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SHAREHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2017

Stockholders' Equity Note [Abstract]

SHAREHOLDERS' EQUITY

8.	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. As discussed in Note 5, 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 1.0 million shares of common stock at a net price of $1.50 per share. Concurrently, the investors received warrants to purchase 1.0 million 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 Options

From time to time, the Company grants stock options under its incentive plan covering shares of common stock to employees of the Company. Stock options, when exercised, are settled through the payment of the exercise price in exchange for new shares of stock underlying the option. These awards typically expire ten years from the grant date.

During the nine months ended September 30, 2017, the Company granted its board of directors 60,000 options in aggregate at an exercise price of $0.72 per share with a 10-year term. The shares were immediately vested and are included in the stock-based compensation expense related to stock options for the nine months ended September 30, 2017 of $65,000 in comparison to $34,000 recorded for the comparable period in 2016. Management used a Black-Scholes valuation model to assess the stock-based compensation expense related to the options using the following input assumptions: 80% volatility rate, 2.34% risk free rate, and no associated dividend payments. The Company had $15,000 of unrecognized compensation expense related to non-vested stock options to be recognized through January 2018 as of September 30, 2017 and $80,000 of unrecognized compensation expense related to non-vested stock options as of September 30, 2016.

As of September 30, 2017, the Company had 279,687 stock options outstanding with exercise prices ranging from $0.72 to $30.24 with a weighted average exercise price of $10.76 and a remaining weighted-average period of 5.7 years. These shares include 274,132 shares which are exercisable as September 30, 2017 with a weighted average price of $10.79 per share.

Presented below is information about stock options outstanding and exercisable as of September 30, 2017 and December 31, 2016:

		September 30, 2017								December 31, 2016
		Shares				Price ⁽¹⁾				Shares				Price ⁽¹⁾

Stock options outstanding			279,687			$	10.76				390,525			$	20.64

Stock options exercisable			274,132			$	10.79				376,084			$	20.97

⁽¹⁾

Represents the weighted average price.

The following table summarizes information for stock options outstanding and exercisable at September 30, 2017:

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				7.3				51,231			$	9.00
	49,504				12.48				12.48				12.48				5.8				49,504				12.48
	98,396				15.01				15.01				15.01				2.1				98,396				15.01
	15,001				22.62				30.24				24.03				5.8				15,001				24.03
	60,000				0.72				0.72				0.72				9.9				60,000				0.72
	279,687			$	0.72			$	30.24			$	10.76				5.7				274,132			$	10.79

As of September 30, 2017, 1,151,000 shares are available for future grants under the Company’s stock option plans.

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 in connection with severance agreements for an aggregate of 240,711 shares. The remaining 100,000 shares vested for 33,333 shares in both January 2016 and January 2017 and the remaining shares will vest for 33,334 shares in January 2018. The fair market value of the 340,711 shares on the date of grant was approximately $511,000. As of September 30, 2017, there was $12,671 of unrecognized expense related to unvested restricted stock grants issued in January 2015, which will be recognized as stock-based compensation expense through January 2018.

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. In connection with the resignations of four members of the Company’s Board of Directors, the restricted stock grants were amended and the members of the Board of Directors subsequently agreed to accept 33,332 fully-vested shares each, in lieu of the 58,500 share grants for a total of 199,992 shares. The closing price of the Company’s common stock on the grant date was $1.05, resulting in an aggregate compensation charge of $209,000. As of September 30, 2017, the Company has accrued for the entire aggregate compensation charge over prior quarters and there was $0 of unrecognized expense related to the September 23, 2016 grants. For the nine months ended September 30, 2017 and 2016, total stock-based compensation expense related to restricted stock grants was $189,000 and $25,000 respectively.