5. SHARE-BASED COMPENSATION

Under various plans, executives, key employees and outside directors receive awards of options to purchase common stock. The Company has a stock option plan (the “2000 Plan”) which authorizes the granting of incentive and nonqualified stock options and restricted stock units. Incentive stock options are granted at not less than 100% of fair market value at the date of grant (110% for stockholders owning more than 10% of the Company’s common stock). Nonqualified stock options are granted at not less than 85% of fair market value at the date of grant. A maximum of 8,000,000 shares of common stock are issuable under the 2000 Plan. Certain additional options have been granted outside the 2000 Plan. These options generally follow the provisions of the 2000 Plan. The Company issues new shares to satisfy option exercises and the vesting of restricted stock awards.

The Company also has an Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible full-time employees to purchase shares of common stock at 90 percent of the lower of the fair market value of a share of common stock on the first or last day of the quarter. Eligible employees are provided the opportunity to acquire Company common stock during each quarter. No more than 661,157 shares of common stock may be issued under the ESPP. Such stock may be unissued shares or treasury shares of the Company or may be outstanding shares purchased in the open market or otherwise on behalf of the ESPP. The Company’s ESPP is compensatory and therefore, the Company is required to recognize compensation expense related to the discount from market value of shares sold under the ESPP. The Company issues new shares to satisfy shares purchased under the ESPP.

Share-based compensation expense recorded in the three and six month periods ended June 30, 2013 and 2012 is summarized as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012

Stock options	$	75	$	153	$	152	$	259
Employee stock purchase plan	1		—		1		1
Restricted stock awards	73		73		116		100

Total share-based compensation expense	$	149	$	226	$	269	$	360

Share-based compensation expense is a component of selling, general and administrative expense, and is recorded as a non-cash expense in the operating activities section of the Company’s consolidated statements of cash flows.

No options were exercised in the six month periods ended June 30, 2013 and 2012. Proceeds received from employee payments into the ESPP in the six month periods ended June 30, 2013 and 2012, were $4 and $7 respectively. These amounts are recorded in the cash flows from financing activities section of the Company’s consolidated statements of cash flows.

As a result of the Asset Sale (see Note 1), all remaining unvested stock options, unvested restricted shares and unvested performance based restricted stock units vested on July 12, 2013. The expense related to this acceleration of vesting to be expensed in the Company’s fiscal third quarter is approximately $921, with approximately $431 related to stock options and $490 related to restricted stock awards.

Information with respect to the activity of outstanding stock options granted under the 2000 Plan and options granted separately from the 2000 Plan for the six months ended June 30, 2013 is summarized as follows:

					Weighted	Aggregate
	Number				Average Remaining	Instrinsic
	of Shares		Price Range		Contractual term	Value

Balance, January 1, 2013	2,170,043		$	1.49 - $ 4.65

Granted	81,200		$	1.19 - $ 1.19
Cancelled / Forfeited	(170,829	)	$	1.19 - $ 4.65

Balance, June 30, 2013	2,080,414		$	1.19 - $ 4.65	6.4 years	$	—

Vested and excercisable at June 30, 2013	1,486,472		$	1.49 - $ 4.65	5.7 years	$	—

Expected to vest as of June 30, 2013	2,027,145		$	1.19 - $ 4.65	6.3 years	$	—

During the six month period ended June 30, 2013, there were 81,200 options granted with a weighted average grant date fair value, based on a Black-Scholes option pricing model, of $0.44 per share. The assumptions used in the Black-Scholes model are as follows: dividend yield 0%, expected volatility 47.1%, risk-free interest rate 1.17% and expected life of 6.25 years. The Company uses the Simplified Method for determining the expected life of options granted to employees which is computed using the sum of the average vesting period and the contractual life of the option and dividing by two, for all periods presented. The Company uses the contractual life of the option to determine the expected life of the option for nonemployees.

The following table provides additional information about the Company’s stock options outstanding and exercisable at June 30, 2013:

	Options Outstanding				Options Exercisable
		Weighted Average				Wtd. Average
Range of	Number of	Remaining	Exercise		Number of	Exercise
Exercise Prices	Shares	Contractual Life	Price		Shares	Price

$ 1.19 - $ 2.51	1,795,502	6.8 Years	$	1.83	1,201,560	$	1.80
$ 3.05 - $ 3.57	66,300	1.5 Years	$	3.52	66,300	$	3.52
$ 3.69 - $ 4.65	218,612	4.2 Years	$	4.19	218,612	$	4.19
$ 1.19 - $ 4.65	2,080,414	6.4 Years	$	2.13	1,486,472	$	2.22

A summary of the status of the Company’s unvested restricted stock as of December 31, 2012 and changes during the six month period ended June 30, 2013 is presented below.

			Weighted Average
			Grant Date		Aggregate
	Shares		Fair Value		Intrinsic Value

Non-vested RSA’s at January 1, 2013	445,000		$	1.60
Granted	100,000		$	1.08
Vested	(138,332	)	$	1.63
Cancelled / forfeited	(50,000	)	$	1.59

Non-vested RSA’s at June 30, 2013	356,668		$	1.45	$	321

Expected to vest at June 30, 2013	321,876		$	1.45	$	290

Restricted stock granted is generally scheduled to vest over periods of two to four years. The cost of the grant is charged to operations over the vesting period. At June 30, 2013, the weighted average remaining term of non-vested restricted stock was 2.5 years.

The Company also issued 410,000 performance-based Restricted Stock Units (“RSUs”) during the period ended June 30, 2012, of which 200,000 have been forfeited. The fair value of an RSU is equal to the market value of a share of stock on the date of grant. The performance-based RSUs vest based upon the achievement of certain goals related to the Company’s senior management team, for periods ranging from June 30, 2012 through December 31, 2015. Unless forfeited, the performance-based RSUs will be paid out in the form of stock, if the Company meets the performance targets. If the designated performance targets are not met, no payout will be made. As of June 30, 2013, performance related to 85,000 RSUs has been met, and these shares are included in the Restricted Stock summary above. No expense has been recognized through June 30, 2013 for the remaining awards as the probability of achieving the targets is currently assessed as not probable. However, vesting for the remaining 125,000 RSUs was accelerated upon the closing of the Asset Sale and conditions of the performance targets deemed to have been met. The expense associated with this accelerated vesting will be approximately $261.

The Company also issued 315,000 performance-based RSUs during the year ended December 31, 2011, of which 50,000 have been forfeited. The performance-based RSUs vest based upon the achievement of certain revenue targets. 50% of the RSUs vest upon the achievement of certain revenue growth targets during any 12-month period prior to December 31, 2012, and any remaining unvested RSUs vest upon the achievement of certain revenue growth targets during any 12-month period prior to December 31, 2014. No expense has been recognized for these awards and they terminated as of the closing of the Asset Sale.