STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2014

NOTE B—STOCK BASED COMPENSATION

Stock Options

Compensation expense related to stock options and restricted stock awards recognized in operating results (general and administrative expenses) was approximately $0.5 and $0.6 million for the three months ended June 30, 2014 and June 30, 2013, respectively, and approximately $1.1 and $0.9 million for the six months ending June 30, 2014 and June 30, 2013, respectively.

The following assumptions were used to value stock options calculated using the Black-Scholes options pricing model:

	Six months ended June 30,
	2014		2013
Dividend yield	0	%	0	%
Expected volatility	52.8	%	70.9	%
Risk-free interest rate	1.0	%	0.5	%
Expected life	3.5 years		3.5 years

			Weighted		Weighted
			Average		Average	Aggregate
	Number		Exercise		Remaining	Intrinsic Value
	of Options		Price		Term (in years)	(in thousands)
Outstanding at March 31, 2014	1,485,321		$	3.35
Granted	290,810		4.84
Exercised	(59,949	)	2.66
Forfeited or expired	(5,000	)	2.75
Outstanding at June 30, 2014	1,711,182		$	3.63	3.63	$	4,398
Exercisable at June 30, 2014	525,239		$	2.86	1.93	$	1,755

The total intrinsic value of options exercised during the six months ended June 30, 2014 and 2013 were approximately $1.0 million and $461,000 respectively.

As of June 30, 2014 total unrecognized stock-based compensation expense related to non-vested stock options was approximately $2.0 million, which we expect to recognize over a weighted average period of 1.9 years.

Restricted Shares

Restricted share activity for the six months ended June 30, 2014 was as follows:

	Shares		Weighted Average Fair Value

Outstanding at December 31, 2013	1,898,133		$	1.97
Granted	225,296		4.62
Vested	(511,527	)	2.81
Forfeited	(25,399	)	2.89
Outstanding at June 30, 2014	1,586,503		$	2.06

Restricted stock awards for executive officers and employees generally vest ratably over three years. Fair value of our restricted shares is based on our closing stock price on the date of grant. As of June 30, 2014, total unrecognized stock-based compensation expense related to non-vested restricted shares was $2.8 million, which is expected to be recognized over a weighted average period of approximately 1.3 years.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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