(7) Capitalization

Stock-Based Compensation

Effective July 16, 2013, the Company’s stockholders approved the 2013 Stock Incentive Plan and effective June 6, 2016, the Company’s stockholders approved the amendment and restatement of such plan (as amended and restated, the “2013 Plan”). The 2013 Plan serves as the successor to the 2006 Incentive Award Plan (which includes the 2003 Incentive Award Plan as amended by the adoption of the 2006 Incentive Award Plan) (the “2006 Plan”). The 2013 Plan authorizes to be issued (i) 1,200,000 additional shares of common stock, and (ii) 136,484 shares of common stock previously reserved but unissued under the 2006 Plan. No future grants will be awarded under the 2006 Plan, but outstanding awards previously granted under the 2006 Plan continue to be governed by its terms. Any shares of common stock that are subject to outstanding awards under the 2006 Plan which are forfeited, terminate or expire unexercised and would otherwise have been returned to the share reserve under the 2006 Plan will be available for issuance as common stock under the 2013 Plan. The 2013 Plan provides for the issuance of equity‑based awards to officers, other employees and directors.

Stock Options

Stock options issued to employees are granted at the market price on the date of grant, generally vest over a three-year period, and generally expire seven to ten years from the date of grant. The Company issues new shares of common stock upon exercise of stock options. The Company has also granted non-plan stock options to certain executives as a material inducement for employment. The Company estimates the fair value of stock-based payment awards on the date of grant using an option-pricing model.

Stock-based compensation expense recognized in selling, general and administrative expenses for stock options was $229 and $295 for the First Quarter and the first quarter ended April 30, 2016, respectively.

The following table summarizes activity for the Company’s stock options in the First Quarter:


				Weighted
				Average
				Remaining
		Weighted		Contractual	Aggregate
		Average		Term	Intrinsic
	Shares	Price		(in years)	Value
Outstanding, at January 28, 2017	1,092,502	$	16.59	3.66	—
Granted	—	$	—
Exercised	—	$	—
Canceled/forfeited	(25,667)	$	—
Outstanding, at April 29, 2017	1,066,835	$	16.57	3.33	—
Vested and Exercisable at April 29, 2017	670,492	$	16.03	2.59	—

As of April 29, 2017, total unrecognized stock-based compensation expense related to unvested stock options was approximately $1,184, which is expected to be recognized over a weighted average period of approximately 1.66 years. The total fair value of all stock options that vested during the First Quarter was $29.

Performance Stock Units and Restricted Stock Units

In April 2016, the Compensation Committee of the Company’s board of directors granted certain performance-based equity awards, or performance stock units, to executives under the 2013 Plan.

The performance metric applicable to such awards is compound stock price growth, using the closing price of the Company’s common stock on April 5, 2016, or $16.89, as the benchmark. The target growth rate is 10% annually, which results in an average share price target of (i) $18.58 for Fiscal 2017, (ii) $20.44 for Fiscal 2018 and (iii) $22.48 for Fiscal 2019. The average share price will be calculated as the average of all market closing prices during the January preceding the applicable fiscal year end. If a target is met at the end of a fiscal year, one third of the shares subject to the award will vest. If the stock price target is not met at the end of a fiscal year, the relevant portion of the shares subject to the award will not vest but will roll over to the following fiscal year. The executive must continue to be employed by the Company through the relevant vesting dates to be eligible for vesting. The target average share price was not achieved for Fiscal 2017.

Since the vesting of these performance-based equity awards is subject to market based performance conditions, the fair value of these awards was measured on the date of grant using the Monte Carlo simulation model for each vesting tranche. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the performance conditions stipulated in the award and calculates the fair market value for the performance stock units granted. The Monte Carlo simulation model also uses stock price volatility and other variables to estimate the probability of satisfying the performance conditions and the resulting fair value of the award.

Stock-based compensation expense recognized in selling, general and administrative expenses for restricted stock units and performance stock units was $307 and $341 for the First Quarter and the first quarter ended April 30, 2016.

The following table summarizes activity for the Company’s restricted stock units and performance stock units in the First Quarter:


		Weighted
		Average
	Number of	Grant-Date
	Shares	Fair Value
Unvested stock at January 28, 2017	157,169	$	19.71
Granted	—		—
Vested	(2,500)		22.94
Forfeited	(7,500)		19.52
Unvested stock at April 29, 2017	147,169	$	19.66

As of April 29, 2017, total unrecognized stock-based compensation expense related to restricted stock units and performance stock units was approximately $1,507, which is expected to be recognized over a weighted average period of approximately 1.24 years.

Warrants

The Company issued warrants to purchase 120,000 shares of Cherokee Global Brands common stock in connection with a Hi-Tec customer license agreement. The warrants vest in five tranches of 20,000 shares corresponding to the five year initial term of the license, plus a 6th tranche which vests only if the license is renewed for a subsequent five year period. The 6th tranche is assigned no value until such time as the related contingency is resolved.

For the year ended January 28, 2017, the Company determined the fair value of the stock warrants to be $567. During the three month period ended April 29, 2017, the Company recognized contra-revenue and additional paid in capital of $13, related to the amortization of the deferred warrant expense.