NOTE 8 — STOCKHOLDERS’ EQUITY

Stock Incentive Plans

On June 3, 2004, we adopted the 2004 Stock Incentive Plan, or the 2004 Incentive Plan, and in October 2011, we adopted an Amended and Restated 2004 Stock Incentive Plan, or the Restated Plan, to update it with respect to certain provisions and changes in the tax code since its original adoption. Under the Restated Plan, the number of shares authorized for issuance is 6,825,000 shares of common stock. After the adoption of the Restated Plan in October 2011, we no longer grant awards pursuant to the 2004 Incentive Plan; however, it remains in effect for awards outstanding as of the adoption of the Restated Plan. Under the Restated Plan, grants may be made to employees, officers, directors and consultants under a variety of awards based upon underlying equity, including, but not limited to, stock options, restricted common stock, restricted stock units or performance shares. The Restated Plan limits the number of shares that can be awarded to any employee in one year to 1,250,000. The exercise price for incentive options may not be less than the fair market value of our common stock on the date of grant and the exercise period may not exceed ten years. Vesting periods, terms and types of awards are determined by the Board of Directors and/or our Compensation and Stock Option Committee, or Compensation Committee. The Restated Plan includes a provision for the acceleration of vesting of all awards upon a change of control as well as a provision that allows forfeited or unexercised awards that have expired to be available again for future issuance. Since fiscal 2008, we have issued both restricted common stock and restricted common stock units, or RSUs, to our officers, directors and employees pursuant to our various plans. The RSUs represent the right to receive one share of common stock for each unit on the vesting date provided that the employee continues to be employed by us. On the vesting date of the RSUs, we expect to issue the shares of common stock to each participant upon vesting and expect to withhold an equivalent number of shares at fair market value on the vesting date to fulfill tax withholding obligations. Any RSUs withheld or forfeited will be shares available for issuance in accordance with the terms of the Restated Plan.

The shares of common stock issued upon exercise of a previously granted stock option or a grant of restricted common stock or RSUs are considered new issuances from shares reserved for issuance in connection with the adoption of the various plans. We require that the option holder provide a written notice of exercise in accordance with the option agreement and plan to the stock plan administrator and full payment for the shares be made prior to issuance. All issuances are made under the terms and conditions set forth in the applicable plan. As of May 31, 2014, 2,988,654 shares remained available for issuance under the Restated Plan.

For all stock compensation awards that contain graded vesting with time-based service conditions, we have elected to apply a straight-line recognition method to account for all of these awards. For existing grants that were not fully vested at November 30, 2013, there was a total of $352,000 and $455,000 of stock based compensation expense recognized during the three months ended May 31, 2014 and 2013, respectively, and $587,000 and $904,000 of stock based compensation expense recognized during the six months ended May 31, 2014 and 2013.

The following summarizes option grants, restricted common stock and RSUs issued to members of the Board of Directors for the fiscal years 2002 through the second quarter of fiscal 2014 (in actual amounts) for service as a member:

	May 31, 2014
Granted as of:	Number of options	Exercise price
2002	40,000	$	1.00
2002	31,496	$	1.27
2003	30,768	$	1.30
2004	320,000	$	1.58
2005	300,000	$	5.91
2006	450,000	$	1.02

		Number of restricted
		shares isssued
2007		320,000
2008		473,455
2009		371,436
2010		131,828
2011		—
2012		617,449
2013		—
2014		219,678

Exercise prices for all options outstanding as of May 31, 2014 were as follows:

	Options Outstanding and Exercisable
Exercise Price	Number of shares	Weighted-Average Remaining Contractual Life
$1.00 - $1.02	100,000	1.8
$1.58 - $1.63	225,000	0.2
$5.91	450,000	1.0

	775,000	0.9

The following table summarizes stock option activity by plan for the six months ended May 31, 2014 and 2013, (in actual amounts). There are no stock options outstanding under our Restated Plan.

	Total Number of Shares		2004 Incentive Plan	2000 Director Plan

Outstanding at November 30, 2013	775,000		775,000	—
Granted	—		—	—
Exercised	—		—	—
Forfeited / Expired	—		—	—
Outstanding and exercisable at May 31, 2014	775,000		775,000	—

Outstanding at November 30, 2012	796,794		775,000	21,794
Granted	—		—	—
Exercised	(21,794	)	—	(21,794	)
Forfeited / Expired	—		—	—
Outstanding and exercisable at May 31, 2013	775,000		775,000	—

Stock option activity in the aggregate for the periods indicated are as follows (in actual amounts):

	Options	Weighted average exercise price		Weighted average remaining contractual Life (Years)	Aggregate Intrinsic Value

Outstanding at November 30, 2013	775,000	$	4.03
Granted	—	—
Exercised	—	—
Expired	—	—
Forfeited	—	—		—	$	—
Outstanding and exercisable at May 31, 2014	775,000	$	4.03	0.9	$	—

Weighted average per option fair value of options granted during the year		N/A

	Options		Weighted average exercise price		Weighted average remaining contractual Life (Years)	Aggregate Intrinsic Value

Outstanding at November 30, 2012	796,794		$	3.96
Granted	—		—
Exercised	(21,794	)	1.30
Expired	—		—
Forfeited	—		—		—	—
Outstanding and exercisable at May 31, 2013	775,000		$	4.03	1.9	$	88,250

Weighted average per option fair value of options granted during the year			N/A

As of May 31, 2014, there was $1,988,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2004 Incentive Plan and the Restated Plan. That unrecognized compensation cost is expected to be recognized over a weighted-average period of 2 years.

A summary of the status of restricted common stock and RSUs as of November 30, 2012 and November 30, 2013, and changes during the six months ended May 31, 2014 and 2013, are presented below (in actual amounts):

							Weighted-Average Grant-Date Fair Value
	Restricted Shares		Restricted Stock Units		Total Shares		Restricted Shares		Restricted Stock Units

Outstanding at November 30, 2013	954,798		1,661,330		2,616,128		$	0.90	$	0.93
Granted	288,121		362,242		650,363		1.49		1.49
Issued	(450,616	)	(352,394	)	(803,010	)	0.95		1.06
Cancelled	—		(187,888	)	(187,888	)	—		0.98
Forfeited	—		(10,715	)	(10,715	)	—		0.70
Outstanding at May 31, 2014	792,303		1,472,575		2,264,878		$	1.08	$	1.04

Outstanding at November 30, 2012	844,236		2,713,605		3,557,841		$	0.85	$	0.89
Granted	420,882		631,059		1,051,941		1.02		1.02
Issued	(310,320	)	(667,598	)	(977,918	)	0.92		0.81
Cancelled	—		(239,011	)	(239,011	)	—		0.82
Forfeited	—		(3,031	)	(3,031	)	—		0.70
Outstanding at May 31, 2013	954,798		2,435,024		3,389,822		$	0.90	$	0.94

In the three months ended May 31, 2014, we did not grant any RSUs or shares of restricted stock. In the six months ended May 31, 2014, we granted 362,242 RSUs and 288,121 shares of restricted stock. In the three months ended May 31, 2013, we did not grant any RSUs or shares of restricted stock and in the six months ended May 31, 2013, we granted 631,059 RSUs and 420,882 shares of restricted stock. In the three months ended May 31, 2014, we (i) issued 58,914 shares of restricted stock and common stock to holders of RSUs, respectively, in connection with the granting of restricted stock or vesting of RSUs, and (ii) withheld, canceled or forfeited 13,837 RSUs. In the six months ended May 31, 2014, we (i) issued 803,010 shares of restricted stock and common stock to holders of RSUs, respectively, in connection with the granting of restricted stock or vesting of RSUs, and (ii) withheld, canceled or forfeited 198,603 RSUs and retired into treasury 194,901 shares of restricted stock. In the three months ended May 31, 2013, we (i) issued 87,247 shares of restricted stock and common stock to holders of RSUs, respectively in connection with the granting of restricted stock or vesting of RSUs, and (ii) withheld, canceled or forfeited 10,111 RSUs. In the six months ended May 31, 2013, we (i) issued 977,918 shares of restricted stock and common stock to holders of RSUs, respectively in connection with the granting of restricted stock or vesting of RSUs, and (ii) withheld, canceled or forfeited 242,042 RSUs.