Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Capital Stock, Stock Plans and Stock-based Compensation

v3.7.0.1
Note 4 - Capital Stock, Stock Plans and Stock-based Compensation
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
4.
Capital Stock, Stock Plans and Stock-Based Compensation
 
The Company has certain stock option plans under which it awards incentive and non-qualified stock options to employees, officers, and outside directors.
 
On
January 13, 2017,
the Company granted
6,000
non-qualified stock options (“NQSOs”) from the Company’s
2003
Outside Directors Stock Plan to a new director elected by the Company’s Board of Directors (“Board”) to fill the vacancy left by Mr. Jack Lahav who retired from the Board in
October 2016.
The options granted were for a contractual term of
ten
years with a vesting period of
six
months. The exercise price of the NQSO was
$3.79
per share, which was equal to our closing stock price the day preceding the grant date, pursuant to the
2003
Outside Directors Stock Plan.
 
On
May 15, 2016,
the Company granted
50,000
incentive stock options (“ISOs”) from the Company’s
2010
Stock Option Plan to our Executive Vice President (“EVP”)/Chief Operating Officer (“COO”). The ISOs granted were for a contractual term of
six
years with
one
-
third
yearly vesting over a
three
year period. The exercise price of the ISO was
$3.97
per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.
 
The summary of the Company’s total Stock Option Plans as of
June 30, 2017,
as compared to
June 30, 2016,
and changes during the periods then ended, are presented below. The Company’s Plans consist of the
2010
Stock Option Plan and the
2003
Outside Directors Stock Plan:
 
   
Shares
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining Contractual
Term
(years)
   
Aggregate
Intrinsic
Value
(2)
 
Options outstanding January 1, 2017
   
247,200
    $
6.69
     
 
     
 
 
Granted
   
6,000
     
3.79
     
 
     
 
 
Exercised                            
Forfeited/expired
   
(30,000
)    
5.00
     
 
     
 
 
Options outstanding end of period
(1)
   
223,200
    $
6.84
     
4.5
    $
13,080
 
Options exercisable at June 30, 2017
(1)
   
180,534
    $
7.51
     
4.3
    $
13,080
 
Options exercisable and expected to be vested at June 30, 2017
   
223,200
    $
6.84
     
4.5
    $
13,080
 
 
 
   
Shares
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining Contractual
Term
(years)
   
Aggregate
Intrinsic
Value
(2)
 
Options outstanding January 1, 2016
   
218,000
    $
7.65
     
 
     
 
 
Granted
   
50,000
     
3.79
     
 
     
 
 
Exercised
                           
Forfeited/expired
                           
Options outstanding end of period
(1)
   
268,000
    $
6.96
     
4.6
    $
134,102
 
Options exercisable at June 30, 2016
(1)
   
181,533
    $
8.18
     
4.4
    $
74,802
 
Options exercisable and expected to be vested at June 30, 2016
   
254,883
    $
7.10
     
4.6
    $
125,230
 
 
The Company estimates the 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.
 
   
Outside Director Stock Options Granted
 
   
January 13, 2017
 
Weighted-average fair value per option
  $
2.63
 
Risk -free interest rate
(1)
   
2.40%
 
Expected volatility of stock
(2)
   
56.32%
 
Dividend yield
   
None 
 
Expected option life (years) 
(3)
   
10.0
 
 
   
Employee Stock Option Granted
 
   
May 15, 2016
 
Weighted-average fair value per share
  $
2.00
 
Risk -free interest rate
(1)
   
1.27%
 
Expected volatility of stock
(2)
   
53.12%
 
Dividend yield
   
None
 
Expected option life (years)
(3)
   
6.0
 
 
 
(
1
)
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.
 
 
(
2
)
The expected volatility is based on historical volatility from our traded Common Stock over the expected term of the option.
 
 
(
3
)
The expected option life is based on historical exercises and post-vesting data.
 
The following table summarizes stock-based compensation recognized for the
three
and
six
months ended
June 30, 2017
and
2016
for our employee and director stock options.
 
   
Three Months Ended
   
Six Months Ended
 
Stock Options
 
June 30,
   
June 30,
 
   
2017
   
2016
   
2017
   
2016
 
Employee Stock Options
  $
11,000
    $
17,000
    $
21,000
    $
31,000
 
Director Stock Options
   
8,000
 
 
 
 
   
20,000
     
14,000
 
Total
  $
19,000
    $
17,000
    $
41,000
    $
45,000
 
 
As of
June 30, 2017,
the Company has approximately
$64,000
of total unrecognized compensation cost related to unvested options, of which
$18,000
is expected to be recognized in remaining
2017,
$33,000
in
2018,
with the remaining
$13,000
in
2019.
 
During the
six
months ended
June 30, 2017,
the Company issued a total of
28,964
shares of its common stock under the
2003
Outside Directors Stock Plan to its outside directors as compensation for serving on our Board. The Company has recorded approximately
$110,000
in compensation expenses for the
six
months ended
June 30, 2017 (
included in selling, general and administration expenses) in connection with the issuance of shares of its common stock to outside directors.