Stockholders' Equity

12 Months Ended

Dec. 31, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Note 7. Stockholders’ Equity

Common Stock

The total number of shares of common stock, $0.001 par value, that the Company is authorized to issue is 250,000,000.

Preferred Stock

The Company’s board of directors (the “Board”) may, without further action by the stockholders, issue a series of preferred stock and fix the rights and preferences of those shares, including the dividend rights, dividend rates, conversion rights, exchange rights, voting rights, terms of redemption, redemption price or prices, liquidation preferences, the number of shares constituting any series and the designation of such series. As of December 31, 2016, no shares of preferred stock have been issued.

Stock Splits

On October 7, 2015, the Company executed a 1-for-100 reverse stock split of its common stock, followed by a 10-for-1 forward stock split of its common stock. The stock split was approved at the Company’s 2015 Annual Meeting of Stockholders held on May 20, 2015.

At the effective time of the reverse stock split, every 100 shares of the Company’s issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock, with no change in par value per share. Holders with less than 100 shares of common stock had their shares repurchased and retired by the Company in the reverse stock split and received cash in lieu of such shares. After the reverse stock split, the Company effected a forward stock split pursuant to which stockholders received 10 shares of common stock for each share of common stock held. No fractional shares were issued in connection with the forward stock split. Stockholders who would otherwise be entitled to receive a fractional share received a cash payment in lieu thereof at a rate of $1.425 per fractional pre-split share. The Company paid $0.2 million for fractional shares from holders with less than 100 shares upon the initial 1-for-100 reverse stock split. For stockholders owning greater than 100 shares prior to the reverse stock split, the net effective ratio was a 1-for-10 reverse split. The number of shares of common stock underlying the Company’s options, warrants, or other rights to acquire shares of common stock were adjusted accordingly. As a result, each stockholder’s percentage ownership interest and proportional voting power remains substantially unchanged and the rights and privileges of the holders of the Company’s common stock are substantially unaffected.

Stock Compensation Plans

The Company’s 1999 Stock Incentive Plan (the “1999 Stock Incentive Plan”), as successor to the 1997 Stock Option Plan (the “1997 Stock Option Plan”), provided for options to purchase shares of the Company’s common stock to be granted to employees, independent contractors, officers, and directors. The plan expired in July 2009. As a result of the termination of all employees on December 31, 2009, the stock options held by employees were cancelled on March 31, 2010.  No options remain outstanding under the 1999 Stock Incentive Plan.

The Company’s 2010 Stock Incentive Plan (the “2010 Stock Incentive Plan”) provides for options, restricted stock, and other customary forms of equity to be granted to the Company’s directors, officers, employees, and independent contractors. All forms of equity incentive compensation are granted at the discretion of the Board and have a term not greater than 10 years from the date of grant.

J. Brett Pope resigned as the Company’s Chief Executive Officer and a member of the Board effective January 12, 2016. Under the terms of Mr. Pope’s severance agreement, the Company approved the cashless exercise of 18,750 vested stock options and the remaining 156,250 unvested stock options were forfeited. Of the 18,750 vested stock options, 14,751 options were surrendered to the Company to pay the exercise price, resulting in a net issuance of 3,999. The surrendered shares were immediately canceled by the Company.

The following table summarizes activities under the option plans for the indicated periods:

	Options Outstanding
	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Balances, December 31, 2014		367,000		$	12.00		8.3		1,109.0
Options cancelled and retired		—			—
Options exercised		(3,000	)		8.86
Options granted		—			—
Balances, December 31, 2015		364,000			12.05		7.4		420.0
Options cancelled and retired		(170,250	)		12.67
Options exercised		(18,750	)		8.30
Options granted		15,000			9.61
Balances, December 31, 2016		190,000			11.25		6.9		169.4
Options vested and exercisable and expected to be vested and exercisable at December 31, 2016		190,000		$	11.25		6.9		169.4
Options vested and exercisable at December 31, 2016		43,750		$	11.39		6.7		39.4

At December 31, 2016, the 1999 Stock Incentive Plan had expired, and the Company had no unrecognized stock-based compensation expense under this Plan.  At December 31, 2016, there were 0.3 million shares reserved for equity awards under the 2010 Stock Incentive Plan, and the Company had $0.2 million of total unrecognized stock option expense, net of estimated forfeitures, which will be recognized over the weighted average remaining period of 2 years.

The following table summarizes significant ranges of outstanding and exercisable options as of December 31, 2016:

Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (in Years)		Weighted Average Exercise Price Per Share		Number Exercisable		Weighted Average Exercise Price Per  Share
	8.30		75,000		5.4		8.30		18,750		8.30
	13.70		100,000		7.6		13.70		25,000		13.70
	9.61		15,000		9.5		9.61		—		—
	Total		190,000		6.9		11.25		43,750	$	11.39

Employee stock-based compensation expense recognized for time-vesting options for the years ended December 31, 2016, and 2015, uses the Black-Scholes option pricing model for estimating the fair value of options granted under the Company’s equity incentive plans. Risk-free interest rates for the options were taken from the Daily Federal Yield Curve Rates on the grant dates for the expected life of the options as published by the Federal Reserve. The expected volatility was based upon historical data and other relevant factors such as the Company’s changes in historical volatility and its capital structure, in addition to mean reversion. Employee stock-based compensation expense recognized for market performance-vesting options uses a binomial lattice model for estimating the fair value of options granted under the Company’s equity incentive plans.

In calculating the expected life of stock options, the Company determines the amount of time from grant date to exercise date for exercised options and adjusts this number for the expected time to exercise for unexercised options. The expected time to exercise for unexercised options is calculated from grant as the midpoint between the expiration date of the option and the later of the measurement date or the vesting date. In developing the expected life assumption, all amounts of time are weighted by the number of underlying options.

As of December 31, 2016, the Company had 112,500 shares of restricted stock outstanding with a weighted-average grant date fair value of $3.10. During the years ended December 2016 and 2015, no restricted shares were canceled, forfeited, granted, or vested. The Company has not recognized any expense related to restricted stock for the years ended December 31, 2016 and 2015.

The restricted shares included in the Company’s shares outstanding as of December 31, 2016 and 2015, respectively, but are not included in the computation of basic income per share as the shares are not yet earned by the recipients. The Company had no unrecognized stock-based compensation expense, net of estimated forfeitures, related to restricted shares as of December 31, 2016.

In October 2015, the Board approved a change in the compensation plan for non-employee directors such that each non-employee director shall receive an annual cash retainer of $45 thousand and an annual grant of 1,000 shares of the Company’s common stock, both payable quarterly in arrears. In addition, each member of (i) the Audit Committee shall receive an additional fee of $10 thousand payable quarterly in arrears; (ii) the Compensation Committee shall receive an additional fee of $1,000 payable quarterly in arrears and (iii) the Governance Committee shall receive an additional fee of $2,000 payable quarterly in arrears. Each non-employee director has the option to elect to receive up to 100 percent of the annual cash retainer in shares of the Company’s common stock.

During the year ended December 31, 2015, the Board approved the following grants as compensation for Board services: (i) a grant of 3,366 shares of common stock as the pro-rated director compensation for the non-employee director appointed on September 6, 2014; (ii) a grant of 3,000 shares to each non-employee director for services as a director for the period January 1, 2015 to December 31, 2015; and (iii) a grant of 15,611 shares of common stock in lieu of cash payments to the non-employee directors upon the voluntary election of such directors.

During the year ended December 31, 2016, the Board approved compensation for Board services by granting 24,384 shares of common stock as compensation for the non-employee directors. During the year ended December 31, 2016 the Company recorded approximately $246 thousand in board compensation expense relating to the quarterly grants. The aggregate stock-based compensation expense, including the board quarterly grants, recognized by the Company for the years ended December 31, 2016 and 2015 was $0.4 million and $0.6 million, respectively.

Non-controlling Interests

As discussed in Note 4, SWK HP has a limited partnership interest in Holmdel. The total investment by SWK HP was $13.0 million, of which SWK Holdings GP provided $6.0 million.  The remaining $7.0 million is reflected as non-controlling interest in the consolidated balance sheets and the consolidated statements of stockholders’ equity. Changes in the carrying amount of the non-controlling interest in the consolidated balance sheet for the year ended December 31, 2016, is as follows (in thousands):

Balance at December 31, 2015	$	4,299
Add: Income attributable to non-controlling interests		3,153
Less: Cash distribution to non-controlling interests		(3,696	)
Balance at December 31, 2016	$	3,756