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SHAREHOLDERS' EQUITY
 12 Months Ended
Dec. 31, 2015
Stockholders' Equity Note [Abstract]  
SHAREHOLDERS' EQUITY
11. SHAREHOLDERS’ EQUITY

 

Preferred Stock

 

The Company’s articles of incorporation authorize the issuance of up to 100,000 shares of preferred stock, $0.01 par value.  Shares of preferred stock may be issued with such dividend, liquidation, voting and conversion features as may be determined by the Board of Directors without shareholder approval.  The Company is authorized to issue 50,000 shares of Series P preferred stock in connection with a shareholder rights plan that expired in 2011.  As discussed in Note 6, in February 2016 the Board of Directors approved the designation of 50,000 shares of Series A Convertible Preferred Stock in connection with the disposition of the Company’s mining segment.

 

Stock Option Plans

 

Employee Stock Option Plans. In December 2001 the Board of Directors adopted, and the Company’s shareholders subsequently approved, the U.S. Energy Corp. 2001 Incentive Stock Option Plan (the "2001 ISOP"). The 2001 ISOP, as subsequently amended and approved by the Company’s shareholders, reserved for issuance 25% of the Company’s shares of common stock issued and outstanding at any time. The 2001 ISOP had a term of 10 years which expired in December 2011. Accordingly, no options may be granted under the 2001 ISOP; as of December 31, 2015, options for a total of 1,430,312 shares are outstanding under the 2001 ISOP and expire on various dates through September 2018.

 

In June 2012 the Board of Directors adopted, and the shareholders subsequently approved, the U.S. Energy Corp. 2012 Equity and Performance Incentive Plan (the “2012 Equity Plan”). The 2012 Equity Plan, as amended and approved by shareholders in June 2015, reserves for issuance to the Company’s employees and Directors a total of 3,200,000 shares of the Company’s common stock. The 2012 Equity Plan has a term of 10 years which expires in June 2022. As of December 31, 2015, options for a total of 734,044 shares are outstanding under the 2012 Equity Plan and expire on various dates through January 2025.

 

Director and Advisory Board Members Option Plan. In June 2008 the Board of Directors adopted, and the shareholders subsequently approved, the 2008 Stock Option Plan for U.S. Energy Corp. Independent Directors and Advisory Board Members (the "2008 Director SOP"). The 2008 Director SOP reserved for issuance 1.0% of the Company’s shares of common stock issued and outstanding at any time. The 2008 Director SOP had an original term of 10 years. However, as a result of shareholder approval in June 2015 of an amendment to the 2012 Equity Plan, no additional options may be granted under the 2008 Director SOP. As of December 31, 2015, options for a total of 178,666 shares are outstanding under the 2008 Director SOP and expire on various dates through September 2024.

 

A summary of the combined activity in the 2001 ISOP, the 2012 Equity Plan, and the 2008 Director SOP for the years ended December 31, 2015, 2014 and 2013 is as follows:

 

    2015     2014     2013  
    Shares     Price (1)     Shares     Price (1)     Shares     Price (1)  
                                     
Outstanding, beginning of year     2,276,079     $ 3.78       2,646,949     $ 3.56       2,409,282     $ 3.75  
Granted     340,711       1.50       60,000       3.77       306,000       2.08  
Forfeited     -       -       (3,333 )     2.08       -       -  
Expired     (273,768 )     3.86               -       (68,333 )     3.46  
Exercised     -       -       (427,537 )     2.46       -       -  
                                                 
Outstanding, end of year     2,343,022     $ 3.44       2,276,079     $ 3.78       2,646,949     $ 3.56  
                                                 
Exercisable, end of year     2,194,022     $ 3.53       2,031,413     $ 3.92       2,194,287     $ 3.84  

 

  (1) Represents the weighted average price.

 

No stock options were exercised during the years ended December 31, 2015 and 2013. During the year ended December 31, 2014, a total of 427,537 stock options were exercised through the payment of nominal cash consideration and the surrender of 257,253 shares valued at $1,106. The aggregate intrinsic value of options exercised in 2014 was $788.

 

The following table summarizes information for stock options outstanding and for stock options exercisable at December 31, 2015:

 

Options Outstanding     Options Exercisable  
Number     Exercise Price     Remaining     Number     Weighted  
of     Range     Weighted     Contractual     of     Average  
Shares     Low     High     Average     Term (years)     Shares     Exercise Price  
                                       
  340,711     $ 1.50     $ 1.50     $ 1.50       9.0       240,711     $ 1.50  
  297,000       2.08       2.08       2.08       7.5       288,000       2.08  
  590,311       2.32       2.52       2.50       3.8       590,311       2.50  
  1,115,000       3.77       4.97       4.89       2.1       1,075,000       4.93  
                                                     
  2,343,022     $ 1.50     $ 4.97     $ 3.44       4.2       2,194,022     $ 3.53  

 

The following table sets forth the number of options available for grant as well as the intrinsic value of the options outstanding and exercisable as of December 31, 2015, 2014 and 2013:

 

    2015     2014     2013  
                   
Shares available for future grants     2,108,578       790,000       790,000  
                         
Aggregate intrinsic value for options:                        
Outstanding   $ -     $ -     $ 1,661  
Exercisable   $ -     $ -     $ 1,073  

 

In connection with severance agreements entered into with employees during 2015, an aggregate of 1,617,689 outstanding stock options would have expired upon termination of employment. However, the Company agreed to permit exercise until the original expiration dates specified in the option agreements. Accordingly, the Company determined the fair value of the options at the date of modification and recorded additional compensation expense which amounted to an aggregate of $109.

 

For the years ended December 31, 2015, 2014 and 2013, total stock-based compensation expense associated with stock options, including the modification charge discussed above, was $948, $318 and $184, respectively. As of December 31, 2015, there was $141 of unrecognized expense related to unvested stock options, which will be recognized as stock-based compensation expense through January 2018. The weighted average fair value per share for options granted for the years ended December 31, 2015, 2014 and 2013 was $0.88, $2.27 and $1.20, respectively. In estimating the fair value of options, the Company used the Black-Scholes option-pricing model with the following weighted average assumptions:

 

    2015     2014     2013  
                   
Expected lives (in years)     6.0       6.0       6.0  
Risk-free interest rate     1.77 %     2.06 %     1.66 %
Expected volatility     63.36 %     65.45 %     62.59 %
Expected dividend yield     0.00 %     0.00 %     0.00 %

 

Restricted Stock Grants. In January 2015, the Board of Directors granted 340,711 shares of restricted stock under the 2012 Equity Plan to four officers of the Company. These shares originally vested annually over a period of three years. However, during 2015 vesting was accelerated for three of the four officers as a condition of severance agreements. Accordingly, 240,711 shares vested in 2015 and the officers elected to surrender an aggregate of 88,637 shares in exchange for the Company’s agreement to fund their payroll tax liabilities associated with the fair value of the shares on the dates of vesting.

 

As of December 31, 2015, the remaining 100,000 shares will vest for one-third of the shares beginning in January 2016 and annually thereafter until the shares are fully vested in January 2018. The fair market value of the 340,711 shares on the date of grant was approximately $511; through December 31, 2015 the Company had recognized $411 of stock-based compensation expense related to these restricted stock grants.

 

Employee Stock Ownership Plan

 

The Board of Directors of the Company adopted the U.S. Energy Corp. 1989 Employee Stock Ownership Plan ("ESOP") in 1989, for the benefit of all the Company’s employees. Employees become eligible to participate in the ESOP after one year of service which must consist of at least 1,000 hours worked. Employees become 20% vested after three years of service and increase their vesting by 20% each year thereafter until such time as they are fully vested after seven years of service.

 

An employee’s total compensation paid, which is subject to federal income tax, (up to an annual limit of $265, $260 and $255 for the years ended December 31, 2015, 2014 and 2013, respectively) is the basis for computing how much of the total annual funding is contributed into each employee’s personal account. An employee’s compensation divided by the total eligible compensation paid to all plan participants is the percentage that each participant receives on an annual basis. For the years ended December 31, 2014 and 2013, the Company funded 10% of all eligible compensation through the issuance of shares of the Company’s common stock. As of December 31, 2015, all shares of the Company’s common stock contributed to the ESOP have been allocated to specific employees and are vested. Total shares held by the ESOP at December 31, 2015, 2014, and 2013 were 789,110, 949,870, and 877,399, respectively.

 

For the year ended December 31, 2015, the Company’s Board of Directors approved a mandatory contribution of $171 which is either payable in cash or settled through the issuance of common stock at the election of the Company. Accordingly, this amount is included in accrued compensation and benefits in the accompanying balance sheet as of December 31, 2015. The Company’s Board of Directors approved a contribution of 141,721 shares to the ESOP at a price per share of $1.48 for a total expense of $209 for the year ended December 31, 2014. The Board of Directors approved a contribution of 53,276 shares to the ESOP at a price per share of $3.76 for a total expense of $200 for the year ended December 31, 2013. For the year ended December 31, 2015 the ESOP expense is included in compensation and benefits in the statement of operations since the Company may settle it with cash. For the years ended December 31, 2014 and 2013 the ESOP expense in included in stock-based compensation.