13. Stock-Based Compensation

Long-term incentive plan

During 1995, the Company established the 1995 Long-Term Incentive Stock Option Plan (the "Plan"), which permits the granting of stock options (including incentive stock options and nonqualified stock options) stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards or any combination of these to employees, directors or consultants. Options to purchase shares of the Company's common stock under the Plan expire in either seven or ten years from the date of grant and become exercisable in three, five, or seven installments with a certain percentage of options vesting on the first anniversary of the grant date and additional options vesting on each of the subsequent anniversaries of the grant date, subject to acceleration under certain circumstances. The Plan expires on June 30, 2018; the total number of shares that could be issued under the Plan is 5,500,000. As of December 31, 2013, 3,035,987 stock options were outstanding under the Plan, while 820,253 stock options remained to be granted under the Plan.

The Company recognizes compensation expense on a pro rata straight-line basis over the requisite service period for stock-based compensation awards with both graded and cliff vesting terms. The Company recognizes the cumulative effect of a change in the number of awards expected to vest in compensation expense in the period of change. The Company has not capitalized any portion of its stock-based compensation.

During the years ended December 31, 2013, 2012, and 2011, the Company recognized $810,000, $914,000 and $727,000, respectively, of stock-based compensation expense under the fair value method.

Stock option activity

During the year ended December 31, 2013, the Company granted stock options to purchase 293,000 shares of common stock to GSE directors and employees. During the year ended December 31, 2012, the Company granted stock options to purchase 212,870 shares of common stock to GSE directors and employers.

Information with respect to stock option activity as of and for the year ended December 31, 2013 is as follows:

	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)		Weighted Average Remaining Contractual Life (Years)

Options outstanding at December 31, 2012		3,070,803		$	3.40
Options granted		293,000			1.76
Options exercised		(162,000	)		1.62
Options forfeited		(165,816	)		2.71
Options outstanding at December 31, 2013		3,035,987			3.38	$	-		4.32
Options expected to vest		1,287,801			2.37	$	-		5.28
Options exercisable at December 31, 2013		1,748,186		$	4.12	$	-		3.62

A summary of the status of the Company's nonvested options as of and for the year ended December 31, 2013 is presented below.

	Number of Shares			Weighted Average Fair Value

Nonvested options at December 31, 2012		1,750,107		$	1.43
Options granted		293,000			0.90
Options forfeited		(120,646	)		1.19
Options vested during the period		(634,660	)		1.45

Nonvested options at December 31, 2013		1,287,801		$	1.33

The fair value of the options granted in 2013, 2012 and 2011 were estimated on the date of grant using a Black-Scholes option-pricing model with the following assumptions:

	Years ended December 31,
	2013	2012	2011

Risk-free interest rates	.85 - 1.68%	.34 - 1.16%	1.06 - 2.28%
Dividend yield	0%	0%	0%
Expected life	5.49 - 7.00 years	2.00 - 6.28 years	3.75 - 6.98 years
Volatility	51.31 - 56.80%	52.13 - 57.85%	49.49 - 60.24%
Weighted average volatility	52.46%	53.85%	55.04%

As of December 31, 2013, the Company had $1.5 million of unrecognized compensation expense related to the unvested portion of outstanding stock options expected to be recognized on a pro-rata straight line basis over a weighted average remaining service period of approximately 5.28 years.

The Company received cash for the exercise price associated with stock options exercised of $44,000 and $272,000 during the years ended December 31, 2013 and 2012, respectively. The Company received cash for the exercise price associated with stock options and warrants exercised of $133,000 and $10,000, respectively, during the year ended December 31, 2011. The total intrinsic value realized by participants on stock options exercised was $57,000, $94,000 and $103,000 during the years ended December 31, 2013, 2012, and 2011, respectively.