16. Stock-Based Compensation

The Company recognizes compensation expense using a fair-value based method for costs associated with all share-based awards issued to the Company’s directors, employees and outside consultants under its stock plan. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in the Company’s Consolidated Statements of Income.

The Company has adopted the simplified method to calculate the beginning balance of the additional paid-in capital pool of the excess tax benefit and to determine the subsequent effect on the APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee stock-based compensation awards that were outstanding upon adoption.

The Company calculates stock-based compensation expense based on the number of awards ultimately expected to vest, net of estimated forfeitures. The Company estimates forfeiture rates at the time of grant and revise such rates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The stock-based compensation expense was determined using the Black-Scholes option pricing model.

Stock-based compensation expense for employees and directors and non-employees for the years ended December 31, 2017, 2016 and 2015, is presented below:



	Year Ended December 31,
Stock-based Compensation	2017		2016		2015
(in thousands)
Employees and directors	$	3,138	$	3,679	$	1,952
Non-employees	—		63		93
Total	$	3,138	$	3,742	$	2,045

Stock-Based Incentive Plans

2005 Equity Incentive Plan

The Company currently has one active stock-based incentive plan under which it may grant stock-based awards to the Company’s employees, directors and non-employees.

The total number of shares of common stock authorized for issuance, shares of common stock issued upon exercise of options or grant of restricted stock, shares of common stock subject to outstanding awards and available for grant under this plan as of December 31, 2017, is as follows:



Title of Plan	Total Shares of Common Stock Authorized	Total Shares of Common Stock Issued	Total Shares of Common Stock Subject to Outstanding Awards	Total Shares of Common Stock Available for Grant
2005 Equity Incentive Plan⁽¹⁾	6,200,000	4,110,197	—	2,089,803

_________________________


(1)	As of December 31, 2017, there were 2,065,232 shares of unvested restricted stock awards outstanding as issued from the 2005 Equity Incentive Plan.

Under the Company’s Amended and Restated 2005 Equity Incentive Plan effective May 28, 2015 (the “2005 Equity Incentive Plan”), the Company is authorized to issue a variety of incentive awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance share and performance unit awards, deferred compensation awards and other stock-based or cash-based awards.

Restricted Stock

Restricted stock has the same rights as other issued and outstanding shares of the Company’s common stock, including, in some cases, the right to accrue dividends, which are held in escrow until the award vests. The compensation expense related to these awards is determined using the fair market value of the Company’s common stock on the date of the grant, and the compensation expense is recognized ratably over the vesting period. Under the Company’s restricted stock plans, restricted stock awards typically vest over one to five years. In addition to service requirements, vesting of restricted stock awards may be subject to the achievement of specified performance goals set by the Compensation Committee. If the performance goals are not met, no compensation expense is recognized and any previously recognized compensation expense is reversed.

A summary of the Company’s restricted stock activity is presented below:



	2017				2016				2015
	Number of shares (in thousands)		Weighted-average grant-date fair value per share		Number of shares (in thousands)		Weighted-average grant-date fair value per share		Number of shares (in thousands)		Weighted- average grant-date fair value per share
Unvested at beginning of year	1,472		$	3.96	586		$	7.13	277		$	8.39
Awards granted	1,917		$	2.15	1,264		$	3.31	522		$	6.40
Awards vested	(749	)	$	3.78	(366	)	$	6.65	(173	)	$	8.38
Forfeited	(575	)	$	3.00	(12	)	$	7.10	(40	)	$	7.79
Unvested at end of year	2,065		$	2.61	1,472		$	3.96	586		$	7.13

Stock-based compensation expense associated with the Company’s restricted stock for the years ended December 31, 2017, 2016 and 2015, was $2.7 million, $3.5 million and $2.0 million, respectively. As of December 31, 2017, the aggregate intrinsic value of non-vested restricted stock was $5.7 million. Total unrecognized compensation costs associated with non-vested restricted stock as of December 31, 2017, was $3.1 million, excluding forfeitures, which the Company expects to recognize over a weighted-average period of 2.1 years.

Inducement Award Agreements

On September 12, 2017, the Company granted 961,000 shares of common stock in the form of a nonstatutory inducement stock option grant pursuant to a nonstatutory inducement stock option agreement and granted 240,200 shares of our common stock in the form of an inducement restricted stock grant pursuant to an inducement restricted stock agreement. These inducement awards were not granted under the 2005 Equity Incentive Plan.

Inducement Stock Option Activity

During the year ended December 31, 2017, there were a total of 961,000 shares of stock options granted with an exercise price of $3.21 per share. The Company’s determination of the fair value of the stock-based payment awards on the date of grant using an option-pricing model is affected by the Company’ stock price, as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, the following:


•	Expected term (in years): 3.7


•	Risk-free interest rate: 1.77-1.96%


•	Volatility: 44%


•	Dividend yield: 0%


•	Weighted-average grant-date fair value: $1.51

As of December 31, 2017, all awards were outstanding and not exercisable. The weighted average remaining contractual life of stock options outstanding was 9.7 years and the aggregate intrinsic value was $1.5 million. Unrecognized compensation cost related to non-vested stock options was $1.2 million and will be recognized over a weighted-average period of 1.9 years.

Inducement Restricted Stock

During the year ended December 31, 2017, there were a total of 240,200 shares of restricted stock awards granted with the grant date fair value of $3.22 per share. At December 31, 2017, all awards were outstanding and vest annually over a three year period.

As of December 31, 2017, all awards were outstanding and unvested. The aggregate intrinsic value of the restricted awards was $0.7 million. Unrecognized compensation cost related to unvested restricted awards was $0.7 million and will be recognized over a weighted-average period of 1.5 years.