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

The Previously Approved Plans had provided that, if any options outstanding under any of those Plans were to expire or otherwise terminate, rather than being exercised, or if any unvested restricted shares were to be cancelled, the shares that had been subject to those options and such cancelled restricted shares would have become available for the grant of new options or other equity incentives under those Plans. However, the 2012 Plan provides, instead, that if any of those options expire or terminate for any reason or any of those unvested restricted shares are cancelled, then, the number of shares that will become available for grants or awards of equity incentives under the 2012 Plan will be increased by an equivalent number of shares, instead of becoming available for new equity incentive grants under the Previously Approved Plans. Therefore, if any equity incentives that are outstanding under the Previously Approved Plans expire, terminate or, subject to certain limitations, are reacquired by the Company, then a number of shares equal to the number of shares that had been subject to those equity incentives would become available for future grants under the 2012 Plan and those shares would cease to be available for future grants under the Previously Approved Plans. As of March 31, 2015, 308,821 shares from the Previous Plans have become available for grant under the 2012 Plan due to the expiration or termination of equity incentives that had been outstanding under the Previously Approved Plans.

At March 31, 2015, options to purchase a total of 64,000 shares of our common stock and a total of 165,491 of unvested restricted shares were outstanding under the 2012 and Previously Approved Plans. As of that same date, 419,330 shares remained available for future equity incentive grants under the 2012 Plan.

We recognized non-cash stock-based compensation expense of $143,000 and $157,000 in the three months ended March 31, 2015 and 2014, respectively, as a component of selling, general and administrative expenses in our condensed consolidated statements of operations.

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

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

We did not grant any stock options in the three months ended March 31, 2015 or 2014. As a result, no estimates of the fair market values of options were made during either of those periods.

The following tables summarize stock option activity during the three month period ended March 31, 2015:


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

Outstanding and exercisable at March 31, 2015		64,000		$	4.17	4.8 years	$	21,500

Exercisable at March 31, 2015		64,000		$	4.17	4.8 years	$	21,000

Options vested and expected (as of March 31, 2015) to vest in the future		64,000		$	4.17	4.8 years	$	21,500

The aggregate intrinsic values set forth in the above table represent the total pre-tax intrinsic values (the aggregate differences between the closing stock price of the Company’s common stock on March 31, 2015 and the exercise prices of the then outstanding in-the-money options) that would have been received by the option holders if all of the in-the-money options had been exercised on March 31, 2015. There were no options exercised during the first quarter of 2015.

There was no unrecognized compensation cost related to unvested options at March 31, 2015.

Restricted Shares. We began granting “service-contingent” restricted shares of common stock to some of our officers and other key management employees in 2010. The terms of those grants provided for those restricted shares to vest in equal annual installments over a three or four year service period following the respective dates of those awards, subject to the continued service with the Company of the recipients of such shares. In accordance with Accounting Standards Codification (“ASC”) 718, compensation expense for such awards is based on the fair market value of the awards on their respective dates of grant and is recognized over those service periods. At March 31, 2015, no service-contingent restricted shares remained outstanding.

In 2013 and 2014, the Compensation Committee granted “performance-contingent” restricted shares to our officers and other key management employees. These performance-contingent shares vest in three annual installments, subject to the achievement by the Company of different financial performance goals applicable to those years. Stock-based compensation expense with respect to each one-third of those performance-contingent shares is recognized only if, and when, we are able to determine that the Company’s achievement of the performance goal for the particular year has become probable. However, if any compensation expense were to be recognized based on such a determination, but the performance goal was not ultimately achieved, then that previously recognized stock-based compensation expense would be reversed. At March 31, 2015, a total of 165,491 unvested performance-contingent restricted shares were outstanding.

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


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

Unvested restricted shares at March 31, 2015		165,491		$	3.42

(1)	Service-based restricted shares.

The intrinsic value of the 103,494 restricted shares that vested during the three months ended March 31, 2015 was approximately $370,000. A total of 9,998 of those restricted shares were cancelled in satisfaction of a total of $35,000 of tax withholding obligations of holders of those restricted shares that arose as a result of the vesting of those shares.

Unrecognized stock-based compensation expense related to the outstanding unvested restricted shares totaled approximately $475,200 at March 31, 2015. Those costs are expected to be recognized generally over weighted average period of 1.4 years measured, from March 31, 2015. All 165,491 unvested shares of restricted stock outstanding as of March 31, 2015 are expected to vest. The aggregate intrinsic value of these shares was $571,000 as of March 31, 2015.