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Note 10 - Shareholders' Equity | 12 Months Ended
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Dec. 31, 2015
Note 10 - Shareholders Equity |
Note 10 - Shareholders' Equity | Note 10 - Shareholders' Equity
| a. | Stock-based Compensation Expense
We recorded non-cash stock compensation expense in each period as follows:
|  | 2015 |  | 2014
Stock options |  | $ | 489 |  |  | $ | 614 |
Restricted stock grants: |  |  |  |  |  |  |  |
Employee |  |  | 82 |  |  |  | 29 |
President and CEO |  |  | — |  |  |  | 150 |
Board of Directors compensation – |  |  |  |  |  |  |  |
stock grant |  |  | — |  |  |  | 210 |
Total |  | $ | 571 |  |  | $ | 1,003 |
These are more fully discussed as follows: b. Stock Options We have various stock-based employee compensation plans, for which compensation cost is recognized in the financial statements. The cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award). Our shareholders have approved various equity-based plans that permit the grant of stock options, restricted stock and other equity-based awards. In addition, our shareholders have approved the grant of stock options outside of these plans. In June 2004, our shareholders adopted the 2004 Long-Term Incentive Plan (“2004 LTIP”) pursuant to which we were authorized to issue up to 750,000 shares of common stock and grant stock options, restricted stock awards, stock appreciation rights and other stock-based awards. Through shareholder approved amendments to the LTIP in 2006, 2008, 2011, and 2013, the total number of shares authorized under the LTIP were increased to 2,900,000. In June 2014, our shareholders approved the 2014 Long-Term Incentive Plan (“2014 LTIP”) as the successor plan to the 2004 LTIP which expired on June 10, 2014. Under the 2014 LTIP, a total of 1,750,000 shares of Common Stock will be available for grant of awards. However, of the total number of shares of common stock available for awards under the 2014 LTIP, no more than 800,000 shares of Common Stock may be used for awards other than stock options and stock appreciation rights. Grants under the 2014 LTIP may be awarded through June 2, 2024. Stock options granted under the LTIPs are either Incentive Stock Options (“ISOs”) or Non-Qualified Stock Options (“NQSOs”). Key employees are eligible to receive ISOs and NQSOs; however, directors and consultants are eligible to receive only NQSOs. Most ISOs vest over a three- or five-year period and expire on the sixth or seventh anniversary of the grant date. All NQSOs issued to non-employee directors vest immediately and expire on either the sixth or seventh anniversary of the grant date. Some NQSOs issued to non-employees vest immediately and expire within three years; others have the same vesting characteristics as options given to employees. As of December 31, 2015, there were 1,447,219 stock options outstanding under the 2004 LTIP and 410,750 stock options outstanding under the 2014 LTIP. On December 30, 2010, pursuant to the terms of his employment agreement, we granted our President and Chief Executive Officer, Michael D. Popielec, options to purchase shares of common stock under the 2004 LTIP as follows: (i) 50,000 shares at $6.42, vesting in annual increments of 12,500 shares over a four-year period commencing December 30, 2011; (ii) 250,000 shares at $6.42, vesting in annual increments of 62,500 shares over a four-year period commencing December 30, 2011; (iii) 200,000 shares at $10.00, with vesting to begin on the date the stock reaches a closing price of $10.00 per share for 15 trading days within a 30-day trading period, with such vesting in annual increments of 50,000 shares over the four anniversary dates of that date; and (iv) 200,000 shares at $15.00, with vesting to begin on the date the stock reaches a closing price of $15.00 per share for 15 trading days within a 30-day trading period, with such vesting in annual increments of 50,000 shares over the four anniversary dates of that date. All such options in items (i) and (ii) shall expire on December 30, 2017. All such options in items (iii) and (iv) shall expire as of the later of December 30, 2017 and five years after the initial vesting commences, but in no event later than December 30, 2020. The options set forth in items (ii), (iii) and (iv) were subject to shareholder approval of an amendment to the 2004 LTIP, which approval was obtained on June 7, 2011. On January 3, 2011, pursuant to the terms of his employment agreement, we granted our President and Chief Executive Officer, Michael D. Popielec, an option to purchase 50,000 shares of common stock at $6.58 under the 2004 LTIP. The option vested in annual increments of 12,500 shares over a four-year period commencing December 30, 2011. The option expires on December 30, 2017. As of December 31, 2015, there was $440 of total unrecognized compensation costs related to outstanding stock options, which is expected to be recognized over a weighted average period of 1.7 years. We use the Black-Scholes option-pricing model to estimate fair value of stock-based awards. The following weighted average assumptions were used to value options granted during the years ended December 31, 2015 and 2014:
|  | Years Ended December 31,
|  | 2015 |  | 2014
Risk-free interest rate |  |  | 0.72 | % |  |  | 1.10 | %
Volatility factor |  |  | 48.54 | % |  |  | 50.70 | %
Dividends |  |  | 0.00 | % |  |  | 0.00 | %
Weighted average expected life (years) |  |  | 4.15 |  |  |  | 4.15 |
Forfeiture rate |  |  | 13.8 | % |  |  | 13.8 | %
We used a Monte Carlo simulation option-pricing model to estimate the fair value of market performance stock-based awards, of which there were no new awards in the years ended December 31, 2015 or 2014. We calculate expected volatility for stock options by taking an average of historical volatility over the past five years and a computation of implied volatility. The computation of expected term was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield in effect at the time of grant. Forfeiture rates are calculated by dividing unvested shares forfeited by beginning shares outstanding. The pre-vesting forfeiture rate is calculated yearly and is determined using a historical twelve-quarter rolling average of the forfeiture rates. The following tables summarize data for the stock options issued by us:
Year Ended December 31, 2015
|  | Number of Shares |  | Weighted Average Exercise Price Per Share |  | Weighted Average Remaining Contractual Term |  | Aggregate Intrinsic Value
Shares under option – January 1 |  |  | 2,056,122 |  |  | $ | 6.66 |  |  |  |  |  |  |  |  |
Options granted |  |  | 411,250 |  |  |  | 4.68 |  |  |  |  |  |  |  |  |
Options exercised |  |  | (137,937 | ) |  |  | 3.90 |  |  |  |  |  |  |  |  |
Options forfeited or expired |  |  | (71,466 | ) |  |  | 11.86 |  |  |  |  |  |  |  |  |
Shares under option – December 31 |  |  | 2,257,969 |  |  | $ | 6.30 |  |  |  | 3.57 |  |  | $ | 3,094 |
Vested and expected to vest - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31 |  |  | 2,093,294 |  |  | $ | 6.45 |  |  |  | 3.39 |  |  | $ | 2,731 |
Options exercisable – December 31 |  |  | 1,255,736 |  |  | $ | 5.22 |  |  |  | 2.44 |  |  | $ | 1,786 |
Year Ended December 31, 2014
|  | Number of Shares |  | Weighted Average Exercise Price Per Share
Shares under option – January 1 |  |  | 2,131,622 |  |  | $ | 6.99 |
Options granted |  |  | 252,500 |  |  |  | 3.94 |
Options exercised |  |  | (3,067 | ) |  |  | 3.67 |
Options forfeited or expired |  |  | (324,933 | ) |  |  | 6.77 |
Shares under option – December 31 |  |  | 2,056,122 |  |  | $ | 6.66 |
Options exercisable – December 31 |  |  | 1,296,619 |  |  | $ | 5.63 |
The following table represents additional information about stock options outstanding at December 31, 2015:
|  | Option outstanding |  | Options exercisable
Range of Exercise Prices |  | Number of Outstanding Options – December 31, 2015 |  | Weighted-Average Remaining Contractual Life |  | Weighted- Average Exercise Price |  | Number of Options Exercisable at December 31, 2015 |  | Weighted- Average Exercise Price
| $3.22-$3.99 |  |  |  | 817,064 |  |  |  | 4.64 |  |  | $ | 3.78 |  |  |  | 348,581 |  |  | $ | 3.76 |
| $4.00-$4.99 |  |  |  | 427,500 |  |  |  | 2.79 |  |  | $ | 4.47 |  |  |  | 393,750 |  |  |  | 4.44 |
| $5.00-$9.99 |  |  |  | 581,833 |  |  |  | 2.84 |  |  | $ | 6.60 |  |  |  | 481,833 |  |  |  | 6.45 |
| $10.00-$15.00 |  |  |  | 431,572 |  |  |  | 3.30 |  |  | $ | 12.48 |  |  |  | 31,572 |  |  |  | 12.18 |
| $3.22-$15.00 |  |  |  | 2,257,969 |  |  |  | 3.57 |  |  | $ | 6.30 |  |  |  | 1,255,736 |  |  | $ | 5.22 |
The weighted average fair value of options granted during the years ended December 31, 2015 and 2014 was $2.32 and $1.60, respectively. The total intrinsic value of options (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) exercised during the years ended December 31, 2015 and 2014 was $364 and $3, respectively. Cash flows from excess tax benefits are classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. We recorded excess tax benefits totaling $287 in 2015, and $0 in 2014. Cash received from option exercises under our stock-based compensation plans for the years ended December 31, 2015 and 2014 was $538 and $11, respectively. c. Restricted Stock Awards On January 29, 2013, we granted 120,000 contingent restricted stock units to our President and Chief Executive Officer, Michael D. Popielec, subject to shareholder approval, which was obtained on June 4, 2013. These restricted stock units vest as follows: (i) 30,000 shares of our common stock will vest on the later of January 1, 2014 or the date when our common stock first reaches a closing price of $4.00 per share for 15 trading days in a 30 trading day period; (ii) 30,000 shares of our common stock will vest on the later of January 1, 2014 or the date when our common stock first reaches a closing price of $5.00 per share for 15 trading days in a 30 trading day period; (iii) 30,000 shares of our common stock will vest on the later of January 1, 2015 or the date when our common stock first reaches a closing price of $4.00 per share for 15 trading days in a 30 trading day period; and (iv) 30,000 shares of our common stock will vest on the later of January 1, 2015 or the date when our common stock first reaches a closing price of $5.00 per share for 15 trading days in a 30 trading day period. The restricted stock units described in (i) and (iii) had achieved their closing price condition prior to shareholder approval and were valued at the closing price on the date of grant. The restricted stock units described in (ii) and (iv) had not yet achieved their closing price conditions and were valued utilizing a Monte Carlo simulation to determine fair value and the derived service period. The weighted average assumptions utilized in this simulation included the risk-free interest rate of 0.21%, volatility of 59.08% and no dividend payouts. The weighted average fair value per share was estimated at $3.62 for an aggregate value of $434. Of this amount, $150 was recognized in selling, general and administrative expenses in the years ended December 31, 2014. The restricted stock units described in (ii) and (iv) both vested during 2015. During 2014, we awarded 49,200 restricted stock units under the 2014 LTIP to certain key employees. These units vest over three years and we estimated their weighted average grant date fair value to be $3.24 per share. $82 and $29 of expense was recorded in 2015 and 2014, respectively, relating to these units. At December 31, 2015, there was $49 of unrecognized compensation expense related to restricted stock grants. d. Reserved Shares We have reserved 3,596,719 shares of common stock under the various stock option plans, warrants and restricted stock awards as of December 31, 2015.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(d),(e)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 4.E) -URI http://asc.fasb.org/extlink&oid=27010918&loc=d3e74512-122707 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.29-31) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SAB TOPIC 4.C) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187143-122770 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Preferred Stock -URI http://asc.fasb.org/extlink&oid=6521494 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section C + Details
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