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Note 6 - Shareholders' Equity | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Shareholders' Equity and Share-based Payments [Text Block] | Note 6 - Shareholders' Equity
a. | Stock-Based Compensation Expense
We recorded non-cash stock compensation expense in each period as follows:
|  | 2018 |  |  | 2017 |
Stock Options |  | $ | 817 |  |  | $ | 642 |
Restricted Stock Grants |  |  | 73 |  |  |  | 11 |
Total |  | $ | 890 |  |  | $ | 653 |
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 estimated 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 2004 LTIP was 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 that 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 - year period and expire on the seventh anniversary of the grant date. As of December 31, 2018, there were 727,649 stock options outstanding under the 2004 LTIP and 848,438 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. 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. All such options in items (i) and (ii) were due to expire on December 30, 2017. On April 19, 2017, the Company’s Board of Directors extended the expiration date to December 30, 2020. Pursuant to Accounting Standards Codification Topic 718, Compensation – Stock Compensation, the transaction was accounted for as an equity award modification. During the second quarter of 2017, the Company recognized compensation cost of $193 representing the incremental fair value of the modified award computed as of the modification date as the difference between the fair value of the modified award and the fair value of the original award immediately before it was modified. The incremental fair value was determined using the Black-Scholes model. All such options in items (iii) and (iv) were due to 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. On July 25, 2018, the Company’s Board of Directors modified the option in item (iii) such that the option will vest immediately upon the Company’s common stock first reaching a closing price $10.00 for 15 trading days in a 30 trading-day period. The option became fully vested during the third quarter of 2018 and expires December 30, 2020. The transaction has been accounted for as an equity award modification pursuant to Accounting Standards Codification Topic 718, Compensation – Stock Compensation. During the third quarter 2018, the Company recognized compensation cost of $182 representing the incremental fair value of the modified award computed as of the modification date as the difference between the fair value of the modified award and the fair value of the original award immediately before it was modified. The incremental fair value was determined using a Monte Carlo simulation option-pricing model consistent with the valuation methodology used to value and recognize the original award. The market-based conditions for the option in item (iv) had not been met as of December 31, 2018. 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 expired on December 30, 2017. As of December 31, 2018, there was $521 of total unrecognized compensation costs related to outstanding stock options, which we expect to recognize over a weighted average period of 0.9 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, 2018 and 2017:
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |
Risk-free interest rate |  |  | 2.6 | % |  |  | 1.7 | %
Volatility factor |  |  | 46.8 | % |  |  | 50.0 | %
Weighted average expected life (years) |  |  | 5.0 |  |  |  | 5.0 |
Forfeiture rate |  |  | 10.0 | % |  |  | 10.0 | %
Dividends |  |  | 0.0 | % |  |  | 0.0 | %
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 for the years ended December 31, 2018 and 2017. We calculate expected volatility for stock options by taking an average of historical volatility over the expected term. 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, 2018 |
|  | Number of Shares |  |  | Weighted Average Exercise Price Per Share |  |  | Weighted Average Remaining Contractual Term |  |  | Aggregate Intrinsic Value |
Shares under Option – January 1 |  |  | 1,860,211 |  |  | $ | 5.96 |  |  |  |  |  |  |  |  |
Options Granted |  |  | 217,500 |  |  |  | 9.68 |  |  |  |  |  |  |  |  |
Options Exercised |  |  | (422,793 | ) |  |  | 4.49 |  |  |  |  |  |  |  |  |
Options Forfeited or Expired |  |  | (78,831 | ) |  |  | 11.75 |  |  |  |  |  |  |  |  |
Shares under option – December 31 |  |  | 1,576,087 |  |  | $ | 6.58 |  |  |  | 3.50 |  |  | $ | 1,946 |
Vested and Expected to Vest - December 31 |  |  | 1,475,570 |  |  | $ | 6.56 |  |  |  | 3.37 |  |  | $ | 1,851 |
Options Exercisable – December 31 |  |  | 1,064,127 |  |  | $ | 5.89 |  |  |  | 2.69 |  |  | $ | 1,565 |
Year Ended December 31, 2017 |
|  | Number of Shares |  |  | Weighted Average Exercise Price Per Share |
Shares under Option – January 1 |  |  | 2,323,581 |  |  | $ | 6.22 |
Options Granted |  |  | 244,750 |  |  |  | 5.60 |
Options Exercised |  |  | (333,305 | ) |  |  | 4.29 |
Options Forfeited or Expired |  |  | (374,815 | ) |  |  | 8.11 |
Shares under option – December 31 |  |  | 1,860,211 |  |  | $ | 5.06 |
Options Exercisable – December 31 |  |  | 1,649,594 |  |  | $ | 4.63 |
The following table represents additional information about stock options outstanding at December 31, 2018:
|  |  |  | Option Outstanding |  |  | Options Exercisable |
Range of Exercise Prices |  | Number of Outstanding Options – December 31, 2018 |  |  | Weighted- Average Remaining Contractual Life |  |  | Weighted- Average Exercise Price |  |  | Number of Options Exercisable at December 31, 2018 |  |  | Weighted- Average Exercise Price |
$3.22 | - | $3.99 |  |  | 346,148 |  |  |  | 2.56 |  |  |  | 3.79 |  |  |  | 346,148 |  |  | $ | 3.79 |
$4.00 | - | $5.99 |  |  | 451,023 |  |  |  | 4.72 |  |  |  | 4.94 |  |  |  | 217,979 |  |  |  | 4.72 |
$6.00 | - | $9.99 |  |  | 528,916 |  |  |  | 3.79 |  |  |  | 7.72 |  |  |  | 300,000 |  |  |  | 6.42 |
$10.00 | - | $15.00 |  |  | 250,000 |  |  |  | 2.00 |  |  |  | 11.00 |  |  |  | 200,000 |  |  |  | 10.00 |
$3.22 | - | $15.00 |  |  | 1,576,087 |  |  |  | 3.50 |  |  |  | 6.58 |  |  |  | 1,064,127 |  |  | $ | 5.89 |
The weighted average fair value of options granted during the years ended December 31, 2018 and 2017 was $4.22 and $2.47, 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, 2018 and 2017 was $1,722 and $588, respectively. Cash received from option exercises under our stock-based compensation plans for the years ended December 31, 2018 and 2017 was $1,568 and $1,429, respectively.
c. | Restricted Stock Awards
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. $11 of expense was recorded in 2017 relating to these awards. In September 2017, 12,900 shares of the awarded restricted stock vested and the Company repurchased 3,959 shares to satisfy the statutory tax withholding on shares vested for certain employees. Unrecognized compensation cost related to these restricted shares was $0 at December 31, 2018 and 2017. In January 2018, 17,500 shares of restricted stock were awarded to certain of our employees. These shares vest in equal annual installments over three years. The weighted average grant date fair value of these awards was $7.16 per share. $73 of expense was recorded in 2018 relating to these awards. Unrecognized compensation cost related to these restricted shares was $52 at December 31, 2018.
d. | Reserved Shares
There were 726,858 shares of common stock available for future issuance under equity compensation plans as of December 31, 2018.

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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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