Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.7.0.1
Stock-Based Compensation
6 Months Ended
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

NOTE 10 - STOCK-BASED COMPENSATION

 

Stock Option Plans

 

The Company adopted the 1999 Stock Option Plan, pursuant to which the Company had the right to grant stock awards and options to purchase up to 2,813,000 shares of common stock. The 1999 Stock Option Plan expired during 2009 and the Company cannot issue additional options under this plan.

 

The Company adopted the 2007 Equity Compensation Plan, pursuant to which, as amended, the Company may grant options to purchase up to an aggregate of 2,500,000 shares of common stock. There were 49,000 shares available for future issuance under the 2007 Equity Compensation Plan at June 30, 2017. The Company also adopted the 2009 Non-Employee Director Equity Compensation Plan, pursuant to which, as amended, the Company may grant options to purchase up to an aggregate of 600,000 shares of common stock. There were 14,000 shares available for future issuance under the 2009 Non-Employee Director Equity Compensation Plan at June 30, 2017. In June 2015, the Company adopted the 2015 Equity Compensation Plan (the “2015 Plan”) pursuant to which the Company may grant stock options, restricted stock and other equity-based awards with respect to up to an aggregate of 1,200,000 shares of common stock. There were 317,000 shares available for future issuance under the 2015 Plan at June 30, 2017. The plans are administered by the Compensation Committee of the Company’s Board of Directors, which has the authority to determine, among other things, the term during which an option may be exercised (not more than 10 years), the exercise price of an option and the vesting provisions.

 

The Company recognizes all employee share-based payments in the statement of operations as an operating expense, based on their fair values on the applicable grant date. As a result, the Company recorded stock-based compensation expense of $83,000 and $161,000, respectively, for the three- and six-month periods ended June 30, 2016 and $108,000 and $198,000, respectively, for the three- and six-month periods ended June 30, 2017, in connection with awards made under the stock option plans.

 

The following table summarizes the activity relating to the Company’s stock options for the six-month period ended June 30, 2017:

 

                Weighted-        
          Weighted-     Average        
          Average     Remaining     Aggregate  
          Exercise     Contractual     Intrinsic  
    Options     Price     Term     Value  
                         
Outstanding at beginning of year     1,243,000     $ 5.08                  
Granted     349,000       6.0                  
Exercised     (258,000 )     4.70                  
Forfeited or expired     (31,000 )     8.26                  
                                 
Outstanding at end of period     1,303,000     $ 5.33        7 years     $ 1,095,000  
                                 
Exercisable at end of period     581,000     $ 5.09        4 years     $ 654,000  

 

The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model reflecting the following weighted-average assumptions:

 

    June 30,  
    2016     2017  
             
Expected volatility     45.5 %     42.4 %
Expected life of options (in years)     4       4  
Risk free interest rate     1.2 %     1.7 %
Dividend yield     0 %     0 %
Weighted average fair value of options granted during the period   $ 1.60     $ 2.11  

 

Expected volatility is based on historical volatility of the Company’s common stock and the expected life of options is based on historical data with respect to employee exercise periods.

 

The fair value of options vested during the six-month periods ended June 30, 2016 and 2017 was $113,000 and $106,000, respectively. The total intrinsic value of options exercised during the six-month periods ended June 30, 2016 and 2017 was $10,000 and $351,000, respectively.

 

As of June 30, 2017, there was approximately $1,174,000 of unrecognized compensation cost related to non-vested options granted under the Company’s stock option plans. That cost is expected to be recognized over a weighted-average period of 3.25 years.

 

The Company estimates forfeitures at the time of valuation and reduces expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

 

Restricted Stock

 

The Company grants restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested stock at the time of grant and, upon vesting, there are no contractual restrictions on the stock. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of all non-vested restricted stock for six-month period ended June 30, 2017 is as follows:

 

          Weighted-  
    Number of     Average  
    Non-vested     Grant Date  
    Shares     Fair Value  
             
Restricted stock, non-vested, beginning of year     392,000     $ 5.45  
Granted     145,000       6.00  
Vested     (44,000 )     5.76  
Forfeited     (7,000 )     5.69  
                 
Restricted stock, non-vested, end of period     486,000     $ 5.58  

 

The Company recorded stock-based compensation expense of $285,000 and $616,000, respectively, for the three- and six-month periods ended June 30, 2016 and $411,000 and $854,000, respectively, for the three- and six-month periods ended June 30, 2017, in connection with restricted stock grants. As of June 30, 2017, there was $1,870,000 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 2.38 years.

 

Performance Shares

 

In January 2016, the Company granted performance shares to employees pursuant to the 2015 Plan. The shares are unvested at the time of grant and, upon vesting, there are no contractual restrictions on the shares. The vesting of the shares is subject to the achievement of performance goals during a two-year period from the date of issuance, with the ability to achieve prorated vesting of the shares during interim annual measurement periods. If the performance goals are not met, the performance shares will not vest and will automatically be returned to the plan. If the performance goals are met, then the shares will be issued to the employees. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of all non-vested performance shares for the six-month period ended June 30, 2017 is as follows:

 

          Weighted-  
    Number of     Average  
    Non-vested     Grant Date  
    Shares     Fair Value  
             
Performance shares, non-vested, beginning of year     261,000     $ 4.07  
Granted     -       -  
Vested     (100,000 )     4.07  
Forfeited     (44,000 )     4.07  
                 
Performance shares, non-vested, end of period     117,000     $ 4.07  

 

The Company recorded stock-based compensation expense of $137,000 and $250,000, respectively, for the three- and six-month periods ended June 30, 2016 and $65,000 and $245,000, respectively, for the three- and six-month periods ended June 30, 2017, in connection with the performance share grants. As of June 30, 2017, there was $136,000 of total unrecognized compensation cost related to non-vested performance shares. That cost is expected to be recognized over a weighted-average period of 0.55 years.