Stockholders’ (Deficit) Equity

The Company’s certificate of incorporation adopted in connection with the IPO provides for 105,000,000 shares of capital stock, consisting of 5,000,000 shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”) and 100,000,000 shares of Common Stock, par value $0.001 per share (the “Common Stock”).

The Company’s 2006 Stock Incentive Plan, as amended and restated (the “2006 Plan”), authorizes the Company to issue up to 3,500,000 shares of Common Stock to employees, non-employee directors and consultants pursuant to awards of stock options, stock appreciation rights, restricted stock, in payment of performance shares or other stock-based awards. An amendment to the 2006 Plan to increase the aggregate number of shares issuable under the plan by 500,000 shares from 2,500,000 shares to 3,000,000 shares was unanimously adopted by the Board of Directors on March 1, 2011, and approved by stockholders at the Annual Meeting of Stockholders on May 12, 2011. In April 2015, the Company further amended the 2006 Plan to increase the aggregate number of shares of Common Stock issuable under the 2006 Plan by 500,000 shares to a total of 3,500,000. As of December 31, 2015, there were 668,460 shares available to be issued under the 2006 Plan.

Effective December 31, 2014, the Company’s Board of Directors adopted a stockholder rights plan (the "Rights Plan"). Pursuant to the Rights Plan, the Board of Directors declared a dividend distribution of one preferred share right (a "Right") for each share of Common Stock held as of January 12, 2015. Each Right entitles the holder to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock (the "Preferred Shares") at an initial exercise price of $15, subject to certain adjustments. On March 24, 2015, the Company entered into a nomination and standstill agreement (the “Nomination and Standstill Agreement”). Pursuant to the Nomination and Standstill Agreement, the Company agreed to redeem, effective immediately, the rights issued pursuant to the Rights Plan. Pursuant to the terms of the Rights Plan, the Company paid a redemption price to the holders of the rights equal to $0.01 per right in cash, or $246, on April 20, 2015.

a. Common Stock Options

The outstanding Common Stock options as of December 31, 2015 vest in full at various dates between January 1, 2018 and December 31, 2019. The vesting of certain grants will be accelerated in the event that certain defined events occur including the sale of the Company. The term of each grant generally ranges from five to ten years.

As of December 31, 2015, 2014 and 2013, a total of 544,869, 1,023,606 and 1,029,416 Common Stock options were exercisable, respectively.

At December 31, 2015, the Company had no stock option outstanding under the 2004 Plan while the 2006 Plan had 1,394,869 stock options outstanding.

The Company recognizes stock option expense equal to the grant date fair value of a stock option on a straight-line basis over the requisite service period, which is generally the vesting period, net of estimated forfeitures. The total compensation expense related to options, classified within payroll and related on the consolidated statements of operations related to these plans was $99, $299, and $843 for the years ended December 31, 2015, 2014 and 2013, respectively, and the related tax benefit was $38, $142 and $362 for the years ended December 31, 2015, 2014 and 2013, respectively. The 2015 and 2014 benefit of $38 and $142, respectively, were prior to the recognition of the valuation allowance. The total compensation expense of $299 for the year ended December 31, 2014 includes $160 related to incremental compensation expense recognized in connection with the modification of stock options described below.

The following table summarizes the stock option activity for the years ended December 31, 2015, 2014 and 2013:



	Common		Weighted Average Exercise Price
Balance at January 1, 2013	1,310,818		$	5.21
Exercised	(135,786	)	4.42
Cancelled	(30,548	)	6.33
Forfeited	(4,253	)	1.00
Balance at December 31, 2013	1,140,231		5.21
Exercised	(73,043	)	1.82
Cancelled	(34,567	)	12.56
Forfeited	(2,100	)	3.54
Balance at December 31, 2014	1,030,521		5.29
Granted	850,000		2.68
Exercised	(171,718	)	1.68
Cancelled	(313,934	)	8.61
Balance at December 31, 2015	1,394,869		$	3.40

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2015:



	Options Outstanding				Options Exercisable
	Number of Options	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price		Number of Options	Weighted- Average Exercise Price
Common
2006 grants	53,500	7 months	12.05		53,500	12.05
2007 grants	64,500	18 months	15.44		64,500	15.44
2008 grants	42,770	34 months	2.92		42,770	2.92
2009 grants	80,678	47 months	1.73		80,678	1.73
2010 grants	295,921	55 months	1.84		295,921	1.84
2011 grants	7,500	61 months	1.93		7,500	1.93
2015 grants	850,000	67 months	2.68		—	—
Total Grants	1,394,869	58 months	$	3.40	544,869	$	4.52

At December 31, 2015 stock options outstanding have a weighted average remaining contractual life of 4.8 years and the total intrinsic value for “in-the-money” options, based on the Company’s closing stock price of $1.19, was $36. At December 31, 2015 stock options exercisable have a weighted average remaining contractual life of 3.6 years and the total intrinsic value for “in-the-money” exercisable options was $36. The total intrinsic value of options exercised was $187 for the year ended December 31, 2015.

The aggregated intrinsic value represents the pre-tax intrinsic value (the difference between the fair value of the Company’s common stock at December 31, 2015 of $1.19 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2015. The intrinsic value is based on the fair market value of the Company’s stock and therefore changes as the fair market value of the stock price changes.

Under the 2006 Plan, stock options must be granted at a price not less than the fair market value of the stock on the date the option is granted, generally are not subject to re-pricing, and will not be exercisable more than ten years after the date of grant. Options granted under the 2006 Plan generally are qualify as "non-qualified stock options" under the U.S. Internal Revenue Code. Certain options granted under the 2004 Stock Option Plan generally qualify as “incentive stock options” under the U.S. Internal Revenue Code. The exercise price of a stock option is equal to the fair market value of the Company’s Common Stock on the option grant date.

Options granted during the year ended December 31, 2015 to employees of the Company were as follows:



Date	Number of Shares	Exercise Price		Grant Date Fair Value
August 19, 2015	700,000	$	2.61	$	1,827
October 12, 2015	50,000	$	2.95	148
October 19, 2015	100,000	$	3.04	304
	850,000			$	2,279

Included in the August 2015 grants above were 450,000 shares of non-qualified options issued to the Company's COO (“Non-Plan Options”) to purchase its common stock. These Non-Plan Options were granted outside of any shareholder-approved plan as an inducement to accept employment with the Company. The options granted on August 19, 2015 shall vest in three equal installments on each of the first three anniversaries of the date of grant and have a term of five years. These options have an exercise price of $2.61 per share, equal to the closing price of the Company's common stock on the date of grant.

The weighted average fair value of stock options as of the grant date was $1.10 in 2015. The Company did not grant any stock options during the years ended December 31, 2014 and 2013. 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:



Common	Risk-Free Interest Rate		Expected Dividend Yield	Expected Term (Years)	Expected Volatility
2015 Grants	1.1	%	—	3.99	52.03	%

The Company calculated the weighted average expected term of stock options to be 3.99 years, which represents the period of time that options are expected to be outstanding. The risk free interest rate for periods within the contractual life of the option is based on the U.S. treasury yield in effect at the time of grant. The volatility is determined based on management's estimate or historical volatilities of comparable companies.

As of December 31, 2015, $822 of unrecognized compensation cost related to stock options is expected to be recognized through October 2019.

b. Common Stock Grants

Restricted Stock Grants

The following restricted stock grants were issued to employees of the Company during the year ended December 31, 2015.



Date	Number of Shares	Share Price		Grant Date Fair Value
March 2, 2015	207,000	$	6.68	$	1,383
August 19, 2015	300,000	$	2.61	783
Total	507,000			$	2,166

Included in the grants above were 300,000 shares of restricted stock issued to the Company's COO (“Non-Plan RSA”). These Non-Plan RSA were granted outside of any shareholder-approved plan as an inducement to accept employment with the Company. The fair value of the Non-Plan RSA was $2.61 per share, representing the closing stock price on the date of grant. These shares will vest in three equal installments on each of the first three anniversaries of the date of grant.

The following table summarizes the restricted stock activity for the year ended December 31, 2015.



	Number of Shares		Weighted Average Grant Date Fair Value
Balance as of January 1, 2013	367,612		$	10.72
Granted	178,500		9.33
Vested	(98,692	)	10.39
Forfeited	(84,249	)	10.92
Balance as of December 31, 2013	363,171		10.08
Granted	196,500		8.47
Vested	(116,890	)	9.82
Forfeited	(41,247	)	9.92
Balance as of December 31, 2014	401,534		9.38
Granted	507,000		4.27
Vested	(133,874	)	9.20
Forfeited	(249,790	)	8.19
Balance as of December 31, 2015	524,870		$	5.06

The fair value of restricted stock is based on the closing stock price of an unrestricted share of the Company’s common stock on the grant date and is amortized to compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period, net of estimated forfeitures. The total compensation expense, classified within payroll and related on the consolidated statements of operations, related to restricted stock grants was $842, $1,367 and $1,056 for the years ended December 31, 2015, 2014 and 2013, respectively, and the related tax benefit was $321, $648, $459 for the years ended December 31, 2015, 2014 and 2013, respectively. The 2015 and 2014 benefit of $321 and $648, respectively, were prior to the recognition of the valuation allowance. The restricted shares contain vesting restrictions and generally vest 25% per year over four years on the anniversary date of the grants. The Company granted restricted stock awards totaling 507,000 shares with an aggregate grant date fair value of $2,166 in the year ended December 31, 2015. In the years ended December 31, 2014 and 2013, the Company granted 196,500 and 178,500 restricted shares, respectively, with an aggregate grant date fair value of $1,663 and $1,665, respectively.

The total unrecognized compensation cost related to restricted stock of $1,614 is expected to be recognized through March 2019.

Non-Restricted Stock Grants

The below table indicates the non-restricted common stock grants issued to the Company’s Board of Directors during the year ended December 31, 2015 and 2014. The total fair value of the shares issued was expensed upon the grant dates.



Date	Number of Shares	Share Price	Grant Date Fair Value
January 16, 2014	21,248	11.53	245
February 2, 2015	35,764	6.85	245
March 24, 2015	31,845	6.28	200

c. Common Stock Dividends

On April 15, 2014, the board of directors of the Company declared a quarterly cash dividend of $0.16 per share, payable on June 5, 2014 to common stockholders of record at the close of business on May 22, 2014. On February 12, 2014, the board of directors of the Company declared a quarterly cash dividend of $0.16 per share, payable on March 5, 2014 to common stockholders of record at the close of business on February 24, 2014.

On November 15, 2013, the board of directors of the Company declared a quarterly cash dividend of $0.16 per share, payable on December 5, 2013 to common stockholders of record at the close of business on November 26, 2013. The aggregate amount of the dividends payable was $3,792, based upon shares of common stock outstanding as of the record date of November 26, 2013 and additional amounts payable with each quarterly declaration as restricted shares vest. The remaining amount payable was $56 and $162 as of December 31, 2015 and 2014, respectively. The quarterly dividend was discontinued in the second quarter of 2014.

On November 16, 2012, the board of directors of the Company declared a special cash dividend of $3.00 per share, payable on December 11, 2012 to common stock holders of record at the close of business on November 30, 2012. The aggregate amount of the dividends payable was $70,296, based upon shares of common stock outstanding as of the record date of November 30, 2012 with another $1,104 payable as restricted shares vest. The remaining amount payable was $62 and $340 as of December 31, 2015 and 2014, respectively.

Pursuant to the 2006 Plan, holders of unvested restricted shares as of December 11, 2012 qualify to receive the $3.00 dividend on each future vesting date, subject to continued employment through the vesting date. Holders of unvested restricted shares as of December 5, 2013, March 5, 2014 and June 5, 2014 qualify to receive the $0.16 dividend on each future vesting date, subject to continued employment through the vesting date. As of December 31, 2015, the total dividends payable on unvested restricted shares was $118, of which $90 is classified as the current portion of the dividends payable expected to be paid in 2014 and $28 classified as long-term which is expected to be paid in the vesting periods in 2016 through 2018.