Note 5 - Capital Stock, Stock Plans, Warrants, and Stock Based Compensation
|12 Months Ended|
Dec. 31, 2015
|Notes to Financial Statements|
|Disclosure of Compensation Related Costs, Share-based Payments [Text Block]||
CAPITAL STOCK, STOCK PLANS, WARRANTS, AND STOCK BASED COMPENSATION
Stock Option Plans
The Company adopted the 2003 Outside Directors Stock Plan (the “2003 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on July 29, 2003. Options granted under the 2003 Plan generally have a vesting period of six months from the date of grant and a term of 10 years, with an exercise price equal to the closing trade price on the date prior to grant date. The 2003 Plan also provides for the issuance to each outside director a number of shares of Common Stock in lieu of 65% or 100% (based on option elected by each director) of the fee payable to the eligible director for services rendered as a member of the Board of Directors (“Board”). The number of shares issued is determined at 75% of the market value as defined in the plan. The 2003 Plan, as amended, also provides for the grant of an option to purchase up to 6,000 shares of Common Stock for each outside director upon initial election to the Board, and the grant of an option to purchase 2,400 shares of Common Stock upon each re-election. The number of shares of the Company’s Common Stock authorized under the 2003 Plan is 800,000, pursuant to the 2003 Plan, as amended.
Effective July 28, 2004, the Company adopted the 2004 Stock Option Plan ( the “2004 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on such date. The 2004 Plan provided for the grants of options to selected officers and employees, including any employee who was also a member of the Board of the Company. A maximum of 400,000 shares of our Common Stock were authorized for issuance under this plan in the form of either Incentive Stock Options (“ISO”) or Non-Qualified Stock Options (“NQSOs”). The options granted under the 2004 Plan were exercisable for a period of up to 10 years from the date of grant at an exercise price of not less than market price of the Common Stock at grant date. On July 28, 2014, the 2004 Plan expired. The last options issued under the 2004 Plan prior to the expiration date of the Plan expired on February 26, 2015.
On April 28, 2010, the Company adopted the
2010 Stock Option Plan (“2010 Plan”), which was approved by our stockholders at the Company’s Annual Meeting of Stockholders on September 29, 2010. The 2010 Plan authorizes an aggregate grant of 200,000 NQSOs and ISOs to officers and employees of the Company for the purchase of up to 200,000 shares of the Company’s Common Stock. The term of each stock option granted will be fixed by the Compensation and Stock Option Committee (“Compensation Committee”), but no stock options will be exercisable more than ten years after the grant date, or in the case of an incentive stock option granted to a 10% stockholder, five years after the grant date. The exercise price of any ISO granted under the 2010 Plan to an individual who is not a 10% stockholder at the time of the grant will not be less than the fair market value of the shares at the time of the grant, and the exercise price of any incentive stock option granted to a 10% stockholder shall not be less than 110% of the fair market value at the time of grant. The exercise price of any NQSOs granted under the plan will not be less than the fair market value of the shares at the time of grant.
No employees exercised options during 2015 and 2014. During 2015, the Company issued a total of 3,423 shares of our Common Stock upon exercise of 3,423 NQSOs by an outside director from the 2003 Plan, at an exercise price of $2.79 per share which resulted in total proceeds of approximately $9,600. During 2014, the Company issued a total of 2,577 shares of our Common Stock upon exercise of 2,577 NQSOs by an outside director from the 2003 Plan, at exercise price of $2.79 per share which resulted in total proceeds of approximately $7,200.
The summary of the Company’s total Plans as of December 31, 2015 and 2014, and changes during the period then ended are presented as follows:
The summary of the Company’s nonvested options as of December 31, 2015 and changes during the period then ended are presented as follows:
Capital Stock Issued for Services
The Company issued a total of 71,324 and 67,335 shares of our Common Stock in 2015 and 2014, respectively, under our 2003 Plan to our outside directors as compensation for serving on our Board. As a member of the Board, each director elects to receive either 65% or 100% of the director’s fee in shares of our Common Stock. The number of shares received is calculated based on 75% of the fair market value of our Common Stock determined on the business day immediately preceding the date that the quarterly fee is due. The balance of each director’s fee, if any, is payable in cash. The Company recorded approximately $269,000 and $273,000 in compensation expense for the twelve months ended December 31, 2015 and 2014, respectively, for the portion of director fees earned in the Company’s Common Stock.
Preferred Share Rights Plan
In May 2008, the Company adopted a preferred share rights plan (the “Rights Plan”), designed to ensure that all of our stockholders receive fair and equal treatment in the event of a proposed takeover or abusive tender offer.
In general, under the terms of the Rights Plan, subject to certain limited exceptions, if a person or group acquires 20% or more of our Common Stock or a tender offer or exchange offer for 20% or more of our Common Stock is announced or commenced, our other stockholders may receive upon exercise of the rights (the “Rights”) issued under the Rights Plan the number of shares our Common Stock or of one-one hundredths of a share of our Series A Junior Participating Preferred Stock, par value $.001 per share, having a value equal to two times the purchase price of the Right. In addition, if the Company is acquired in a merger or other business combination transaction in which we are not the survivor or more than 50% of our assets or earning power is sold or transferred, then each holder of a Right (other than the acquirer) will thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the purchase price of the Right. The initial purchase price of each Right was $13.00, subject to adjustment as defined in plan.
The Rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors. The Rights may be redeemed by us at $0.001 per Right at any time before any person or group acquires 20% or more of our outstanding Common Stock. The Rights expire on May 2, 2018.
and Capital Stock Issuance for Debt
As of December 31, 2015, the Company has two Warrants outstanding which provide for the purchase of up to an aggregate of 70,000 shares of the Company’s Common Stock at $2.23 per share. The two Warrants were issued on August 2, 2013, as consideration for a $3,000,000 loan received by the Company from Messrs. William N. Lampson and Robert L. Ferguson (the “Lenders”). Each Warrant provides for the Lender to purchase up to 35,000 shares of the Company’s Common Stock at an exercise price of $2.23 per share. The Warrants are exercisable six months from August 2, 2013 and expire on August 2, 2016. These Warrants are still outstanding at December 31, 2015. The Company also issued 90,000 shares of the Company’s Common Stock to the Lenders. See Note 9 – “Long-Term Debt – Promissory Note and Installment Agreement” for further information and accounting treatment of the Warrants and Common Stock.
At December 31, 2015, the Company has reserved approximately 288,200 shares of Common Stock for future issuance under all of the option and warrant arrangements.
Stock Based Compensation
As discussed above, the Company has certain stock option plans which it awards NQSOs and ISOs to employees, officers, and outside directors. Stock options granted to employees generally have a six year contractual term with one-third yearly vesting over a three year period. Stock options granted to outside directors generally have a ten year contractual term with vesting period of six months.
On September 17, 2015, the Company granted an aggregate of 12,000 NQSOs from the Company’s 2003 Plan to five of the seven re-elected directors at our Annual Meeting of Stockholders held on September 17, 2015. Two of the directors are not eligible to receive options under the 2003 Plan as they are employees of the Company or its subsidiaries. Dr. Centofanti is the Company’s Chief Executive Officer (“CEO”) and Mr. John Climaco is an Executive Vice President (“EVP”) of PF Medical (effective June 2, 2015), the Company’s majority-owned Polish subsidiary. The NQSOs granted were for a contractual term of ten years with a vesting period of six months. The exercise price of the NQSOs was $4.19 per share, which was equal to the Company’s closing stock price the day preceding the grant date, pursuant to the 2003 Plan.
The Company estimates fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield. The fair value of the options granted during 2015 and 2014 and the related assumptions used in the Black-Scholes option model used to value the options granted were as follows (No options were granted to employees during 2015):
The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date over the expected term of the option.
The expected volatility is based on historical volatility from our traded Common Stock over the expected term of the option.
)The expected option life is based on historical exercises and post-vesting data.
The following table summarizes stock-based compensation recognized for the fiscal year 2015 and 2014.
The Company recognizes stock-based compensation expense using a straight-line amortization method over the requisite service period, which is the vesting period of the stock option grant. ASC 718, “Compensation – Stock Compensation” requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has generally estimated forfeiture rates based on historical trends of actual forfeitures. When actual forfeitures vary from our estimates, the Company recognizes the difference in compensation expense in the period the actual forfeitures occur or when options vest. The total stock-based compensation expense for the twelve months ended December 31, 2014 included a reduction in expense of approximately $54,000 resulting from the forfeiture of options by Mr. Jim Blankenhorn, our previous Chief Operating Officer (“COO”), who voluntarily resigned from the Company effective March 28, 2014. The COO was granted an option from the Company’s 2010 Plan on July 25, 2011, to purchase up to 60,000 shares of the Company’s Common Stock at $7.85 per share. The options had a six year contractual term with one-third yearly vesting over a three year period.
As of December 31, 2015, the Company has approximately $86,000 of total unrecognized compensation cost related to unvested options, of which $67,000 is expected to be recognized in 2016, with the remaining $19,000 in 2017.
The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.
Reference 1: http://www.xbrl.org/2003/role/presentationRef