STOCK BASED COMPENSATION

Stock Option Plans

The Company’s Amended and Restated 2013 Stock Incentive Plan (the “2013 Plan”) authorizes the Company to issue up to 4,500,000 equity awards (stock options, stock appreciation rights or “SAR’s”, and restricted stock) to directors and associates of the Company. The 2013 Plan replaced the 2005 Incentive Compensation Plan (the “2005 Plan”). 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. 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, 2016 and 2015, options to purchase 2,186,879 and 1,737,323 shares of the Company’s common stock, respectively, have been granted and are outstanding. There are no SAR’s outstanding.

In fiscal 2015 and 2014, inducement grants were approved by the Company's Board of Directors 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, 2016, no stock options were issued, 405,417 options expired, 69,583 options were forfeited, and no stock options were exercised. For the year ended January 31, 2015, 300,000 stock options were issued, 125,694 options expired, 99,722 were forfeited, and 205,556 were exercised. At January 31, 2016 and 2015, there were 225,000 and 700,000 options outstanding, respectively. Please see “Restricted Stock” section for information on the restricted shares.

A summary of stock option activity follows:



	Options		Weighted Average Exercise Price			Remaining Life in Years	Aggregate intrinsic value
Outstanding as of February 1, 2015	2,437,323		$	4.52
Granted	1,011,828		3.02
Exercised	(75,000	)	2.15
Expired	(704,326	)	3.67
Forfeited	(257,946	)	4.97
Outstanding as of January 31, 2016	2,411,879		$	4.16	(1)	8.09	$	4,003,719
Exercisable as of January 31, 2016	1,000,037		$	4.75	(2)	6.82	$	1,660,061
Vested or expected to vest as of January 31, 2016	1,990,872		$	4.25		7.90	$	3,304,848

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(1)	The exercise prices range from $1.53 to $8.17, of which 207,924 shares are between $1.53 and $2.00 per share, 862,938 shares are between $2.08 and $4.00 per share, and 1,341,017 shares are between $4.02 and $8.17 per share.


(2)	The exercise prices range from $1.53 to $8.17, of which 97,924 shares are between $1.53 and $2.00 per share, 268,356 shares are between $2.08 and $4.00 per share, and 633,757 shares are between $4.02 and $8.17 per share.

For fiscal 2015 and 2014, the weighted average grant date fair value of options granted during the year was $1.64 and $2.90, respectively, and the total intrinsic value of options exercised during the year was $125,000 and $990,000, respectively.

The fiscal 2015 and 2014 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:



	2015		2014
Expected life	6 years		6 years
Risk-free interest rate	1.51	%	1.35	%
Weighted average volatility factor	0.59		0.60
Dividend yield	—		—
Forfeiture rate	30	%	22	%

At January 31, 2016, there was $1,588,000 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 1.8 years. The expense associated with stock option awards was $1,783,000 and $1,655,000, respectively, for fiscal 2015 and 2014. Cash received from the exercise of options and purchases pursuant to the Employee Stock Purchase Plan was $276,000 and $552,000, respectively, in fiscal 2015 and 2014.

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, 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-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 2014 and 2015 is presented below:



	Non-vested Number of Shares		Weighted Average Grant Date Fair Value
Non-vested balance at January 31, 2014	29,698		$	6.01
Granted	120,306		4.31
Vested	(29,698	)	6.65
Forfeited/expired	—		—
Non-vested balance at January 31, 2015	120,306		$	4.31
Granted	118,180		2.62
Vested	(120,306	)	4.31
Forfeited/expired	(5,800	)	4.31
Non-vested balance at January 31, 2016	112,380		$	2.62

At January 31, 2016, there was $77,000 of unrecognized compensation cost related to restricted stock awards. That cost is expected to be recognized over a remaining period of one year or less.

The expense associated with restricted stock awards was $582,000 and $265,000, respectively, for fiscal 2015 and 2014.