NOTE 11 — STOCK-BASED COMPENSATION

Stock Option Plans

The Company’s Second Amended and Restated 2013 Stock Incentive Plan (the “2013 Plan”) replaced the 2005 Incentive Compensation Plan (the “2005 Plan”). Under these plans, the Company is authorized to issue equity awards (stock options, stock appreciation rights or “SARs”, and restricted stock) to directors and associates of the Company. Outstanding awards under the 2005 Plan continue to be governed by the terms of the 2005 Plan until exercised, expired or otherwise terminated or canceled, but no further equity awards are allowed to be granted under the 2005 Plan. Under the 2013 Plan, the Company is authorized to issue a number of shares not to exceed (i) 2,300,000 plus (ii) the number of shares remaining available for issuance under the 2005 Plan as of the date the 2005 Plan was replaced, plus (iii) the number of shares that become available under the 2005 Plan pursuant to forfeiture, termination, lapse, or satisfaction of a 2005 Plan award in cash or property other than shares of common stock. The options granted under the 2013 Plan and 2005 Plan have terms of ten years or less, and typically vest and become fully exercisable ratably over three years of continuous service to the Company from the date of grant. At January 31, 2019 and 2018, options to purchase 1,355,657 and 1,873,156 shares of the Company’s common stock, respectively, have been granted and are outstanding under the 2013 Plan. There are no SARs outstanding.

Inducement grants are approved by the Company’s compensation committee pursuant to NASDAQ Marketplace Rule 5635(c)(4). The terms of the grants were nearly identical to the terms and conditions of the Company’s stock incentive plans in effect at the time of each inducement grant. For the year ended January 31, 2019, with regard to inducement grants, no stock options were issued, no options expired, 75,000 options were forfeited and no stock options were exercised. For the year ended January 31, 2018, with regard to inducement grants, no stock options were issued, no options expired, no options were forfeited and no stock options were exercised. As of January 31, 2019 and 2018, there were 225,000 and 300,000 options outstanding, respectively, under inducement grants.

Please see “Restricted Stock” section for information on the restricted shares.

A summary of stock option activity follows:


		Weighted
		Average			Remaining	Aggregate
	Options	Exercise Price			Life in Years	intrinsic value
Outstanding as of February 1, 2018	2,173,156	$	3.42
Granted	47,000		1.68
Exercised	(50,694)		1.18
Expired	(201,469)		2.55
Forfeited	(387,336)		3.61
Outstanding as of January 31, 2019	1,580,657	$	3.50	(1)	6.13	$	15,000
Exercisable as of January 31, 2019	1,401,435	$	3.73	(2)	5.91	$	8,000
Vested or expected to vest as of January 31, 2019	1,542,516	$	3.54		6.09	$	14,000

(1)

The exercise prices range from $1.10 to $8.10, of which 440,000 shares are between $1.10 and $2.00 per share, 362,240 shares are between $2.19 and $4.00 per share, and 778,417 shares are between $4.02 and $8.10 per share.

(2)

The exercise prices range from $1.18 to $8.10, of which 280,778 shares are between $1.18 and $2.00 per share, 362,240 shares are between $2.19 and $4.00 per share, and 758,417 shares are between $4.02 and $8.10 per share.

For fiscal 2018 and 2017, the weighted average grant date fair value of options granted during the year was $1.03 and $0.65, respectively, and the total intrinsic value of options exercised during the year was $13,000 and zero for fiscal 2018 and 2017, respectively.

The fiscal 2018 and 2017 stock-based compensation was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for each fiscal year:


	2018		2017
Expected life	6	years	6	years
Risk-free interest rate	2.89	%	2.65	%
Weighted average volatility factor	0.65		0.65
Dividend yield	—		—
Forfeiture rate	20	%	13	%

At January 31, 2019, there was $98,000 of unrecognized compensation cost related to non-vested stock-option awards. That cost is expected to be recognized over a remaining weighted average period of 0.6 years. The expense associated with stock option awards was $244,000 and $563,000, respectively, for fiscal 2018 and 2017. Cash received from the exercise of options was zero in both fiscal 2018 and 2017.

The 2005 Plan and the 2013 Plan contain change in control provisions whereby any outstanding equity awards under the plans subject to vesting, which have not fully vested as of the date of the change in control, shall automatically vest and become immediately exercisable. One of the change in control provisions is deemed to occur if there is a change in beneficial ownership, or authority to vote, directly or indirectly, of securities representing 20% or more of the total of all of the Company’s then-outstanding voting securities, unless through a transaction arranged by or consummated with the prior approval of the Board of Directors. Other change in control provisions relate to mergers and acquisitions or a determination of change in control by the Company’s Board of Directors.

Restricted Stock

The Company is authorized to grant restricted stock awards to associates and directors under the 2013 Plan. The Company has also issued restricted stock as inducement grants to certain new employees. The restrictions on the shares granted generally lapse over a one- to four-year term of continuous employment from the date of grant. The grant date fair value per share of restricted stock, which is based on the closing price of our common stock on the grant date, is expensed on a straight-line basis as the restriction period lapses. The shares represented by restricted stock awards are considered outstanding at the grant date, as the recipients are entitled to voting rights. A summary of restricted stock award activity for fiscal 2018 and 2017 is presented below:


		Weighted
	Non-vested	Average
	Number of	Grant Date
	Shares	Fair Value
Non-vested balance at January 31, 2017	858,225	$	1.59
Granted	295,337		1.17
Vested	(331,975)		1.47
Forfeited	—		—
Non-vested balance at January 31, 2018	821,587	$	1.59
Granted	826,666		1.15
Vested	(453,537)		1.34
Forfeited	(130,850)		1.61
Non-vested balance at January 31, 2019	1,063,866	$	1.27

At January 31, 2019, there was $1,110,000 of unrecognized compensation cost related to restricted stock awards. That cost is expected to be recognized over a remaining period of 2.3 years.

The expense associated with restricted stock awards was $383,000 and $546,000, respectively, for fiscal 2018 and 2017.