12. Stock and Stock Options

In October 2000, the Company approved a Stock Incentive Plan which was effective for a ten-year period commencing on October 25, 2000 and ending on October 24, 2010. The aggregate number of shares of Common Stock as to which options and Stock Appreciation Rights may be granted to participants under the original Plan was not to exceed 7,000,000. An amendment to the Plan increasing the number of shares that may be issued under the Plan by 3,500,000 shares and extending the Plan for another ten years was approved by the Company’s Board of Directors on February 1, 2008 and approved by the Company’s shareholders at the Annual Meeting of Stockholders held on June 2, 2008. On March 21, 2016 at a special meeting of the shareholders, the Plan was amended to permit grant of common stock. Options are not transferable, are exercisable for 3 months after voluntary resignation from the Company, and terminate immediately upon involuntary termination from the Company. The purchase price of shares subject to this Plan shall be determined at the time the options are granted, but are not permitted to be less than 85% of the fair market value of such shares on the date of grant.

On March 21, 2016, the Company’s shareholders approved a 1 for 10 reverse stock split, effective with trading on March 24, 2016. All share and per share information in the following tables has been adjusted to reflect the impact of this reverse stock split.

The following table summarizes stock option activity in 2016, 2015, and 2014:



	2016			2015			2014
		Weighted			Weighted			Weighted
		Average			Average			Average
		Exercise			Exercise			Exercise
	Shares	Price		Shares	Price		Shares	Price
Outstanding, beginning of year	45,625	$	6.10	90,025	$	5.70	87,025	$	5.90
Granted	2,500	$	1.20	10,000	$	2.40	10,000	$	4.40
Exercised	—	$	—	—	$	—	—	$	—
Expired/cancelled	(10,625)	$	9.88	(54,400)	$	4.80	(7,000)	$	6.30
Outstanding, end of year	37,500	$	4.70	45,625	$	6.10	90,025	$	5.70
Exercisable, end of year	37,500	$	4.70	45,625	$	6.10	90,025	$	5.70

The following table summarizes information about stock options outstanding and exercisable at December 31, 2016:



Weighted Average Exercise Price		Options Outstanding (shares)	Weighted Average Remaining Contractual Life (years)	Options Exercisable (shares)
$	7.50	1,875	—	1,875
$	10.70	1,875	0.3	1,875
$	8.10	1,875	0.5	1,875
$	7.30	1,875	0.8	1,875
$	6.40	1,875	1.0	1,875
$	6.20	1,875	1.2	1,875
$	4.80	1,875	1.5	1,875
$	4.10	1,875	1.8	1,875
$	4.10	2,500	2.0	2,500
$	4.80	2,500	2.2	2,500
$	4.40	2,500	2.5	2,500
$	4.40	2,500	2.8	2,500
$	2.50	2,500	3.0	2,500
$	2.30	2,500	3.2	2,500
$	2.70	2,500	3.5	2,500
$	2.20	2,500	3.8	2,500
$	1.20	2,500	4.0	2,500
		37,500		37,500

During 2016, the Company issued the following options to each of the four non-executive directors that remain outstanding as of December 31, 2016. These options vested upon grant date.



Options Issued to
Each Non-executive	Total Options Issued to
Director	Non-executive Directors	Exercise Price		Grant Date	Expiration Date
625	2,500	$	1.20	1/4/2016	1/3/2021

The weighted average fair value per share of options granted in 2016 was $1.01 and 2015 was $2.40 calculated using the Black Scholes option pricing model.

Compensation expense related to stock options was $3,000 in 2016, $12,000 in 2015 and $32,000 in 2014. This expense is recorded in “General and administrative” in the Consolidated Statements of Operations. The fair value of stock options used to compute share based compensation is the estimated present value at grant date using the Black Scholes option pricing model with weighted average assumptions for 2016 were an expected volatility of 122.7%; a risk free interest rate of 2.67%; and an expected option life remaining from 0.3 to 4.8 years. The weighted average assumptions for 2015 were an expected volatility of 61.7%; a risk free interest rate of 2.53%; and an expected option life remaining from 0.3 to 4.8 years. The weighted average assumptions for 2014 were an expected volatility of 53.3%; a risk free interest rate of 3.27%; and an expected option life remaining from 0.1 to 4.8 years.

In addition, during 2016, the Company issued 12,641 shares of common stock to the Directors and to the CEO. The shares issued to Directors was in lieu of stock options. The shares issued to the CEO was in lieu of a portion of the quarter cash payment paid for service as the Company’s CEO. The company recorded compensation expense of $14,000 as a result of the stock issuances.