NOTE 10. SHARE-BASED COMPENSATION

We designed our share-based compensation arrangements to advance our long-term interests; for example, by allowing us to attract employees and directors, to retain them and by aligning their interests with those of our stockholders. The amount, frequency, and terms of share-based awards may vary based on competitive practices, our operating results, government regulations and availability under our equity incentive plans. Depending upon the form of the share-based award, new shares of our common stock may be issued upon grant, option exercise or vesting of the award.

The Affinity Gaming Amended and Restated 2011 Long-Term Incentive Plan (“LTIP”), which the Compensation Committee of our Board of Directors approved, allows us to issue up to 2,000,000 shares of common stock, subject to stock options, or as restricted stock, to employees, officers, directors and consultants. Awards vest upon the passage of time, the attainment of performance criteria, or both. Stock options awarded under the LTIP expire five years from the grant date. Awards granted to management generally vest ratably over three years from the date of the grant, and those granted to directors generally vest in two equal tranches, the first upon issuance and the second during January of the calendar year following the year of grant. Holders of restricted stock may vote their shares and receive their proportionate share of any dividends. Restricted stock remains subject to the terms and conditions contained in the applicable award agreement and our LTIP until the recipient vests in the award.

As of December 31, 2015, awards representing 1,292,148 shares or potential shares of our common stock remained available for issuance under the LTIP.

The following table summarizes the activity related to our outstanding and non-vested stock options and restricted stock for the period ended December 31, 2015:



	Stock Options				Restricted Stock
	Outstanding				Non-Vested
	Shares		Weighted Average Exercise Price Per Share		Shares		Weighted Average Fair Value Per Share
December 31, 2014	177,497		$	10.99	70,061		$	11.54
Granted	212,500		9.75		84,101		9.75
Vested	—		—		(71,872	)	10.79
Forfeited	(18,383	)	11.61		—		—
Expired	(41,009	)	$	10.36	—		$	—
December 31, 2015	330,605		$	10.24	82,290		$	10.54

At December 31, 2015, our outstanding stock options had an aggregate intrinsic value of $0.5 million, and had a weighted-average remaining contractual term of 3.6 years.

The weighted-average grant-date fair value of options granted during the years ended December 31, 2015 and 2014 were $2.56 and $4.66, respectively. No option grants were awarded in 2013 as the Company chose to grant restricted stock instead.

We account for stock option awards as liabilities. As of December 31, 2015, we have reported a $1.2 million share-based compensation liability in the Other liabilities line item.

The following table lists certain information related to stock options awarded under the LTIP which had vested as of December 31, 2015:



	Vested and Exercisable		Expected to Vest
Number of stock options	63,610		329,685
Weighted-average exercise price per share	$	10.69	$	10.23
Aggregate intrinsic value (in thousands)	$	62	$	474
Weighted-average remaining contractual term (in years)	1.7		3.6

We estimate the fair value of stock option awards at each reporting date using a Black-Scholes-Merton option-pricing model. For the years ended December 31, 2015 and 2014, we applied the following weighted-average assumptions:



	2015		2014
Expected term in years	1.8		1.3
Expected volatility	45	%	48	%
Expected dividends	—	%	—	%
Risk-free interest rates	0.91	%	0.45	%

We determined the expected option term using the contractual term. Because we are closely held and, therefore, do not have equity listed on a public exchange, we based expected volatility on the historical volatility associated with an average of the stocks of our peer group, which we determined to be publicly-traded, U.S.-based regional casino operators. The risk-free interest rate is based on U.S. Treasury rates appropriate for the expected term. Actual compensation, if any, ultimately realized may differ significantly from the amount estimated using an option-pricing model.

Since inception of the LTIP, no stock options have been exercised.

The following tables present certain information related to compensation cost:



	Year Ended December 31,
	2015		2014		2013
Compensation cost included in operating expense (in thousands)
Stock options	$	245	$	61	$	338
Restricted stock	961		394		831
Total	$	1,206	$	455	$	1,169



	December 31, 2015
Unrecognized compensation cost for non-vested awards (in thousands)
Stock options	$	1,087
Restricted stock	964
Total	$	2,051

Weighted-average years to be recognized
Stock options	1.3
Restricted stock	0.6