9. Share-Based Compensation

We recognize compensation expense for all share-based awards made to employees and directors based on estimated fair values on the date of grant.

Stock Plans – Historically, we have granted stock options, restricted stock awards, restricted stock units and performance unit awards to employees and directors under various stock plans. We currently maintain two stock plans. Under our 1998 Stock Incentive Plan, as amended (the “1998 Stock Plan”), we granted incentive stock options, non-qualified stock options, restricted stock, performance awards and other stock-based awards to our officers, directors, employees, consultants and advisors for shares of our common stock. Stock options granted under the 1998 Stock Plan contained exercise prices not less than the fair market value of our common stock on the date of grant, and had a term of 10 years from the date of grant. Nonqualified stock option grants to our directors under the 1998 Stock Plan generally vested over periods up to two years. Qualified stock option grants to our employees under the 1998 Stock Plan generally vested over periods up to five years. The 1998 Stock Plan expired on June 12, 2008, and no additional awards may be made under the 1998 Stock Plan, although awards granted prior to such date will remain outstanding and subject to the terms and conditions of those awards.

In March 2008, our board of directors adopted the PowerSecure International, Inc. 2008 Stock Incentive Plan (the “2008 Stock Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders held on June 9, 2008. The 2008 Stock Plan authorizes our board of directors to grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance awards and other stock-based awards to our officers, directors, employees, consultants and advisors for up to an aggregate of 0.6 million shares of our common stock. Stock options granted under the 2008 Stock Plan must contain exercise prices not less than the fair market value of our common stock on the date of grant, and must contain a term not in excess of 10 years from the date of grant. On June 19, 2012, at our 2012 Annual Meeting of Stockholders, our stockholders adopted and approved an amendment and restatement of the 2008 Stock Incentive Plan, including an amendment to increase the number of shares of our common stock authorized thereunder by 1.4 million shares to a total of 2.0 million shares. The 2008 Stock Plan replaced our 1998 Stock Plan.

Stock Options – Net income (loss) for the three months ended June 30, 2015 and 2014 includes $59 thousand and $43 thousand, respectively, of pre-tax compensation costs related to outstanding stock options. Net income (loss) for the six months ended June 30, 2015 and 2014 includes $145 thousand and $87 thousand, respectively, of pre-tax compensation costs related to outstanding stock options. All of the stock option compensation expense is included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

A summary of option activity for the six months ended June 30, 2015 is as follows:


				Weighted
				Average
		Weighted		Remaining	Aggregate
		Average		Contractual	Intrinsic
	Shares	Exercise Price		Term (years)	Value
Balance, December 31, 2014	519	$	9.12
Granted	21		11.88
Exercised	(60)		5.03
Expired	-		-
Forfeited	(8)		7.32
Balance, June 30, 2015	472	$	9.79	5.60	$	4.97

Exercisable, June 30, 2015	275	$	9.03	3.50	$	5.73

A summary of option activity for the six months ended June 30, 2014 is as follows:


				Weighted
				Average
		Weighted		Remaining	Aggregate
		Average		Contractual	Intrinsic
	Shares	Exercise Price		Term (years)	Value
Balance, December 31, 2013	669	$	8.59
Granted	20		15.77
Exercised	(232)		8.80
Expired	-		-
Forfeited	(8)		4.58
Balance, June 30, 2014	449	$	8.87	4.99	$	0.87

Exercisable, June 30, 2014	298	$	7.71	3.21	$	2.03

The weighted average grant date fair value of stock options granted during the six months ended June 30, 2015 and 2014 was $4.99 and $6.49, respectively. The fair value of the stock options granted during the six months ended June 30, 2015 and 2014 was measured using the Black-Scholes valuation model with the following assumptions:



	Six Months Ended June 30,
	2015			2014
Expected stock price volatility		46.4	%		45.5	%
Risk free interest rate		1.5	%		1.6	%
Annual dividends	$	-			-
Expected life (years)		5			5

The fair value of stock option grants is amortized to expense over the respective service periods using the straight-line method and assuming a forfeiture rate of 5%. As of June 30, 2015 and December 31, 2014, there was $0.7 million and $0.8 million, respectively, of total unrecognized compensation costs related to stock options. These costs at June 30, 2015 are expected to be recognized over a weighted average period of approximately 4.3 years.

During the three months ended June 30, 2015 and 2014, the total intrinsic value of stock options exercised was $0.1 million and $0, respectively. Cash received from stock option exercises during the three months ended June 30, 2015 and 2014 was $0 and $0, respectively. The total grant date fair value of stock options vested during the three months ended June 30, 2015 and 2014 was $78 thousand and $60 thousand, respectively.

During the six months ended June 30, 2015 and 2014, the total intrinsic value of stock options exercised was $0.4 million and $3.3 million, respectively. Cash received from stock option exercises during the six months ended June 30, 2015 and 2014 was $0.3 million and $2.0 million, respectively. The total grant date fair value of stock options vested during the six months ended June 30, 2015 and 2014 was $106 thousand and $65 thousand, respectively

Restricted Stock Awards and Restricted Stock Units – Net income (loss) for the three months ended June 30, 2015 and 2014 includes $0.6 million and $0.6 million, respectively, of pre-tax compensation costs related to the vesting of outstanding restricted stock awards and restricted stock units granted to directors and employees. Net income (loss) for the six months ended June 30, 2015 and 2014 includes $1.1 million and $0.8 million, respectively, of pre-tax compensation costs related to the vesting of outstanding restricted stock awards and restricted stock units granted to directors and employees. All of the restricted stock award compensation expense during the three and six months ended June 30, 2015 and 2014 is included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

A summary of restricted stock award activity for the six months ended June 30, 2015 is as follows:


		Weighted
	Unvested	Average
	Restricted	Grant Date
	Shares	Fair Value
Balance, December 31, 2014	579	$	17.20
Granted	30		12.47
Vested	(26)		12.86
Forfeited	-		-
Balance, June 30, 2015	583	$	17.15

A summary of restricted stock award activity for the six months ended June 30, 2014 is as follows:


		Weighted
	Unvested	Average
	Restricted	Grant Date
	Shares	Fair Value
Balance, December 31, 2013	387	$	14.37
Granted	226		21.39
Vested	(11)		14.95
Forfeited	(5)		23.44
Balance, June 30, 2014	597	$	16.95

A summary of restricted stock unit activity for the six months ended June 30, 2015 is as follows:


		Weighted
	Unvested	Average
	Restricted	Grant Date
	Stock Units	Fair Value
Balance, December 31, 2014	-	$	-
Granted	11		15.49
Vested	-		-
Forfeited	-		-
Balance, June 30, 2015	11	$	15.49

There were no restricted stock units issued or outstanding at or during the three or six months ended June 30, 2014.

Restricted shares and restricted stock units are subject to forfeiture and cannot be sold or otherwise transferred until they vest. If the holder of the restricted shares or stock units leaves us before they vest, other than due to termination by us without cause, then any unvested restricted shares will be forfeited and returned to us. The restricted shares and restricted stock units granted to directors vest in equal amounts over a period of one or three years, depending on the nature of the grant. The restricted shares granted to employees generally vest over five or ten years. All restricted and unvested shares or units automatically vest upon a change in control.

The fair value of the restricted shares and restricted stock units is amortized on a straight-line basis over the respective vesting period. At June 30, 2015, the balance of unrecognized compensation cost related to unvested restricted shares was $7.7 million, which is expected to be recognized over a weighted average period of approximately 4.7 years. At June 30, 2015, the balance of unrecognized compensation cost related to unvested restricted stock units was $0.2 million, which is expected to be recognized over a weighted average period of approximately 1.0 year.

Performance Units – Net income (loss) for the three months ended June 30, 2015 includes $66 thousand of pre-tax compensation costs related to outstanding performance units based on the number of awards that we expect will vest over the requisite service period and the probable outcome of the associated performance condition. Net income (loss) for the six months ended June 30, 2015 includes $101 thousand of pre-tax compensation costs related to outstanding performance units based on the number of awards that we expect will vest over the requisite service period and the probable outcome of the associated performance condition. All of the performance unit compensation expense during the three and six months ended June 30, 2015 is included in general and administrative expenses in the accompanying condensed consolidated statements of operations. There were no performance units issued or outstanding during the three or six months ended June 30, 2014.

A summary of performance unit award activity for the six months ended June 30, 2015 is as follows:


		Weighted
	Unvested	Average
	Performance	Grant Date
	Units	Fair Value
Balance, December 31, 2014	17	$	20.57
Granted	28		12.30
Vested	-		-
Incremental performance shares vested	-		-
Forfeited	-		-
Balance, June 30, 2015	45	$	15.39

The performance units outstanding at June 30, 2015 obligate the Company to issue a variable number of shares of its common stock in the event certain cumulative earnings per share performance thresholds are met. At June 30, 2015, the number of shares issuable upon attainment of performance thresholds ranges from 23 thousand to 68 thousand shares. The fair value of the performance units are being amortized on a straight-line basis over the requisite service period. At June 30, 2015, the balance of unrecognized compensation costs related to outstanding performance units was $0.5 million, which is expected to be recognized over a weighted average period of approximately 2.0 years.