4. Stock-based Compensation

The Company’s stock-based compensation plans consist of a 2006 Long-Term Incentives Plan (the “2006 LTIP”), under which there were 2,646,570 shares available for grant as of June 30, 2015.

Total stock-based compensation recorded by the Company for the quarter ended June 30, 2015 and 2014 was $1,104 and $894, respectively, and for the six months ended June 30, 2015 and 2014 was $2,235 and $1,775, respectively. Total capitalized stock-based compensation for the quarter ended June 30, 2015 and 2014 was $50 and $66, respectively, and for the six months ended June 30, 2015 and 2014 was $78 and $127, respectively.

The following table summarizes the components of stock-based compensation expense in the condensed consolidated statements of operations for the quarters and six months ended June 30, 2015 and 2014:


	Quarters ended June 30,				Six months ended June 30,
	2015		2014		2015		2014

Cost of services	$	85	$	11	$	199	$	80
Cost of product sales		10		20		24		50
Selling, general and administrative		952		793		1,881		1,515
Product development		57		70		131		130

Total	$	1,104	$	894	$	2,235	$	1,775

As of June 30, 2015, the Company had unrecognized compensation costs for stock appreciation rights and restricted stock unit arrangements totaling $2,773.

2006 LTIP

Time-Based Stock Appreciation Rights

A summary of the Company’s time-based Stock Appreciation Rights (“SARs”) for the six months ended June 30, 2015 is as follows:


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2015		3,853,367		$	4.53
Granted		270,000			6.23
Exercised		(106,950	)		4.15
Forfeited or expired		(50,000	)		4.83

Outstanding at June 30, 2015		3,966,417		$	4.65		6.00	$	8,608

Exercisable at June 30, 2015		3,318,417		$	4.24		5.27	$	8,633

Vested and expected to vest at June 30, 2015		3,966,417		$	4.65		6.00	$	8,608

For the quarter ended June 30, 2015 and 2014, the Company recorded stock-based compensation expense of $529 and $432 relating to these SARs, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded stock-based compensation expense of $958 and $846 relating to these SARs, respectively. As of June 30, 2015, $1,674 of total unrecognized compensation cost related to these SARs is expected to be recognized through January 2018.

The weighted-average grant date fair value of the time-based SARs granted during the six months ended June 30, 2015 was $3.37.

The intrinsic value of the SARs exercised was $249 for the six months ended June 30, 2015.

Performance-Based Stock Appreciation Rights

A summary of the Company’s performance-based SARs for the six months ended June 30, 2015 is as follows:


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2015		786,034		$	5.51
Granted		8,000			5.65
Exercised		(10,300	)		2.78
Forfeited or expired		(160	)		5.65

Outstanding at June 30, 2015		783,574		$	5.55		4.90	$	1,925

Exercisable at June 30, 2015		779,574		$	5.55		4.87	$	1,921

Vested and expected to vest at June 30, 2015		783,574		$	5.55		4.90	$	1,925

For the quarter ended June 30, 2015 and 2014, the Company recorded stock-based compensation of $3 and $0 relating to these SARs, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded stock-based compensation of $16 and $47 relating to these SARs, respectively. As of June 30, 2015, $10 of total unrecognized compensation cost related to these SARs is expected to be recognized through March 2016.

The intrinsic value of the SARs exercised was $40 for the six months ended June 30, 2015.

The fair value of each time-based and performance-based SAR award is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions described below. For the periods indicated the expected volatility was based on the Company’s historical volatility over the expected terms of SAR awards. Estimated forfeitures were based on voluntary and involuntary termination behavior, as well as analysis of actual forfeitures. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of the grant over the expected term of the SAR grants.


	Six months ended June 30,
	2015	2014
Risk-free interest rate	1.35% and 1.82%	1.81% and 1.94%
Expected life (years)	6.0	6.0
Estimated volatility factor	64.04% and 64.63%	66.59% to 67.34%
Expected dividends	None	None

Time-based Restricted Stock Units

A summary of the Company’s time-based Restricted Stock Units (“RSUs”) for the six months ended June 30, 2015 is as follows:


	Shares			Weighted-Average Grant Date Fair Value
Balance at January 1, 2015		90,255		$	6.66
Granted		61,070			6.55
Vested		(90,255	)		7.04
Forfeited or expired		—			—

Balance at June 30, 2015		61,070		$	5.99

For the quarter ended June 30, 2015 and 2014, the Company recorded stock-based compensation expense of $100 and $167 related to these RSUs, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded stock-based compensation expense of $271 and $257 related to these RSUs, respectively. As of June 30, 2015, $203 of total unrecognized compensation cost related to these RSUs is expected to be recognized through December 2015.

Performance-based Restricted Stock Units

A summary of the Company’s performance-based RSUs for the six months ended June 30, 2015 is as follows:


	Shares			Weighted-Average Grant Date Fair Value
Balance at January 1, 2015		321,525		$	6.41
Granted		76,375			6.14
Vested		(137,129	)		6.09
Forfeited or expired		(15,673	)		6.21

Balance at June 30, 2015		245,098		$	6.51

For the quarter ended June 30, 2015 and 2014, the Company recorded stock-based compensation expense of $308 and $205 related to these RSUs, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded stock-based compensation expense of $750 and $431 related to these RSUs, respectively. As of June 30, 2015, $886 of total unrecognized compensation cost related to these RSUs is expected to be recognized through March 2016.

The fair values of the time-based and performance-based RSU awards are based upon the closing stock price of the Company’s common stock on the date of grant.

Performance Units

The Company grants Market Performance Units (“MPUs”) to its senior executives based on stock price performance over a three-year period measured on December 31 for each performance period. The MPUs will vest at the end of each performance period only if the Company satisfies the stock price performance targets and continued employment by the senior executives through the dates the Compensation Committee has determined that the targets have been achieved. The value of the MPUs that will be earned each year ranges up to 15% of each of the senior executives’ annual base salaries depending on the Company’s stock price performance target for that year. The value of the MPUs can be paid in either cash or common stock or a combination at the Company’s option. The MPUs are classified as a liability and are revalued at the end of each reporting period based on the awards fair value over a three-year period.

As the MPUs contain both a performance and service condition, the MPUs have been treated as a series of three separate awards, or tranches, for purposes of recognizing stock-based compensation expense. The Company recognizes stock-based compensation expense on a tranche-by-tranche basis over the requisite service period for that specific tranche. The Company estimated the fair value of the MPUs using a Monte Carlo Simulation Model that used the following assumptions:


	Six months ended June 30,
	2015	2014
Risk-free interest rate	0.11% to 0.83%	0.07% to 0.68%
Estimated volatility factor	31.00% to 38.00%	40.00% to 46.00%
Expected dividends	None	None

For the quarter ended June 30, 2015 and 2014, the Company recorded stock-based compensation of $164 and $91 relating to these MPUs, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded stock-based compensation of $240 and $196 relating to these MPUs, respectively.

2004 Stock Option Plan

During the six months ended June 30, 2015, 50,000 stock options were exercised at a weighted-average exercise price of $4.88 shares and an intrinsic value of $55. There are no stock options outstanding and available for exercise as of June 30, 2015.