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SHAREHOLDERS' EQUITY
 12 Months Ended
Dec. 31, 2016
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. 

Warrants

On December 21, 2016, the Company completed a registered direct offering of 1,000,000 shares of common stock at a net price of $1.50 per share. Concurrently, the investors received warrants to purchase 1,000,000 shares of Common Stock of the Company at an exercise price of $2.05 per share, subject to adjustment, for a period of five years from closing. The total net proceeds received by the Company was approximately $1.32 million. The fair value of the warrants upon issuance was $1.24 million, with the remaining $0.08 million being attributed to common stock. The warrants contain a dilutive issuance and other liability provisions which cause the warrants to be accounted for as a liability. Such warrant instruments are initially recorded as a liability and are accounted for at fair value with changes in fair value reported in earnings.

 

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, 2016, options for a total of 360,746 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, 2016, options for a total of 390,525  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, 2016, options for a total of 29,779 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, 2016, 2015 and 2014 is as follows: 

 

    2016     2015     2014  
    Shares     Price (1)     Shares     Price (1)     Shares     Price (1)  
                                     
Outstanding, beginning of year     390,525     $ 20.64       2,276,079     $ 3.78       2,646,949     $ 3.56  
Granted     -       -       340,711       1.50       60,000       3.77  
Forfeited     -       -       -       -       (3,333 )      2.08  
Expired     -       -       (273,768 )      3.86       -        -  
Exercised     -       -       -       -       (427,537 )      2.46  
                                                 
Outstanding, end of year     390,525      $ 20.64       2,343,022     $ 3.44       2,276,079     $ 3.78  
Shares restated after 6 to 1 split     390,525     $ 20.64       390,525     $ 20.64       379,347     $ 22.69  
                                                 
Exercisable, end of year     2,194,022     $ 3.53       2,194,022     $ 3.53       2,031,413     $ 3.92  
Shares restated after 6 to 1 split     376,084     $ 20.97       365,693     $ 21.17       338,569     $ 22.75  

  

  (1) Represents the weighted average price.

 

No stock options were exercised during the years ended December 31, 2016 and 2015. 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, 2016:

 

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  
                                       
  56,786     $ 9.00     $ 9.00     $ 9.00       8.0       45,675     $ 9.00  
  49,504       12.48       12.48       12.48       6.5       49,504       12.48  
  98,396       13.92       17.10       15.01       2.8       98,396       15.01  
  185,839       22.62       30.24       29.35       1.0       182,509       29.48   
                                                     
  390,525     $ 9.00     $ 30.24     $ 20.64       3.2       376,084     $ 20.97  

 

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, 2016, 2015 and 2014: 

 

    2016     2015     2014  
                   
Shares available for future grants     -       2,108,578       790,000  
 Shares restated after 6 to 1 split     -        351,430        131,667   
Aggregate intrinsic value for options:                        
Outstanding     -       -       -  
Exercisable   $ -     $ -     $ -  

 

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.

 

As of December 31, 2016, no shares are available for future grants under the Company’s stock option plans. Based upon the closing price for the Company’s common stock of $1.28 per share on December 30, 2016, there was no intrinsic value related to stock options outstanding as of December 31, 2016.

 

For the years ended December 31, 2016, 2015 and 2014, total stock-based compensation expense associated with stock options, including the modification charge discussed above, was $213, $948 and $318, respectively. As of December 31, 2016, there was $80 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 and 2014 was $0.88 and $2.27, respectively, and no options were granted in 2016. In estimating the fair value of options, the Company used the Black-Scholes option-pricing model with the following weighted average assumptions:

 

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

 

On September 23, 2016, the Board of Directors granted restricted stock to each member of the Board for 58,500 shares per Board member for an aggregate grant of 351,000 shares. Such shares vest for 50% of the shares on September 23, 2017 and the remaining 50% of the shares vest on September 23, 2018. The closing price of the Company’s common stock on the grant date was $1.74, which will result in an aggregate compensation charge of $611 over the two-year vesting period.

 

The 351,000 shares of restricted common stock were granted pursuant to the Company’s 2012 Equity Plan, which provides that each grant constitutes an immediate transfer of ownership that entitles the Board members to voting, dividend and other ownership rights. However, the shares of restricted stock are subject to a substantial risk of forfeiture until vesting occurs. Prior to vesting, the shares are not permitted to be sold or transferred and the directors do not maintain physical custody of the shares.

 

 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.

 

On an annual basis, the Company historically contributed shares of its common stock to the ESOP with an aggregate fair value equal to 10% of compensation for employees that were eligible to participate. Employees were not eligible for ESOP contributions to the extent that their annual taxable compensation exceeded $265 for 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 as of September 30, 2016 and December 31, 2015 were 90,112 and 131,518, respectively. In September 2016, the Company’s Board of Directors agreed to terminate the ESOP, which is expected to result in a distribution of the remaining shares held by the ESOP to the vested employees during the first quarter of 2017.

 

For the year ended December 31, 2016, total stock-based compensation expense related to the ESOP was $23. No expense related to the ESOP has been recorded since June 30, 2016 since the Company’s Board of Directors has not determined if a discretionary contribution will be made for 2016. On July 7, 2016, the Board of Directors elected to issue 68,128 shares of the Company’s common stock with a fair value of $2.49 per share to settle this obligation.