	164	(267)
Available-for-sale securities [Member] | Foreign Currency Exchange Contracts [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance, beginning of period	(243)	(132)	(357)	(180)
Change before reclassification	83	(368)	259	(294)
Reclassification into net revenue, non-directly delivered programs	0	0	0	0
Reclassification into interest and dividend income	8	8	8	8
Effect of income taxes, Available-for-sale securities	62	126	0	100
Other comprehensive income (loss), net of income taxes	153	(234)	267	(186)
Balance, end of period	$ (90)	$ (366)	$ (90)	$ (366)

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Investments and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Investments and Fair Value Measurements [Abstract]

Fair value of investments

The following tables summarize the composition of our investments at June 30, 2014 and December 31, 2013 (in thousands):

								Classification on Balance Sheet
June 30, 2014	Amortized Cost		Unrealized Gains  (Losses)			Aggregate Fair Value		Cash and cash equivalents		Short-term available-for-sale securities		Long-term available-for-sale securities
Auction rate securities (“ARS”), greater than one year	$	1,000	$	(271	)	$	729	$	-	$	-	$	729
Money market funds, ninety days or less		3,597		-			3,597		3,597		-		-
Municipal securities1
Short term municipal securities funds2		40,717		18			40,735		-		40,735		-
One year or less		921		3			924		-		924		-
After one year through three years		2,716		11			2,727		-		2,727		-
Greater than three years		2,735		(33	)		2,702		-		2,702		-
Total	$	51,686	$	(272	)	$	51,414	$	3,597	$	47,088	$	729

								Classification on Balance Sheet
December 31, 2013	Amortized Cost		Unrealized Gains  (Losses)				Aggregate Fair Value	Cash and cash equivalents		Short-term available-for-sale securities		Long-term available-for-sale securities
ARS, greater than one year	$	1,002	$	(283	)	$	719	$	-	$	-	$	719
Money market funds, ninety days or less		488		-			488		488		-		-
Municipal securities1
Short term municipal securities funds2		27,493		(143	)		27,350		-		27,350		-
One year or less		952		3			955		-		955		-
After one year through three years		3,132		20			3,152		-		3,152		-
Greater than three years		4,854		(137	)		4,717		-		4,717		-
Total	$	37,921	$	(540	)	$	37,381	$	488	$	36,174	$	719

1Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

2Amounts include short-term municipal security funds that do not have a set maturity date.

Fair value by balance sheet grouping

The following tables detail the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at June 30, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements at Reporting Date Using
June 30, 2014	Fair Market Value		Level 1		Level 2		Level 3
Financial assets:
ARS	$	729	$	-	$	-	$	729
Money market funds		3,597		3,597		-		-
Municipal securities1		47,088		41,237		5,851		-
Foreign currency exchange contracts		89		-		89		-
Total financial assets	$	51,503	$	44,834	$	5,940	$	729
Financial liabilities:
Foreign currency exchange contracts		29		-		29		-
Total financial liabilities	$	29	$	-	$	29	$	-
			Fair Value Measurements at Reporting Date Using
December 31, 2013	Fair Market Value		Level 1		Level 2		Level 3
Financial assets:
ARS	$	719	$	-	$	-	$	719
Money market funds		488		488		-		-
Municipal securities1		36,174		27,350		8,824		-
Foreign currency exchange contracts		253		-		253		-
Total financial assets	$	37,634	$	27,838	$	9,077	$	719
Financial liabilities:
Foreign currency exchange contracts		549		-		549		-
Total financial liabilities	$	549	$	-	$	549	$	-

1 At June 30, 2014, municipal securities consisted of an 86/7/6/1 percent split between holdings in short-term municipal security funds, municipal revenue bonds, municipal general obligation bonds and certificates of deposit, respectively. At December 31, 2013, municipal securities consisted of a 76/13/11 split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. The underlying credit rating of the municipal securities at June 30, 2014 and December 31, 2013 were A+, A1 or better as defined by S&P 500 and Moody’s, respectively.

Fair value measurements of assets measured on non-recurring basis

The following table details the fair value measurements of assets measured on a non-recurring basis within the three levels of the fair value hierarchy at June 30, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements at Reporting Date Using									Total Loss
June 30, 2014	Fair Market Value		Qouted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs  (Level 2)			Significant Other Unobservable Inputs (Level 3)			Three months ended June 30, 2014
Non-financal assets:
Property and equipment, net	$	8,750		$	-		$	-		$	8,750		$	2,000
Goodwill	$	-		$	-		$	-		$	-		$	9,711
			Fair Value Measurements at Reporting Date Using									Total Loss
December 31, 2013	Fair Market Value		Qouted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)			Year ended December 31, 2013
Non-financal assets:
Property and equipment, net	$	11,000		$	-		$	-		$	11,000		$	4,544

Fair value of Level 3 assets measured on a recurring basis

The following table presents a reconciliation for the three and six months ended June 30, 2014 and 2013, of available-for-sale ARS measured at fair value on a recurring basis using Level 3 inputs (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2014		2013			2014		2013
Beginning balance	$	723	$	729		$	719	$	723
Total realized / unrealized losses:
Included in OCI		6		(13	)		10		(7	)
Ending balance	$	729	$	716		$	729	$	716

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net income (loss)	$ (11,736)	$ 33
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	2,977	2,711
Stock-based compensation	1,168	1,957
Deferred income tax benefit	(805)	(275)
Loss on disposition and impairment of property and equipment	2,000	7
Loss on impairment of goodwill	9,711	0
Program merchandise writedown	554	0
Excess tax shortfall from stock-based compensation	109	2,095
Change in assets and liabilities:
Accounts receivable and other assets	368	(53)
Prepaid program costs and expenses	(11,403)	(9,189)
Accounts payable, accrued expenses, and other current liabilities	3,542	2,406
Participants' deposits	16,503	23,723
Net cash provided by operating activities	12,988	23,415
Cash flows from investing activities:
Purchase of available-for-sale securities	(24,517)	(26,844)
Proceeds from sale of available-for-sale securities	13,861	7,329
Purchase of property and equipment	(952)	(1,799)
Purchase of intangibles	(146)	(164)
Net cash used in investing activities	(11,754)	(21,478)
Cash flows from financing activities:
Repurchase of Common Stock	(186)	(486)
Dividend payment to shareholders	0	(1,017)
Proceeds from exercise of stock options	0	5
Excess tax shortfall from stock-based compensation	(109)	(2,095)
Net cash used in financing activities	(295)	(3,593)
Net increase (decrease) in cash and cash equivalents	939	(1,656)
Cash and cash equivalents, beginning of period	9,473	6,150
Cash and cash equivalents, end of period	$ 10,412	$ 4,494

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
STOCKHOLDERS' EQUITY
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	17,038,508	17,040,724
Common stock, shares outstanding (in shares)	17,038,508	17,040,724

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Stock-Based Compensation [Abstract]

Stock-Based Compensation

10. Stock-Based Compensation

Under our Equity Participation Plan (the “Plan”), we may grant stock-based incentive compensation awards to eligible employees (including officers), non-employee directors and consultants in the form of distribution equivalent rights, incentive stock options, non-qualified stock options, performance share awards, performance unit awards, restricted stock awards, restricted stock units awards, stock appreciation rights, tandem stock appreciation rights, unrestricted stock awards or any combination of the foregoing.  As of June 30, 2014, we had 1,896,120 shares authorized under the Plan available for future stock-based compensation.

Stock Options

Under the terms of the Plan, options to purchase shares of our common stock are granted at a price set by the Compensation Committee of the Board of Directors (the “Compensation Committee”). The price is not to be less than the fair market value of the stock on the date of grant. The Compensation Committee establishes the vesting period of the awards, which is generally set at 25 percent per year for four years. Options may be exercised any time after they vest for a period up to 10 years from the grant date.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of options. Option valuation models require the input of highly subjective assumptions, particularly for the expected term and stock price volatility. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and our experience. Our employee stock options do not trade on a secondary exchange; therefore, employees do not derive a benefit from holding stock options unless there is an appreciation in the market price of our stock above the grant price. Such an increase in stock price would benefit all shareholders commensurately.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the three and six months ended June 30, 2014 and 2013.

	Three months ended  June 30, 2014		Three months ended  June 30, 2013		Six months ended  June 30, 2014		Six months ended  June 30, 2013
Expected dividend yield	-	%	-	%	-	%	1.37	%
Expected stock price volatility	59.43	%	52.68	%	59.43	%	54.66	%
Risk-free interest rate	2.02	%	2.10	%	2.02	%	2.08	%
Expected life of options	4.64	Years	4.53	Years	4.64	Years	4.56	Years
Estimated fair value per option granted	$1.68		$1.61		$1.68		$1.63

The dividend yield is based on expected quarterly cash dividends paid to our shareholders. Expected stock price volatility is based on historical volatility of our stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. Additionally, an annualized forfeiture rate of 15.2 percent is used as a best estimate of future forfeitures based on our historical forfeiture experience. Stock-based compensation expense will be adjusted in later periods if the actual forfeiture rate is different from the estimate.

A summary of option activity under the Plan as of June 30, 2014, and the changes during the six months then ended is presented below:

	Stock Options	Weighted-Average  Exercise Price		Weighted-Average Remaining Contractual Life (years)
Outstanding at December 31, 2013	907,945	$	6.54
Granted	64,239		3.76
Forfeited / Expired	(113,012)		7.60
Exercised	-		-
Outstanding at June 30, 2014	859,172	$	6.19	4.24
Exercisable at June 30, 2014	577,316	$	6.99	2.02

During the three and six months ended June 30, 2014, the total intrinsic value of stock options exercised was zero and the total fair value of options which vested was $0.7 million. During the three and six months ended June 30, 2013, the total intrinsic value of stock options exercised was zero and the total fair value of options which vested was $1.0 million. The aggregate intrinsic value of outstanding and exercisable stock options was $0.1 million, based on our $4.61 closing stock price at June 30, 2014. Compensation expense recognized in the consolidated statement of operations for stock options was $0.3 million and $0.1 million for the three months ended June 30, 2014 and 2013, respectively, before the effect of income taxes. Compensation expense recognized in the consolidated statement of operations for stock options was $0.4 million and $1.0 million for the six months ended June 30, 2014 and 2013, respectively, before the effect of income taxes. As of June 30, 2014, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $0.3 million, which is expected to be recognized over approximately 3.8 years.

Restricted Stock Grants

 Restricted stock awards and restricted stock units may be granted under the Plan by the Compensation Committee. The Compensation Committee also establishes the vesting period of the awards, which is generally set at 100 percent at the conclusion of one to four years for restricted stock awards. Restricted stock units generally vest pro rata at 25 percent each year over a four year vesting period. Our key employees who have been granted awards are typically subject to a four year vesting period, while members of our Board of Directors who have been granted awards are subject to a one year vesting period. The fair value of restricted stock awards and restricted stock units is based on the market price of our shares on the grant date.

A summary of the activity of non-vested restricted stock awards and restricted stock units under the Plan as of June 30, 2014, and the changes during the six months then ended is presented below:

	Restricted Stock Awards				Restricted Stock Units
	Restricted Stock Awards	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual  Life (years)	Restricted Stock  Units	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Life (years)
Balance at December 31, 2013	285,435	$	5.24		28,123	$	3.88
Granted	51,704		3.72		28,398		4.37
Forfeited	(10,944)		5.46		(8,660)		3.98
Vested	(185,258)		4.87		-		-
Balance at June 30, 2014	140,937	$	5.16	1.82	47,861	$	4.15	2.00

At June 30, 2014, the aggregate value of non-vested restricted stock awards and restricted stock units was $0.6 million and $0.2 million, respectively, before applicable income taxes, based on a $4.61 closing stock price at June 30, 2014. During the three months ended June 30, 2014 and 2013, the weighted-average grant date fair value of restricted stock awards, which vested was $0.9 million and $0.1 million, respectively. During the six months ended June 30, 2014 and 2013, the weighted-average grant date fair value of restricted stock awards, which vested was $1.0 million and $2.0 million, respectively. Compensation expense recognized in the consolidated statement of operations for restricted stock awards and units was $0.5 million and $0.1 million for the three months ended June 30, 2014 and 2013, respectively, before the effect of income taxes. Compensation expense recognized in the consolidated statement of operations for restricted stock awards and units was $0.6 million and $1.0 million for the six months ended June 30, 2014 and 2013, respectively, before the effect of income taxes. As of June 30, 2014, total unrecognized stock-based compensation expense related to restricted stock awards and units was approximately $0.4 million and $0.2 million, respectively, which is expected to be recognized over approximately 3.8 years.

Performance Stock Awards

Under the terms of the Plan, performance stock awards may be granted by the Compensation Committee to key executive employees. Performance stock awards are based on achieving key internal metrics measured at the end of each fiscal year over a three year performance period. If performance objectives are achieved as determined by the Compensation Committee, common stock is granted. The fair value of these awards is determined on the date of grant based on our share price. Compensation expense related to performance stock units is evaluated quarterly to determine the likelihood that performance metrics will be achieved during the performance period.

A summary of the activity of performance stock units under the Plan as of June 30, 2014, and the changes during the six months then ended is presented below:

	Performance Stock  Units	Weighted-Average Grant Date Fair Value		Weighted-Average  Remaining Contractual Life (years)
Balance at December 31, 2014	114,560	$	4.41
Granted	-		-
Forfeited	(78,514)		4.41
Vested	-		-
Balance at June 30, 2014	36,046	$	4.41	2.51

During the three and six months ended June 30, 2014, no performance stock units were granted. Performance stock units outstanding on June 30, 2014 are payable upon the achievement of certain internal metrics over a performance period of January 1, 2014 through December 31, 2016. As of June 30, 2014, there was no unrecognized compensation expense related to performance share unit awards.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 28, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	AMBASSADORS GROUP INC
Entity Central Index Key	0001162315
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		17,039,992
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014

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Net Income (Loss) per Share

6 Months Ended

Jun. 30, 2014

Net Income (Loss) per Share [Abstract]

Net Income (Loss) per Share

11. Net Income (Loss) per Share

The following table presents a reconciliation of basic and diluted income (loss) per share computations (in thousands, except per share data and anti-dilutive stock option counts):

	Three months ended  June 30,					Six months ended  June 30,
	2014			2013		2014			2013
Numerator:
Net income (loss)	$	(4,185	)	$	8,092	$	(11,736	)	$	33
Denominator:
Weighted-average shares outstanding		16,823			16,727		16,789			16,683
Effect of unvested restricted stock awards      considered participating securities		-			233		-			297
Weighted-average shares outstanding – basic		16,823			16,960		16,789			16,980
Effect of dilutive common stock options		-			-		-			-
Weighted-average shares outstanding – diluted		16,823			16,960		16,789			16,980
Net income (loss) per share - basic	$	(0.25	)	$	0.48	$	(0.70	)	$	0.00
Net income (loss) per share - diluted	$	(0.25	)	$	0.48	$	(0.70	)	$	0.00
Cash dividends declared per share1	$	-		$	-	$	-		$	0.06
Stock options and restricted stock units excluded from the calculation of diluted earnings per share  because their effect would have been anti-dilutive		774,000			1,395,000		799,000			1,635,000

1The Company suspended quarterly dividend payments during the second quarter of 2013.

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) [Abstract]
Net revenue, non-directly delivered programs	$ 18,092	$ 21,183	$ 18,208	$ 21,183
Gross revenue, directly delivered programs	3,565	2,270	3,838	4,164
Gross revenue, internet and advertising	1,055	1,029	2,063	2,028
Total revenue	22,712	24,482	24,109	27,375
Cost of sales, directly delivered programs	2,234	1,553	2,443	2,925
Cost of sales, internet and advertising	118	126	250	255
Cost of sales, program merchandise markdown	554	0	554	0
Gross margin	19,806	22,803	20,862	24,195
Operating expenses:
Selling and marketing	6,159	7,323	13,152	15,842
General and administrative	3,510	2,938	6,650	8,604
Restructuring costs	11,664	0	11,772	0
Asset impairments	2,000	0	2,000	0
Total operating expenses	23,333	10,261	33,574	24,446
Operating income (loss)	(3,527)	12,542	(12,712)	(251)
Other income:
Interest and dividend income	142	160	273	287
Foreign currency and other income	5	1	8	21
Total other income	147	161	281	308
Income (loss) before income tax benefit (provision)	(3,380)	12,703	(12,431)	57
Income tax benefit (provision)	(805)	(4,611)	695	(24)
Net Income (Loss)	$ (4,185)	$ 8,092	$ (11,736)	$ 33
Weighted-average common shares outstanding - basic (in shares)	16,823	16,960	16,789	16,980
Weighted-average common shares outstanding - diluted (in shares)	16,823	16,960	16,789	16,980
Net income (loss) per share - basic (in dollars per share)	$ (0.25)	$ 0.48	$ (0.70)	$ 0
Net income (loss) per share - diluted (in dollars per share)	$ (0.25)	$ 0.48	$ (0.70)	$ 0

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Asset Impairments

6 Months Ended

Jun. 30, 2014

Asset Impairments [Abstract]

Asset Impairments

5. Asset Impairments

In April 2012, our Board of Directors approved the listing for sale of our corporate headquarters building located in Spokane, Washington. The Company intends to relocate our headquarters to a new leased location in Spokane within a year after sale. The initial listing price for the building and underlying land was $13.3 million. During the quarter ended September 30, 2013, the listing price was lowered to $11.9 million and recorded an impairment charge of $4.5 million.

Subsequent to June 30, 2014, a purchase and sale agreement was executed for the corporate headquarters building for $8.8 million.  During the second quarter of 2014, we lowered the carrying value further and recorded approximately $2.0 million in impairment charges to reflect the fair value of the building and other related assets before the effect of income taxes. These costs are classified in our consolidated statements of operations under asset impairments.

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Restructuring Costs

6 Months Ended

Jun. 30, 2014

Restructuring Costs [Abstract]

Restructuring Costs

4. Restructuring Costs

During the third quarter of 2013, we initiated a corporate restructuring plan aimed at streamlining our cost structure and focusing our business on our core Student Ambassador programs in order to promote the long-term health of the organization. This plan included the restructuring of operations and programs associated with Discovery Student Education and terminating the operations associated with our Beijing office. During 2013, we recorded $2.2 million to restructuring costs.

During the second quarter of 2014, we took additional measures intended to continue to streamline the organization and continue our business focus on our Student Ambassador programs.  As previously announced, we completed a workforce reduction during the second quarter of 2014 that resulted in a restructuring expense of $1.6 million.  Under the terms of executive separation agreements, we will continue to pay each terminated executive bi-weekly during the executive’s severance period until the terms have been met, the future payments having been accrued and reflected in the below table as outstanding liabilities at June 30, 2014.

At the date of our most recent annual impairment test of December 1, 2013, the estimated fair value of BookRags exceeded its carrying value by less than five percent.  Due to business changes as well as the narrow margin results of our most recent annual impairment test, we re-evaluated the carrying value of BookRags at June 30, 2014 and determined that its fair value was lower than its carrying value.  The significant assumptions used to determine fair value included projected operating revenues and expenses, growth rates, terminal value, discount rates, future cash flows and capital expenditures.  We estimated fair value weighing the results from the income approach and market approach.  As required by the impairment test, we calculated the implied fair value of the goodwill compared to its carrying value.  Our test resulted in a goodwill impairment of $9.7 million that was recorded as a restructuring cost at June 30, 2014.

Other costs recorded as restructuring during the second quarter of 2014 included accelerated depreciation of assets scheduled for replacement within the next year as well as continued transition costs from the termination of operations of our Beijing office.

We anticipate all restructuring expenses to be recognized within twelve months of the initial implementation of the restructuring plan.

The following table summarizes costs incurred as part of the restructuring plan and balance of the restructuring cost liability as of June 30, 2014 (in thousands).

	Restructuring Costs
	Ambassador Programs and other		BookRags		Consolidated
Contract termination fees	$	1,550	$	-	$	1,550
Separation payments		900		402		1,302
Goodwill impairment		-		9,711		9,711
Equity compensation expenses		377		120		497
Other transition costs		924		-		924
Accumulated expense at June 30, 2014		3,751		10,233		13,984
less: cash payments		2,878		33		2,911
less: non-cash expenses		377		9,831		10,208
Total restructuring liabilities at June 30, 2014	$	496	$	369	$	865

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Restructuring Costs (Tables)

6 Months Ended

Jun. 30, 2014

Restructuring Costs [Abstract]

Summary of changes in restructuring cost liability

The following table summarizes costs incurred as part of the restructuring plan and balance of the restructuring cost liability as of June 30, 2014 (in thousands).

	Restructuring Costs
	Ambassador Programs and other		BookRags		Consolidated
Contract termination fees	$	1,550	$	-	$	1,550
Separation payments		900		402		1,302
Goodwill impairment		-		9,711		9,711
Equity compensation expenses		377		120		497
Other transition costs		924		-		924
Accumulated expense at June 30, 2014		3,751		10,233		13,984
less: cash payments		2,878		33		2,911
less: non-cash expenses		377		9,831		10,208
Total restructuring liabilities at June 30, 2014	$	496	$	369	$	865

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Segment Reporting

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Reporting

12. Segment Reporting

Ambassador Programs and Other’s gross margin is comprised of gross receipts less direct program costs, including accommodations, transportation, speakers, facilitators, and event costs. BookRags’ gross margin is comprised of content and subscription and advertising revenues via www.BookRags.com, less affiliate commissions and amortization of intangible assets directly associated with sales.

Segment information for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):

	Three months ended June 30, 2014												Three months ended June 30, 2013
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	21,657		$	1,055		$	22,712		$	23,453		$	1,029		$	24,482
Gross margin	$	18,869		$	937		$	19,806		$	21,900		$	903		$	22,803
Depreciation and amortization	$	1,490		$	180		$	1,670		$	1,255		$	131		$	1,386
Operating income (loss)	$	6,304		$	(9,831	)	$	(3,527	)	$	12,165		$	377		$	12,542
Income tax benefit (provision)	$	(1,815	)	$	1,010		$	(805	)	$	(4,442	)	$	(169	)	$	(4,611	)
Net income (loss)	$	4,635		$	(8,820	)	$	(4,185	)	$	7,884		$	208		$	8,092

							Six months ended June 30, 2014						Six months ended June 30, 2013
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	22,046		$	2,063		$	24,109		$	25,347		$	2,028		$	27,375
Gross margin	$	19,049		$	1,813		$	20,862		$	22,422		$	1,773		$	24,195
Depreciation and amortization	$	2,624		$	353		$	2,977		$	2,419		$	292		$	2,711
Operating income (loss)	$	(3,217	)	$	(9,495	)	$	(12,712	)	$	(960	)	$	709		$	(251	)
Income tax benefit (provision)	$	(259	)	$	954		$	695		$	265		$	(289	)	$	(24	)
Net income (loss)	$	(3,196	)	$	(8,540	)	$	(11,736	)	$	(387	)	$	420		$	33
Total additions to property and equipment, net	$	711		$	241		$	952		$	1,600		$	189		$	1,789
Total additions to intangibles	$	-		$	146		$	146		$	-		$	164		$	164
Intangibles	$	-		$	3,462		$	3,462		$	-		$	3,540		$	3,540
Total assets	$	89,360		$	6,518		$	95,878		$	108,061		$	15,409		$	123,470

1Ambassador Programs and Other include all travel programs as well as corporate overhead.

Any intercompany sales or services provided are eliminated upon consolidation.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

8. Accumulated Other Comprehensive Income (Loss)

Unrealized gains or losses related to derivative securities are recorded in accumulated other comprehensive income (“AOCI”). The change in unrealized gains or losses related to derivative securities are recorded in other comprehensive income net of income taxes in the period the change occurred. When derivative securities designated as cash flow hedges are used to pay vendors, the effective portion of the hedge is reclassified into the income statement and recorded in net revenue, non-directly delivered programs.

Unrealized gains or losses related to available-for-sale securities are recorded in AOCI. The change in unrealized gains or losses related to available-for-sale securities are recorded in other comprehensive income net of income taxes in the period the change occurred. When securities are sold and a realized gain or loss is recognized, the amount is reclassified from AOCI to the income statement and recorded in interest and dividend income. During the three and six months ended June 30, 2014 and 2013, the Company recognized net realized losses of $25 thousand and $67 thousand, respectively, due to the sale of investments.

For the three months ended June 30, 2014 and 2013, a summary of AOCI balances and gains (losses) recognized in OCI are as follows (in thousands):

	Accumulated Other Comprehensive Income (Loss)
	Derivative Securities						Available-for-sale securities
	Three months ended						Three months ended
	June 30,						June 30,
	2014			2013			2014			2013
Balance, beginning of period	$	(65	)	$	35		$	(243	)	$	(132	)
Change before reclassification		185			(398	)		83			(368	)
Reclassification into net revenue, non-directly delivered programs		(25	)		(67	)		-			-
Reclassification into interest and dividend income		-			-			8			8
Effect of incomes taxes		69			163			62			126
Other comprehensive income (loss), net of income taxes		229			(302	)		153			(234	)
Balance, end of period	$	164		$	(267	)	$	(90	)	$	(366	)

For the six months ended June 30, 2014 and 2013, a summary of AOCI balances and gains (losses) recognized in OCI are as follows (in thousands):

	Accumulated Other Comprehensive Income (Loss)
	Derivative Securities						Available-for-sale securities
	Six months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
Balance, beginning of period	$	(192	)	$	544		$	(357	)	$	(180	)
Change before reclassification		381			(1,081	)		259			(294	)
Reclassification into net revenue, non-directly delivered programs		(25	)		(167	)		-			-
Reclassification into interest and dividend income		-			-			8			8
Effect of incomes taxes		-			437			-			100
Other comprehensive income (loss), net of income taxes		356			(811	)		267			(186	)
Balance, end of period	$	164		$	(267	)	$	(90	)	$	(366	)

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Investments and Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Investments and Fair Value Measurements [Abstract]

Investments and Fair Value Measurements

6. Investments and Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market, and we consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.

Our financial instruments are measured and recorded at fair value. Our non-financial assets, including property and equipment, intangible assets and goodwill, are measured at fair value upon acquisition, reviewed at least annually for impairment, and are fully assessed if there is an indicator of impairment. An adjustment would be made to the fair value of non-financial assets if an impairment charge is recognized.

Fair value is determined for assets and liabilities using a three-tiered hierarchy, based upon significant levels of inputs as follows:

-   Level 1 – Quoted prices in active markets for identical assets or liabilities.

-   Level 2 – Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

-   Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following tables summarize the composition of our investments at June 30, 2014 and December 31, 2013 (in thousands):

								Classification on Balance Sheet
June 30, 2014	Amortized Cost		Unrealized Gains  (Losses)			Aggregate Fair Value		Cash and cash equivalents		Short-term available-for-sale securities		Long-term available-for-sale securities
Auction rate securities (“ARS”), greater than one year	$	1,000	$	(271	)	$	729	$	-	$	-	$	729
Money market funds, ninety days or less		3,597		-			3,597		3,597		-		-
Municipal securities1
Short term municipal securities funds2		40,717		18			40,735		-		40,735		-
One year or less		921		3			924		-		924		-
After one year through three years		2,716		11			2,727		-		2,727		-
Greater than three years		2,735		(33	)		2,702		-		2,702		-
Total	$	51,686	$	(272	)	$	51,414	$	3,597	$	47,088	$	729

								Classification on Balance Sheet
December 31, 2013	Amortized Cost		Unrealized Gains  (Losses)				Aggregate Fair Value	Cash and cash equivalents		Short-term available-for-sale securities		Long-term available-for-sale securities
ARS, greater than one year	$	1,002	$	(283	)	$	719	$	-	$	-	$	719
Money market funds, ninety days or less		488		-			488		488		-		-
Municipal securities1
Short term municipal securities funds2		27,493		(143	)		27,350		-		27,350		-
One year or less		952		3			955		-		955		-
After one year through three years		3,132		20			3,152		-		3,152		-
Greater than three years		4,854		(137	)		4,717		-		4,717		-
Total	$	37,921	$	(540	)	$	37,381	$	488	$	36,174	$	719

1Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

2Amounts include short-term municipal security funds that do not have a set maturity date.

The following tables detail the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at June 30, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements at Reporting Date Using
June 30, 2014	Fair Market Value		Level 1		Level 2		Level 3
Financial assets:
ARS	$	729	$	-	$	-	$	729
Money market funds		3,597		3,597		-		-
Municipal securities1		47,088		41,237		5,851		-
Foreign currency exchange contracts		89		-		89		-
Total financial assets	$	51,503	$	44,834	$	5,940	$	729
Financial liabilities:
Foreign currency exchange contracts		29		-		29		-
Total financial liabilities	$	29	$	-	$	29	$	-
			Fair Value Measurements at Reporting Date Using
December 31, 2013	Fair Market Value		Level 1		Level 2		Level 3
Financial assets:
ARS	$	719	$	-	$	-	$	719
Money market funds		488		488		-		-
Municipal securities1		36,174		27,350		8,824		-
Foreign currency exchange contracts		253		-		253		-
Total financial assets	$	37,634	$	27,838	$	9,077	$	719
Financial liabilities:
Foreign currency exchange contracts		549		-		549		-
Total financial liabilities	$	549	$	-	$	549	$	-

1 At June 30, 2014, municipal securities consisted of an 86/7/6/1 percent split between holdings in short-term municipal security funds, municipal revenue bonds, municipal general obligation bonds and certificates of deposit, respectively. At December 31, 2013, municipal securities consisted of a 76/13/11 split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. The underlying credit rating of the municipal securities at June 30, 2014 and December 31, 2013 were A+, A1 or better as defined by S&P 500 and Moody’s, respectively.

Money market funds and municipal securities are classified as Level 1 assets because market prices are readily available for these investments. Level 2 financial assets and liabilities represent the fair value of our municipal bonds and foreign currency exchange contracts that were valued using pricing models that take into account the contract terms, as well as multiple inputs where applicable, such as equity prices, interest rates, volatility and currency rates. Level 3 financial assets represent the fair value of our one auction-rate security (“ARS”), which was valued using a pricing model that takes into account the average life of the underlying collateral, the rate of return, and the spread used for similar issuances.

The following table details the fair value measurements of assets measured on a non-recurring basis within the three levels of the fair value hierarchy at June 30, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements at Reporting Date Using									Total Loss
June 30, 2014	Fair Market Value		Qouted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs  (Level 2)			Significant Other Unobservable Inputs (Level 3)			Three months ended June 30, 2014
Non-financal assets:
Property and equipment, net	$	8,750		$	-		$	-		$	8,750		$	2,000
Goodwill	$	-		$	-		$	-		$	-		$	9,711
			Fair Value Measurements at Reporting Date Using									Total Loss
December 31, 2013	Fair Market Value		Qouted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)			Year ended December 31, 2013
Non-financal assets:
Property and equipment, net	$	11,000		$	-		$	-		$	11,000		$	4,544

Fair value measurements on a recurring basis using Level 3 inputs consist of one available-for-sale ARS. The following table presents a reconciliation for the three and six months ended June 30, 2014 and 2013, of available-for-sale ARS measured at fair value on a recurring basis using Level 3 inputs (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2014		2013			2014		2013
Beginning balance	$	723	$	729		$	719	$	723
Total realized / unrealized losses:
Included in OCI		6		(13	)		10		(7	)
Ending balance	$	729	$	716		$	729	$	716

During the six months ended June 30, 2014, we experienced one failed ARS auction, representing principal of $1.0 million. This ARS continues to be classified as a long-term asset due to the high probability that the ARS may fail in future auctions. The next scheduled auction for this ARS is March 6, 2015. We have determined that there is no other-than-temporary impairment on this security, since we do not intend and are not required to sell this security before we have recovered the amortized cost basis, there has been no further deterioration of the credit rating of this investment, interest payments at coupon rate continue to be received, and we expect to recover the amortized cost basis of this security. We will continue to reassess liquidity in future reporting periods based on several factors, including the success or failure of future auctions, possible failure of the investment to be redeemed, deterioration of the credit rating of the investment, market risk, and other factors.

In determining the fair value of bond and ARS investments we consider the individual ratings of each holding. With regard to bonds, we consider the following: the underlying rating of the issuer irrespective of the insurance; the performance of the issuer; the term of the bond; and the quality of bond insurance provided by the rating of the bond insurer. With regard to valuation of our ARS, which is comprised of student loans, we consider the underlying credit quality of comparable student loan portfolios and the average life of the underlying student loan assets and apply a discount related to the illiquidity of our ARS due to past failed auctions. Based on these inputs, we have applied a discount of 321.0-basis points to the London interbank offered rate resulting in a valuation of $0.7 million from a costs basis of $1.0 million as of June 30, 2014. At the reporting dates and in the future, we recognize that this investment is subject to general credit, liquidity, market and interest rate risks. The fair value of this investment accordingly will continue to change and we will continue to evaluate its carrying value.

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2014

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

7. Derivative Financial Instruments

The majority of our travel programs take place outside of the United States, and most foreign suppliers require payment in currency other than the U.S. dollar. Accordingly, we are exposed to foreign currency risk relative to changes in foreign currency exchange rates between those currencies and the U.S. dollar for our non-directly delivered programs. We use forward contracts that allow us to acquire foreign currency at a fixed price for a specified point in time to provide a hedge against foreign currency risk. All of our derivatives are cash flow hedges and at June 30, 2014, all contracts qualified for cash flow hedge accounting.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income or loss and reclassified into earnings in the same period during which the hedged transaction is recognized in earnings; this is primarily during the second and third quarters of the year when our student travel programs occur. Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

At June 30, 2014, the following forward contracts were outstanding (in thousands):

	Notional Amount		Matures
Forward contracts:
Australian dollar		3,200	July 2014 - May 2015
Euro		2,860	July 2014
British pound		200	July 2014

The fair value of our forward contracts were as follows (in thousands):

	June 30, 2014
	Derivatives designated as hedging instruments				Total Net
	Assets		Liabilities		Assets
Forward contracts	$	89	$	29		$	60
	December 31, 2013
	Derivatives designated as hedging instruments				Total Net
	Assets		Liabilities		Liabilities
Forward contracts	$	253	$	549		$	296

The net asset and liability derivatives at June 30, 2014 and December 31, 2013 are reported in the consolidated balance sheet as current and long-term foreign currency exchange contracts.

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes [Abstract]

Income Taxes

9. Income Taxes

We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. A significant piece of objective negative evidence we evaluated was our cumulative loss incurred over the three-year period ended June 30, 2014. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. As a result, we determined that the negative evidence outweighed the positive evidence as of June 30, 2014 and recorded a one-time, non-cash charge to income tax expense of approximately  $0.7 million to establish a valuation allowance against our total U.S. deferred tax assets, net of U.S. deferred tax liabilities. This accounting treatment has no effect on our  ability to utilize deferred tax assets such as loss carryforwards and tax credits to reduce future cash tax payments. We will continue to assess the likelihood that the deferred tax assets will be realizable at each reporting period and the valuation allowance will be adjusted accordingly.

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Investments and Fair Value Measurements (Details) (USD $)	3 Months Ended			6 Months Ended			12 Months Ended
	Jun. 30, 2014 Investment		Jun. 30, 2013	Jun. 30, 2014 Investment		Jun. 30, 2013	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 51,686,000			$ 51,686,000			$ 37,921,000
Unrealized Gains (Losses)	(272,000)			(272,000)			(540,000)
Aggregate Fair Value	51,414,000			51,414,000			37,381,000
Cash and cash equivalents	3,597,000			3,597,000			488,000
Short-term available-for-sale securities	47,088,000			47,088,000			36,174,000
Long-term available-for-sale securities	729,000			729,000			719,000
Financial assets [Abstract]
ARS	729,000			729,000			719,000
Money market funds	3,597,000			3,597,000			488,000
Municipal securities	47,088,000	[1]		47,088,000	[1]		36,174,000	[1]
Foreign currency exchange contracts	89,000			89,000			253,000
Total financial assets	51,503,000			51,503,000			37,634,000
Financial liabilities [Abstract]
Foreign currency exchange contracts	29,000			29,000			549,000
Total financial liabilities	29,000			29,000			549,000
Non-financial assets [Abstract]
Property and equipment, net	8,750,000			8,750,000			11,000,000
Goodwill	0			0
Loss on disposition and impairment of property and equipment	2,000,000			2,000,000		7,000	4,544,000
Loss on impairment of goodwill	9,711,000			9,711,000		0
Short-term municipal security funds as a percentage of municipal securities (in hundredths)	86.00%			86.00%			76.00%
Municipal revenue bonds as a percentage of municipal securities (in hundredths)	7.00%			7.00%			13.00%
Municipal general obligation bonds as a percentage of municipal securities (in hundredths)	6.00%			6.00%			11.00%
Certificates of deposit as a percentage of municipal securities (in hundredths)	1.00%			1.00%
Reconciliation of available-for-sale ARS measured at fair value on a recurring basis using Level 3 inputs [Roll Forward]
Beginning balance	723,000		729,000	719,000		723,000	723,000
Total realized / unrealized losses [Abstract]
Included in OCI	6,000		(13,000)	10,000		(7,000)
Ending balance	729,000		716,000	729,000		716,000	719,000
Number of investments that failed at auction	1			1
Principal amount of failed ARS auction	1,000,000			1,000,000
Basis points (in hundredths)				3.21%
Valuation of Ars after discount has been applied	700,000			700,000
Cost basis	1,000,000			1,000,000
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets [Abstract]
ARS	0			0			0
Money market funds	3,597,000			3,597,000			488,000
Municipal securities	41,237,000	[1]		41,237,000	[1]		27,350,000	[1]
Foreign currency exchange contracts	0			0			0
Total financial assets	44,834,000			44,834,000			27,838,000
Financial liabilities [Abstract]
Foreign currency exchange contracts	0			0			0
Total financial liabilities	0			0			0
Non-financial assets [Abstract]
Property and equipment, net	0			0			0
Goodwill	0			0
Significant Other Observable Inputs (Level 2) [Member]
Financial assets [Abstract]
ARS	0			0			0
Money market funds	0			0			0
Municipal securities	5,851,000	[1]		5,851,000	[1]		8,824,000	[1]
Foreign currency exchange contracts	89,000			89,000			253,000
Total financial assets	5,940,000			5,940,000			9,077,000
Financial liabilities [Abstract]
Foreign currency exchange contracts	29,000			29,000			549,000
Total financial liabilities	29,000			29,000			549,000
Non-financial assets [Abstract]
Property and equipment, net	0			0			0
Goodwill	0			0
Significant Other Unobservable Inputs (Level 3) [Member]
Financial assets [Abstract]
ARS	729,000			729,000			719,000
Money market funds	0			0			0
Municipal securities	0	[1]		0	[1]		0	[1]
Foreign currency exchange contracts	0			0			0
Total financial assets	729,000			729,000			719,000
Financial liabilities [Abstract]
Foreign currency exchange contracts	0			0			0
Total financial liabilities	0			0			0
Non-financial assets [Abstract]
Property and equipment, net	8,750,000			8,750,000			11,000,000
Goodwill	0			0
Auction Rate Securities ("ARS"), Greater Than One Year [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,000,000			1,000,000			1,002,000
Unrealized Gains (Losses)	(271,000)			(271,000)			(283,000)
Aggregate Fair Value	729,000			729,000			719,000
Cash and cash equivalents	0			0			0
Short-term available-for-sale securities	0			0			0
Long-term available-for-sale securities	729,000			729,000			719,000
Money Market Funds, Ninety Days or Less [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,597,000			3,597,000			488,000
Unrealized Gains (Losses)	0			0			0
Aggregate Fair Value	3,597,000			3,597,000			488,000
Cash and cash equivalents	3,597,000			3,597,000			488,000
Short-term available-for-sale securities	0			0			0
Long-term available-for-sale securities	0			0			0
Short Term Municipal Securities Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	40,717,000	[2],[3]		40,717,000	[2],[3]		27,493,000	[2],[3]
Unrealized Gains (Losses)	18,000	[2],[3]		18,000	[2],[3]		(143,000)	[2],[3]
Aggregate Fair Value	40,735,000	[2],[3]		40,735,000	[2],[3]		27,350,000	[2],[3]
Cash and cash equivalents	0	[2],[3]		0	[2],[3]		0	[2],[3]
Short-term available-for-sale securities	40,735,000	[2],[3]		40,735,000	[2],[3]		27,350,000	[2],[3]
Long-term available-for-sale securities	0	[2],[3]		0	[2],[3]		0	[2],[3]
Municipal Securities Maturing in One Year or Less [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	921,000	[2]		921,000	[2]		952,000	[2]
Unrealized Gains (Losses)	3,000	[2]		3,000	[2]		3,000	[2]
Aggregate Fair Value	924,000	[2]		924,000	[2]		955,000	[2]
Cash and cash equivalents	0	[2]		0	[2]		0	[2]
Short-term available-for-sale securities	924,000	[2]		924,000	[2]		955,000	[2]
Long-term available-for-sale securities	0	[2]		0	[2]		0	[2]
Municipal Securities Maturing After One Year Through Three Years [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,716,000	[2]		2,716,000	[2]		3,132,000	[2]
Unrealized Gains (Losses)	11,000	[2]		11,000	[2]		20,000	[2]
Aggregate Fair Value	2,727,000	[2]		2,727,000	[2]		3,152,000	[2]
Cash and cash equivalents	0	[2]		0	[2]		0	[2]
Short-term available-for-sale securities	2,727,000	[2]		2,727,000	[2]		3,152,000	[2]
Long-term available-for-sale securities	0	[2]		0	[2]		0	[2]
Municipal Securities Maturing Greater Than Three Years [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,735,000	[2]		2,735,000	[2]		4,854,000	[2]
Unrealized Gains (Losses)	(33,000)	[2]		(33,000)	[2]		(137,000)	[2]
Aggregate Fair Value	2,702,000	[2]		2,702,000	[2]		4,717,000	[2]
Cash and cash equivalents	0	[2]		0	[2]		0	[2]
Short-term available-for-sale securities	2,702,000	[2]		2,702,000	[2]		4,717,000	[2]
Long-term available-for-sale securities	$ 0	[2]		$ 0	[2]		$ 0	[2]

[1] At June 30, 2014, municipal securities consisted of an 86/7/6/1 percent split between holdings in short-term municipal security funds, municipal revenue bonds, municipal general obligation bonds and certificates of deposit, respectively. At December 31, 2013, municipal securities consisted of a 76/13/11 split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. The underlying credit rating of the municipal securities at June 30, 2014 and December 31, 2013 were A+, A1 or better as defined by S&P 500 and Moody’s, respectively.

[2] Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

[3] Amounts include short-term municipal security funds that do not have a set maturity date.

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Line of Credit

6 Months Ended

Jun. 30, 2014

Line of Credit [Abstract]

Line of Credit

14. Line of Credit

The Company's credit agreement with Wells Fargo expired on June 1, 2014 and was not renewed.

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income (Loss) [Abstract]

Summary of AOCI balances and gains (losses) recognized in OCI

For the three months ended June 30, 2014 and 2013, a summary of AOCI balances and gains (losses) recognized in OCI are as follows (in thousands):

	Accumulated Other Comprehensive Income (Loss)
	Derivative Securities						Available-for-sale securities
	Three months ended						Three months ended
	June 30,						June 30,
	2014			2013			2014			2013
Balance, beginning of period	$	(65	)	$	35		$	(243	)	$	(132	)
Change before reclassification		185			(398	)		83			(368	)
Reclassification into net revenue, non-directly delivered programs		(25	)		(67	)		-			-
Reclassification into interest and dividend income		-			-			8			8
Effect of incomes taxes		69			163			62			126
Other comprehensive income (loss), net of income taxes		229			(302	)		153			(234	)
Balance, end of period	$	164		$	(267	)	$	(90	)	$	(366	)

For the six months ended June 30, 2014 and 2013, a summary of AOCI balances and gains (losses) recognized in OCI are as follows (in thousands):

	Accumulated Other Comprehensive Income (Loss)
	Derivative Securities						Available-for-sale securities
	Six months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
Balance, beginning of period	$	(192	)	$	544		$	(357	)	$	(180	)
Change before reclassification		381			(1,081	)		259			(294	)
Reclassification into net revenue, non-directly delivered programs		(25	)		(167	)		-			-
Reclassification into interest and dividend income		-			-			8			8
Effect of incomes taxes		-			437			-			100
Other comprehensive income (loss), net of income taxes		356			(811	)		267			(186	)
Balance, end of period	$	164		$	(267	)	$	(90	)	$	(366	)

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Supplemental Disclosures of Consolidated Statements of Cash Flows (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Non-cash financing and investing activities [Abstract]
Unrealized income (loss) on foreign currency exchange contracts	$ 356	$ (1,248)
Unrealized income (loss) on available-for-sale securities	267	(286)
Property and equipment	$ 0	$ (10)

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) [Abstract]
Net income (loss)	$ (4,185)	$ 8,092	$ (11,736)	$ 33
Unrealized gain (loss) on foreign currency exchange contracts, net of income tax benefit of $69, $163, $0 and $437	229	(302)	357	(811)
Unrealized gain (loss) on available-for-sale securities, net of income tax benefit of $62, $126, $0 and $100	153	(235)	267	(186)
Comprehensive income (loss)	$ (3,803)	$ 7,555	$ (11,112)	$ (964)

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2014

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

3. Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08). This ASU relates to discontinued operations reporting for disposals of components of an entity that represent strategic shifts that have, or will have, a major effect on the entity’s operations and financial results. The standard expands disclosures for discontinued operations and requires new disclosures related to individually material disposals that do not meet the definition of a discontinued operation. The provisions of this ASU are effective for interim and annual periods beginning after December 15, 2014. This ASU is not expected to have an impact on our financial statements or disclosures.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2017.

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Stock-Based Compensation [Abstract]

Valuation assumptions

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the three and six months ended June 30, 2014 and 2013.

	Three months ended  June 30, 2014		Three months ended  June 30, 2013		Six months ended  June 30, 2014		Six months ended  June 30, 2013
Expected dividend yield	-	%	-	%	-	%	1.37	%
Expected stock price volatility	59.43	%	52.68	%	59.43	%	54.66	%
Risk-free interest rate	2.02	%	2.10	%	2.02	%	2.08	%
Expected life of options	4.64	Years	4.53	Years	4.64	Years	4.56	Years
Estimated fair value per option granted	$1.68		$1.61		$1.68		$1.63

Summary of stock option activity

A summary of option activity under the Plan as of June 30, 2014, and the changes during the six months then ended is presented below:

	Stock Options	Weighted-Average  Exercise Price		Weighted-Average Remaining Contractual Life (years)
Outstanding at December 31, 2013	907,945	$	6.54
Granted	64,239		3.76
Forfeited / Expired	(113,012)		7.60
Exercised	-		-
Outstanding at June 30, 2014	859,172	$	6.19	4.24
Exercisable at June 30, 2014	577,316	$	6.99	2.02

Summary of activity of non-vested restricted stock awards and restricted stock units

A summary of the activity of non-vested restricted stock awards and restricted stock units under the Plan as of June 30, 2014, and the changes during the six months then ended is presented below:

	Restricted Stock Awards				Restricted Stock Units
	Restricted Stock Awards	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual  Life (years)	Restricted Stock  Units	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Life (years)
Balance at December 31, 2013	285,435	$	5.24		28,123	$	3.88
Granted	51,704		3.72		28,398		4.37
Forfeited	(10,944)		5.46		(8,660)		3.98
Vested	(185,258)		4.87		-		-
Balance at June 30, 2014	140,937	$	5.16	1.82	47,861	$	4.15	2.00

Summary of activity of performance stock units under the Plan

A summary of the activity of performance stock units under the Plan as of June 30, 2014, and the changes during the six months then ended is presented below:

	Performance Stock  Units	Weighted-Average Grant Date Fair Value		Weighted-Average  Remaining Contractual Life (years)
Balance at December 31, 2014	114,560	$	4.41
Granted	-		-
Forfeited	(78,514)		4.41
Vested	-		-
Balance at June 30, 2014	36,046	$	4.41	2.51

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Stock-Based Compensation (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized under the plan available for future stock-based compensation (in shares)	1,896,120		1,896,120
Expected dividend yield (in hundredths)	0.00%	0.00%	0.00%	1.37%
Expected stock price volatility (in hundredths)	59.43%	52.68%	54.43%	54.66%
Risk-free interest rate (in hundredths)	2.02%	2.10%	2.02%	2.08%
Expected life of options	4 years 7 months 20 days	4 years 6 months 11 days	4 years 7 months 20 days	4 years 6 months 22 days
Estimated fair value per option granted (in dollars per share)	$ 1.68	$ 1.61	$ 1.68	$ 1.63
Stock Options [Roll Forward]
Stock Options, Beginning Balance (in shares)			907,945
Stock Options, Grants in Period (in shares)			64,239
Stock Options, Forfeited / Expired (in shares)			(113,012)
Stock Options, Exercised (in shares)			0
Stock Options, Ending Balance (in shares)	859,172		859,172
Stock Options, Exercisable Ending Balance (in shares)	577,316		577,316
Stock Options, Weighted-Average Exercise Price [Roll Forward]
Stock Options, Weighted-Average Exercise Price, Beginning Balance (in dollars per share)			$ 6.54
Stock Options, Grants, Weighted-Average Exercise Price (in dollars per share)			$ 3.76
Stock Options, Forfeited / Expired, Weighted Average Exercise Price (in dollars per share)			$ 7.60
Stock Options, Exercised, Weighted Average Exercise Price (in dollars per share)			$ 0
Stock Options, Weighted Average Exercise Price, Ending Balance (in dollars per share)	$ 6.19		$ 6.19
Stock Options Exercisable, Weighted Average Exercise Price, Ending Balance (in dollars per share)	$ 6.99		$ 6.99
Outstanding, Weighted-Average Remaining Contractual Life			4 years 2 months 26 days
Exercisable, Weighted-Average Remaining Contractual Life			2 years 0 months 7 days
Stock-based compensation			$ 1,168,000	$ 1,957,000
Board of Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Key Employees and Consultants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage that can vest per year (in hundredths)			25.00%
Vesting period			4 years
Exercised period for vest from grant date			10 years
Fair value assumptions expected forfeiture rate (in hundredths)			15.20%
Stock Options, Weighted-Average Exercise Price [Roll Forward]
Total intrinsic value of stock options exercised	0	0	0	0
Total fair value of options vested	0.7	1,000,000	0.7	1,000,000
Option outstanding, intrinsic value	100,000		100,000
Options exercisable, intrinsic value	100,000		100,000
Share price that valuation assumptions are based on (in dollars per share)	$ 4.61		$ 4.61
Stock price (in dollars per share)	$ 4.61		$ 4.61
Stock-based compensation	300,000	100,000	400,000	1,000,000
Unrecognized stock-based compensation expense	300,000		300,000
Unrecognized stock-based compensation expense recognition period			3 years 9 months 18 days
Restricted Stock Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage that can vest per year (in hundredths)			100.00%
Stock Options, Weighted-Average Exercise Price [Roll Forward]
Option outstanding, intrinsic value	600,000		600,000
Share price that valuation assumptions are based on (in dollars per share)	$ 4.61		$ 4.61
Stock price (in dollars per share)	$ 4.61		$ 4.61
Stock-based compensation	500,000	100,000	600,000	1,000,000
Unrecognized stock-based compensation expense	400,000		400,000
Unrecognized stock-based compensation expense recognition period			3 years 9 months 18 days
Weighted-average grant date fair value of restricted stock awards vested	900,000	100,000	1,000,000	2,000,000
Restricted Stock and Performance Stock Awards [Abstract]
Restricted Stock and Performance Stock Awards, Beginning Balance (in shares)			285,435
Restricted Stock and Performance Stock Awards, Shares Granted (in shares)			51,704
Restricted Stock and Performance Stock Awards, Forfeitures (in shares)			(10,944)
Restricted Stock Awarded Performance Stock Awards, Vested (in shares)			(185,258)
Restricted Stock and Performance Stock Awards, Ending Balance (in shares)	140,937		140,937
Restricted Stock and Performance Stock Awards, weighted average grant date fair value [Abstract]
Restricted Stock and Performance Stock Awards, Beginning Balance (in dollars per share)			$ 5.24
Restricted Stock and Performance Stock Awards, Granted, Weighted-Average Grant Date Fair Value (in dollars per share)			$ 3.72
Restricted Stock and Performance Stock Awards, Forfeited, Weighted-Average Grant Date Fair Value (in dollars per share)			$ 5.46
Restricted Stock and Performance Stock Awards, Vested, Weighted-Average Grant Date Fair Value (in dollars per share)			$ 4.87
Restricted Stock and Performance Stock Awards, Weighted-Average Grant Date Fair Value, Ending Balance (in dollars per share)	$ 5.16		$ 5.16
Weighted-Average Remaining Contractual Life			1 year 9 months 25 days
Restricted Stock Award [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Restricted Stock Award [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage that can vest per year (in hundredths)			25.00%
Vesting period			4 years
Stock Options, Weighted-Average Exercise Price [Roll Forward]
Option outstanding, intrinsic value	200,000		200,000
Unrecognized stock-based compensation expense	200,000		200,000
Unrecognized stock-based compensation expense recognition period			3 years 9 months 18 days
Restricted Stock and Performance Stock Awards [Abstract]
Restricted Stock and Performance Stock Awards, Beginning Balance (in shares)			28,123
Restricted Stock and Performance Stock Awards, Shares Granted (in shares)			28,398
Restricted Stock and Performance Stock Awards, Forfeitures (in shares)			(8,660)
Restricted Stock Awarded Performance Stock Awards, Vested (in shares)			0
Restricted Stock and Performance Stock Awards, Ending Balance (in shares)	47,861		47,861
Restricted Stock and Performance Stock Awards, weighted average grant date fair value [Abstract]
Restricted Stock and Performance Stock Awards, Beginning Balance (in dollars per share)			$ 3.88
Restricted Stock and Performance Stock Awards, Granted, Weighted-Average Grant Date Fair Value (in dollars per share)			$ 4.37
Restricted Stock and Performance Stock Awards, Forfeited, Weighted-Average Grant Date Fair Value (in dollars per share)			$ 3.98
Restricted Stock and Performance Stock Awards, Vested, Weighted-Average Grant Date Fair Value (in dollars per share)			$ 0
Restricted Stock and Performance Stock Awards, Weighted-Average Grant Date Fair Value, Ending Balance (in dollars per share)	$ 4.15		$ 4.15
Weighted-Average Remaining Contractual Life			2 years
Performance Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Stock Options, Weighted-Average Exercise Price [Roll Forward]
Unrecognized stock-based compensation expense	$ 0		$ 0
Restricted Stock and Performance Stock Awards [Abstract]
Restricted Stock and Performance Stock Awards, Beginning Balance (in shares)	114,560
Restricted Stock and Performance Stock Awards, Shares Granted (in shares)	0
Restricted Stock and Performance Stock Awards, Forfeitures (in shares)	(78,514)
Restricted Stock Awarded Performance Stock Awards, Vested (in shares)	0
Restricted Stock and Performance Stock Awards, Ending Balance (in shares)	36,046		36,046
Restricted Stock and Performance Stock Awards, weighted average grant date fair value [Abstract]
Restricted Stock and Performance Stock Awards, Beginning Balance (in dollars per share)	$ 4.41
Restricted Stock and Performance Stock Awards, Granted, Weighted-Average Grant Date Fair Value (in dollars per share)	$ 0
Restricted Stock and Performance Stock Awards, Forfeited, Weighted-Average Grant Date Fair Value (in dollars per share)	$ 4.41
Restricted Stock and Performance Stock Awards, Vested, Weighted-Average Grant Date Fair Value (in dollars per share)	$ 0
Restricted Stock and Performance Stock Awards, Weighted-Average Grant Date Fair Value, Ending Balance (in dollars per share)	$ 4.41		$ 4.41
Weighted-Average Remaining Contractual Life			2 years 6 months 4 days

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Supplemental Disclosures of Consolidated Statements of Cash Flows

6 Months Ended

Jun. 30, 2014

Supplemental Disclosures of Consolidated Statements of Cash Flows [Abstract]

Supplemental Disclosures of Consolidated Statements of Cash Flows

13. Supplemental Disclosures of Consolidated Statements of Cash Flows

Our non-cash investing and financing activities during the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):

	June 30, 2014		June 30, 2013
Unrealized income (loss) on foreign currency exchange contracts	$	356	$	(1,248)
Unrealized income (loss) on available-for-sale securities	$	267	$	(286)
Property and equipment	$	-	$	(10)