NOTE 6 - SHARE-BASED COMPENSATION

In March 2016 shareholders approved a new equity incentive compensation plan (“the Plan”), under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock and other stock or cash awards may be granted. Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by the Company (in the open-market or in private transactions) and that are being held in treasury, or a combination thereof. The maximum number of shares of common stock approved that may be issued under the Plan is four million shares. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of the Company or its subsidiaries. In the event of a change in control (as defined in the Plan), the vesting of awards may be accelerated. The Plan, aspects of which are more fully described below, prohibits further awards from being issued under prior plans. Total share-based compensation costs for the three and nine month periods ended July 31, 2016, were $1.0 million and $2.8 million, respectively, and $0.9 million and $2.8 million for the three and nine month periods ended August 2, 2015, respectively. The Company received cash from option exercises of $0.1 million and $2.9 million for the three and nine month periods ended July 31, 2016, respectively, and $1.1 million and $2.1 million for the three and nine month periods ended August 2, 2015, respectively. No share-based compensation cost was capitalized as part of an asset and no related income tax benefits were recorded during the periods presented.

Stock Options

Option awards generally vest in one to four years, and have a ten-year contractual term. All incentive and non-qualified stock option grants have an exercise price equal to the market value of the underlying common stock on the date of grant. The grant date fair values of options are based on closing prices of the Company’s common stock on the dates of grant using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company's stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that the options granted are expected to remain outstanding. The risk-free rate of return for the estimated term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.

The weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options issued during the three and nine month periods ended July 31, 2016 and August 2, 2015, are presented in the following table.

	Three Months Ended				Nine Months Ended
	July 31, 2016		August 2, 2015		July 31, 2016		August 2, 2015

Volatility		38.9%		42.9%		48.8%		53.9%

Risk free rate of return		1.2%		1.4% – 1.6%		1.2%-1.7%		1.3% - 1.6%

Dividend yield		0.0%		0.0%		0.0%		0.0%

Expected term	5.1 years		4.7 years		5.1 years		4.7 years

Information on outstanding and exercisable option awards as of July 31, 2016, is presented below.

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value

Outstanding at July 31, 2016		3,575,610	$	7.52	6.5 years	$	9,210

Exercisable at July 31, 2016		2,027,160	$	5.87	5.0 years	$	7,807

There were 45,000 share options granted during the three month period ended July 31, 2016, with a weighted-average grant date fair value of $3.44 per share and 63,000 share options granted during the three month period ended August 2, 2015, with a weighted-average grant date fair value of $3.46 per share. There were 647,250 share options granted during the nine month period ended July 31, 2016, with a weighted-average grant date fair value of $4.55 per share and 667,800 share options granted during the nine month period ended August 2, 2015, with a weighted-average grant date fair value of $3.82 per share. As of July 31, 2016, the total unrecognized compensation cost related to unvested option awards was approximately $4.8 million. That cost is expected to be recognized over a weighted-average amortization period of 2.6 years.

Restricted Stock

The Company periodically grants restricted stock awards. The restrictions on these awards lapse over a service period that has ranged from less-than-one to four years. No restricted stock awards were granted during the three month period ended July 31, 2016, and 115,225 restricted stock awards were issued during the nine month period ended July 31, 2016, with a weighted average grant date fair value of $12.13 per share. Awards totaling 10,000 shares of restricted stock were granted during the three month period ended August 2, 2015, with a weighted-average grant date fair value of $8.84 per share, and 121,334 restricted stock awards were issued during the nine month period ended August 2, 2015, with a weighted-average grant date fair value of $8.28 per share. As of July 31, 2016, the total compensation cost not yet recognized related to unvested restricted stock awards was approximately $1.3 million. That cost is expected to be recognized over a weighted-average amortization period of 2.1 years. As of July 31, 2016, there were 177,375 shares of restricted stock outstanding.