Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Jun. 30, 2014

On April 5, 2013, the board of directors approved the Company’s 2013 Incentive Plan (the “2013 Plan”), which was subsequently approved at the 2013 annual meeting of shareholders.  1,500,000 shares were authorized for grant under the 2013 Plan, plus the number of shares remaining available for future grants under the Company’s predecessor 2009 Equity Incentive Plan on the date the shareholders approved the 2013 Plan.  The 2013 Plan is intended to provide a means whereby the Company may be able, by granting equity and other types of awards, to attract, retain and motivate capable and loyal employees, non-employee directors, consultants and advisors of the Company, for the benefit of the Company and its shareholders.

Restricted Stock Awards

During the six months ended June 30, 2014, the Company issued 156,960 restricted shares of common stock under the 2013 Plan as compensation to officers, employees and directors of the Company.  Unvested restricted shares vest over various terms with all restricted shares vesting no later than April 2017.  As of June 30, 2014, there was approximately $6.0 million of total unrecognized compensation expense related to unvested restricted stock.  This compensation expense will be recognized over the remaining vesting period of the grants.  The Company has assumed a zero percent forfeiture rate for restricted stock due to the small number of officers, employees and directors that have received restricted stock awards.

The following table reflects the outstanding restricted stock awards and activity related thereto for the six months ended June 30, 2014:

Six Months Ended
June 30, 2014
Number of
Restricted Stock Awards:
Restricted Shares Outstanding at Beginning of Period
    592,565     $ 16.84  
Shares Granted
    156,960       14.08  
Lapse of Restrictions
    (243,951 )     17.91  
Restricted Shares Outstanding at End of Period
    505,574     $ 15.46  
Stock Option Awards

On November 1, 2007, the board of directors granted options to purchase 560,000 shares of the Company’s common stock under the Company’s 2006 Incentive Stock Option Plan.  The Company granted options to purchase 500,000 shares of the Company’s common stock, to members of the board and options to purchase 60,000 shares of the Company’s common stock to one employee pursuant to an employment agreement.  These options were granted at a price of $5.18 per share and the optionees were fully vested on the grant date.  As of June 30, 2014, options to purchase a total of 141,872 shares of the Company’s common stock remain outstanding but unexercised.  The board of directors determined that no future grants will be made pursuant to the 2006 Incentive Stock Option Plan.

The Company used the Black-Scholes option valuation model to calculate stock-based compensation at the date of grant.  Option pricing models require the input of highly subjective assumptions, including the expected price volatility.  The Company used the simplified method to determine the expected term of the options due to the lack of sufficient historical data.  Changes in these assumptions can materially affect the fair value estimate.  The total fair value of the options was recognized as compensation over the vesting period.  There were no stock options granted by the Company in the six months ended June 30, 2014.

Currently Outstanding Options

No options were forfeited during the six months ended June 30, 2014.
No options expired during the six months ended June 30, 2014.
Options covering 141,872 shares were exercisable and outstanding at June 30, 2014.
The Company recorded no compensation expense related to these options for the six months ended June 30, 2014.  There is no further compensation expense that will be recognized in future periods relative to any options that had been granted as of June 30, 2014, because the Company recognized the entire fair value of such compensation upon vesting of the options.
There were no unvested options at June 30, 2014.