NOTE 8 — Stockholder's Equity and Stock-Based Compensation

Dividends

The Credit Facility allows payment of dividends to the Company's stockholders if certain financial conditions are met. No dividends were paid in fiscal 2015, fiscal 2014 or fiscal 2013.

Stock-based compensation

The Company maintains the following stock plans approved by stockholders: the 2013 Directors' Equity Incentive Plan (the "2013 Plan") and the 2014 Stock Incentive Plan (the “2014 Plan”). Under the 2014 Plan and the 2013 Plan, the Company may grant options to purchase common stock to employees and non-employee members of the Board, respectively, at a price not less than 100% of the fair market value of the common stock on the option grant date. In general, options granted to employees vest over three years and are exercisable up to 10 years from the date of grant, and options granted to Directors vest ratably over approximately 30 months and are exercisable up to 10 years from the grant date. No options have been granted to Directors in the last three fiscal years.

The Company may also grant shares of restricted stock or units representing the right to receive shares of stock to its employees and non-employee members of the Board. The grantee cannot transfer the shares or units before the respective shares or units vest. Shares of nonvested restricted stock are considered to be currently issued and outstanding, but units representing the right to receive stock are not. Grants to employees of restricted stock or restricted stock units generally have original vesting schedules of one to three years, while restricted grants to Directors typically vest approximately one year after the date of grant.

Approximately 0.5 million and 3.9 million shares were authorized for issuance under the 2013 Plan and the 2014 Plan, respectively. As of January 30, 2016, there were approximately 0.2 million and 2.4 million shares available for future grant under the 2013 Plan and the 2014 Plan, respectively. In addition, as of January 30, 2016, there are approximately 1.5 million options outstanding which were granted to our Chief Executive Officer in 2012 outside of the above plans as an inducement to employment.

The total pre-tax compensation expense related to all stock-based awards for fiscal 2015, fiscal 2014 and fiscal 2013 was approximately $1.6 million, $2.3 million and $2.8 million, respectively. Stock-based compensation expense is included in merchandise, buying and occupancy expenses for the buying and distribution employees, and in selling, general and administrative expense for all other employees.

Black-Scholes assumptions

The Company uses the Black-Scholes option-pricing model to value stock options for grants to employees and non-employee directors. Using this option-pricing model, the fair value of each stock option award is estimated on the date of grant and is expensed on a straight-line basis over the vesting period, as the stock options are subject to pro-rata vesting. The expected volatility assumption is based on the historical volatility of the Company’s stock over a term equal to the expected term of the option granted. The expected term of stock option awards granted is derived from the Company’s historical experience and represents the period of time that awards are expected to be outstanding. The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the expected term of the option granted.

The table below shows the weighted average assumptions relating to the valuation of stock options granted during fiscal 2015, fiscal 2014 and fiscal 2013.


	Fiscal 2015	Fiscal 2014	Fiscal 2013
Expected dividend yield	—%	—%	—%
Expected volatility	68.62%	59.59%	70.08-75.66%
Risk-free interest rate	1.73%	1.73%	0.76-1.37%
Expected term	5.00 years	5.00 years	5.00 years

Stock-Based Compensation Activity — Stock Options

The following tables present a summary of stock option activity for fiscal 2015:


				Aggregate		Weighted Average
		Weighted Average		Intrinsic Value		Remaining
	Number of Shares	Exercise Price		(in thousands)		Contractual Life
Outstanding, beginning of period	2,642,774		4.94
Granted	15,609		1.39
Exercised	—		—
Canceled - Vested	(29,124)		3.43
Canceled - Unvested (Forfeited)	(11,432)		5.86
Outstanding, end of period	2,617,827	$	4.93	$	5,307	5.92 years
Exercisable, end of period	2,579,644	$	4.94	$	—	5.89 years


		Weighted Average
		Grant Date
	Number of Shares	Fair Value
Nonvested, beginning of period	689,920	$	2.08
Granted	15,609		0.80
Vested	(655,914)		2.00
Forfeited	(11,432)		3.33
Nonvested, end of period	38,183		2.58

The weighted average fair value for options granted during fiscal 2015, fiscal 2014 and fiscal 2013 was $0.80, $4.55 and $3.80, respectively. The fair value of options vesting during fiscal 2015, fiscal 2014 and fiscal 2013 was approximately $2.00, $1.71 and $2.06, respectively. The aggregate intrinsic value of options exercised during fiscal 2014 and fiscal 2013 was approximately $4.6 million and $0.2 million, respectively. There were no options exercised during fiscal 2015.

As of January 30, 2016, there was approximately $0.02 million of total unrecognized compensation expense related to nonvested stock options granted, which is expected to be recognized over a weighted average period of approximately 1.51 years.

Stock-Based Compensation Activity — Restricted Stock

The following table presents a summary of restricted stock activity for fiscal 2015:


		Weighted Average		Aggregate
		Grant Date Fair		Intrinsic Value
	Number of Shares	Value		(in thousands)
Nonvested, beginning of period	91,641	$	7.84
Granted	212,224		4.50
Vested	(73,836)		8.25
Forfeited	(23,654)		5.42
Nonvested, end of period	206,375		4.54	$	357

The weighted average fair value for restricted stock granted during fiscal 2015, fiscal 2014 and fiscal 2013 was $4.50, $8.89 and $6.51, respectively. The total fair value of restricted stock vested during fiscal 2015, fiscal 2014 and fiscal 2013 was approximately $0.6 million, $0.8 million and $0.6 million, respectively. The aggregate intrinsic value of restricted stock vested during fiscal 2015, fiscal 2014 and fiscal 2013 was approximately $0.1 million, $0.6 million and $0.6 million, respectively.

As of January 30, 2016, there was approximately $0.4 million of unrecognized stock-based compensation expense related to nonvested restricted stock awards, which is expected to be recognized over a weighted average period of approximately 1.2 years.

Other Stock-Based Awards

During fiscal 2014, the Company made performance share awards to a limited number of executive-level employees which entitles these employees to receive a specified number of shares of the Company’s common stock on vesting dates, provided that cumulative two-year and/or three-year targets are achieved. The cumulative targets involve operating margin, net sales growth and total stockholder return versus a specified peer group. Management estimates the fair value of performance shares awards based on the market price of the underlying stock on the date of grant for net sales growth and operating margin targets. The Company utilized a Monte Carlo simulation model to determine the fair value of the performance shares for total stockholder return. The target grants (as revised for non-vested forfeitures) currently approximate 96,000 and 143,000 shares, respectively, with a weighted average grant-date fair value of $6.41 per share. The actual number of shares issued on the vesting dates could range from zero to 200% of target, depending upon actual performance achieved. Based on the market price of the Company’s common stock at January 30, 2016, the maximum future value that could be awarded on the vesting dates was $0.3 million for the two-year target awards and $0.5 million for the three-year target awards.

During fiscal 2015, the Company made performance share awards to a limited number of executive-level employees which entitles these employees to receive a specified number of shares of the Company’s common stock on vesting dates, provided that cumulative two-year targets are achieved. The cumulative targets involve operating margin and net sales growth. Management estimates the fair value of performance shares based on the market price of the underlying stock on the date of grant. The target grants (as revised for non-vested forfeitures) currently approximate 157,000 shares with a weighted average grant-date fair value of $5.29 per share. The actual number of shares issued on the vesting date could range from zero to 200% of target, depending upon actual performance achieved. Based on the market price of the Company’s stock at January 30, 2016, the maximum future value that could be awarded on the vesting dates was $0.5 million.