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 (“Preferred Stock”) and 100,000,000 shares of Common Stock, par value $0.001 per share (“Common Stock”).

The Company’s 2006 Stock Incentive Plan, as amended and restated in April 2015 (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. In May 2016, the Company further amended the 2006 Plan to increase the aggregate number of shares of Common Stock issuable under the 2006 Plan by 1,000,000 shares to a total of 4,500,000. As of December 31, 2016, there were 534,861 shares available to be issued under the 2006 Plan.

On August 19, 2015, the Company granted an award of non-qualified options to purchase 250,000 shares of its common stock to its Chief Operating Officer (“COO”) under the Company's 2006 Plan ("In-Plan Options"). In addition to the In-Plan Options, the Company granted its COO an award of non-qualified options to purchase 450,000 shares (“Non-Plan Options”) of its common stock and 300,000 shares of restricted stock (“Non-Plan RSA”). These Non-Plan Options and Non-Plan RSA were granted outside of any shareholder-approved plan as an inducement to accept employment with the Company. In September 2016, the COO's employment with the Company was terminated. As a result of the termination, the Company accelerated 17% of unvested In-Plan Options, Non-Plan Options and Non-Plan RSA previously awarded to the COO. The Company incurred non-cash severance expense of $250 related to this acceleration.

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.

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 entitled the holder to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock (“Preferred Share”) at an initial exercise price of $15 per one one-thousandth of a Preferred Share, subject to certain adjustments.

a. Common Stock Options

The outstanding Common Stock options as of December 31, 2016 vest in full in October 2019. The vesting of certain grants will be accelerated in the event that certain defined events occur including the sale of the Company. Stock options generally vest over a three to four year service period and expire five to ten years from the date of grant.

As of December 31, 2016, 2015 and 2014, a total of 150,207, 544,869 and 1,023,606 Common Stock options were exercisable, respectively.

At December 31, 2016, the Company had 187,707 stock options outstanding under the 2006 Plan and no Non-Plan Options were 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 was $156, $99, and $299 for the years ended December 31, 2016, 2015 and 2014, respectively, and the related tax benefit was $67, $38 and $142 for the years ended December 31, 2016, 2015 and 2014, respectively. Each of these 2016, 2015 and 2014 tax benefits 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, 2016, 2015 and 2014:



	Common		Weighted Average Exercise Price
Balance at January 1, 2014	1,140,231		$	5.21
Exercised	(73,043	)	1.82
Canceled	(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
Canceled	(313,934	)	8.61
Balance at December 31, 2015	1,394,869		3.40
Exercised	(226,011	)	1.41
Canceled	(533,484	)	3.99
Forfeited	(447,667	)	2.71
Balance at December 31, 2016	187,707		$	5.78

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2016:



	Options Outstanding				Options Exercisable
	Number of Options	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price		Number of Options	Weighted-Average Exercise Price
Common
2007 grants	51,000	7 months	$	14.76	51,000	$	14.76
2008 grants	34,020	23 months	2.64		34,020	2.64
2009 grants	41,372	34 months	1.75		41,372	1.75
2010 grants	11,315	42 months	1.91		11,315	1.91
2015 grants	50,000	105 months	2.95		12,500	2.95
Total Grants	187,707	44 months	$	5.78	150,207	$	6.48

At December 31, 2016, stock options outstanding have a weighted average remaining contractual life of 3.7 years and the total intrinsic value for “in-the-money” options, based on the Company’s closing stock price of $2.50, was $42. At December 31, 2016, stock options exercisable have a weighted average remaining contractual life of 2.4 years and the total intrinsic value for “in-the-money” exercisable options was $42. The total intrinsic value of options exercised was $279 for the year ended December 31, 2016.

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, 2016 of $2.50 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, 2016. 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 qualify as “non-qualified 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. The Company did not grant any stock options during the years ended December 31, 2016 and 2014. In the year ended December 31, 2015, the Company granted 850,000 stock options, with an aggregate grant date fair value of $2,279.

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

The weighted average fair value of stock options as of the grant date was $1.10 in 2015. 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 represented the period of time that options were expected to be outstanding. The risk free interest rate for periods within the contractual life of the option was based on the U.S. treasury yield in effect at the time of grant. The volatility was determined based on management's estimate or historical volatilities of comparable companies.

As of December 31, 2016, $52 of unrecognized compensation cost related to stock options was expected to be recognized over a weighted-average period of 2.8 years.

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, 2016.



	Number of Shares	Share Price		Grant Date Fair Value
March 10, 2016	559,000	$	2.06	$	1,152
September 30, 2016	200,000	$	3.09	618
December 12, 2016	952,000	$	2.60	2,475
Total	1,711,000			$	4,245

The following table summarizes the restricted stock activity for the years ended December 31, 2016, 2015 and 2014:



	Number of Shares		Weighted Average Grant Date Fair Value
Balance as of January 1, 2014	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
Granted	1,711,000		2.48
Vested	(222,495	)	4.59
Forfeited	(402,000	)	3.39
Balance as of December 31, 2016	1,611,375		$	2.80

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 $1,155, $842 and $1,367 for the years ended December 31, 2016, 2015 and 2014, respectively, and the related tax benefit was $496, $321, $648 for the years ended December 31, 2016, 2015 and 2014, respectively. Each of these 2016, 2015 and 2014 tax benefit were prior to the recognition of the valuation allowance. The restricted shares contain vesting restrictions and vest in equal installments over either three or four years on the anniversary date of the grants. In the year ended December 31, 2016, the Company granted 1,711,000 restricted shares with an aggregate grant date fair value of $4,245. In the years ended December 31, 2015 and 2014, the Company granted 507,000 and 196,500 restricted shares, respectively, with an aggregate grant date fair value of $2,166 and $1,663, respectively.

As of December 31, 2016, $3,702 of unrecognized compensation cost related to restricted stock was expected to be recognized over a weighted-average period of 2.7 years.

Non-Restricted Stock Grants

On February 3, 2016, the Company issued 206,750 shares of Common Stock to members of the Company’s Board of Directors with respect to their annual retainer. The fair value of the shares issued was $1.19 per share and was expensed upon the date of grant. The total compensation expense, classified within general and administrative expenses, related to Board of Director Common Stock grants was $246 in the year ended December 31, 2016. In the years ended December 31, 2015 and 2014, the Company issued 67,609 and 21,248 shares of Common Stock, respectively, with an aggregate grant date fair value of $445 and $245, respectively.

c. Common Stock Dividends

On April 15, 2014, February 12, 2014 and November 15, 2013, the board of directors of the Company declared cash dividends of $0.16 per share, payable in June 2014, March 2014 and December 2013, respectively, to common stockholders of record at the close of business on May 22, 2014, February 24, 2014 and November 26, 2013, respectively. On November 16, 2012, the board of directors of the Company declared cash dividends of $3.00 per share, payable in December 2012 to common stockholders of record at the close of business on November 30, 2012.

Pursuant to the 2006 Plan, holders of unvested restricted shares as of the record dates qualify to receive the above dividends on each future vesting date, subject to continued employment through the vesting date. As of December 31, 2016 and 2015, total dividends payable for unvested restricted shares was $14 and $118, respectively.

As of December 31, 2016, $9 and $5 of the remaining amount payable is expected to be paid in 2017 and 2018, respectively, and is included in Accrued expenses and Other liabilities, respectively, on the Company’s consolidated balance sheet as of December 31, 2016.