STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2016

Stockholders' Equity Note [Abstract]

STOCKHOLDERS’ EQUITY

12. STOCKHOLDERS’ EQUITY

Common Stock Dividend Restrictions

As of December 31, 2016, there are no restrictions on common stock dividends. Also, at December 31, 2016 and 2015, retained earnings were not restricted upon involuntary liquidation.

Common Stock Issuances (dollars in thousands)

								Grant date
								fair value
Date of	Type of	Expense/ Prepaid/	Stock issuance		Total no. of			recorded at
issuance	issuance	Cash	recipient	Reason for issuance	shares			issuance
January, April, July and October 2016	Vested restricted common stock	Expensed	Five board members	Director compensation		46,854		$	267	(1)
January and July 2016	Vested restricted common stock	Expensed	Four Employees	Approved bonuses		56,782			381	(2)
January, March, September, and December 2016	Common stock	Expensed	Related party, James McKenzie	Pursuant to royalty agreement		6,275			38
February and April 2016	Common stock	Expensed	Three Employees	Cashless stock option exercise		718			—	(3)
Total 2016 issuances						110,629		$	686	(4)
January, June, August, November 2015	Vested restricted common stock	Expensed	Directors	Director compensation		12,228		$	77
January 2015	Vested restricted common stock	Expensed	New Director of Sales and Marketing - Orbital Gas Systems, North America	Sign-on bonus		17,655			125
March 2015	Vested restricted common stock	$31 thousand included in Prepaid expense and $32 thousand expensed as of December 31, 2015	Consultant	Compensation for strategic investor marketing services		10,000			63
April, August 2015	Common stock	Expensed	Former employee and employee	Cashless stock option exercise		122			—	(3)
May, June, July 2015	Vested restricted common stock	Expensed	Employee	Approved bonus		14,404			72
July 2015	Common stock	Expensed	Related parties, James McKenzie, and IED, Inc.	Pursuant to royalty agreement		4,070			22
Total 2015 issuances						58,479		$	359	(5)
January, February, March, April and November 2014	Common stock	Expensed	Three employees, one officer and one former director	Cashless stock option exercise		31,850		$	—	(3)
February, March, August and December 2014	Common stock	Expensed	Four consultants including former board member	Consideration for services		131,365	(6)		932
March and December 2014	Common stock	Expensed	Related party, James McKenzie	Pursuant to royalty agreement		4,555			31
June 2014	Common stock	Expensed	Related party, Director at Orbital	Bonus		5,624			50
August 2014	Common stock	Expensed	3 Directors	Director compensation		6,435			48
December 2014	Common stock	Expensed	Director	Director compensation		1,248			10
Total 2014 issuances						181,077		$	1,071

(1) Includes $38 thousand of stock-based expense related to 2015 director fees accrued and expensed in the fourth quarter of 2015.

(2) Bonuses of $366 thousand were accrued and expensed in the fourth quarter of 2015

(3) The Company received $0 for the issuance in the cashless option exercise.

(4) Does not include stock expense of $176 thousand included in accrued liabilities at December 31, 2016.

(5) There was $404 thousand of stock-based expense related to employee stock-based bonuses and vested restricted stock units held by a Director that were earned in 2015 but not issued until the first quarter of 2016.

(6) The second phase of this consulting agreement could result in up to an additional 150,000 shares of common stock being granted subject to sales related performance criteria being achieved. At December 31, 2016, those criteria have not been achieved and no shares have been granted for the second phase of the agreement.

Employee Stock Options and Warrants

All options and warrants issued are presented at post reverse quantities.

On May 16, 2008 the Company’s board of directors adopted the Waytronx, Inc. 2008 Equity Incentive Plan (the ‘‘Equity Incentive Plan’’) and authorized  1,500,000 shares of Common Stock to fund the Plan. At the 2008 Annual Meeting of Shareholders held on September 15, 2008, the Equity Incentive Plan was approved by the Company shareholders. At the 2009 Annual Meeting of Shareholders held on September 29, 2009, the shareholders approved an amendment to the 2008 Equity Incentive Plan to increase the number of common shares issuable under the plan from  1,500,000 to  3,000,000. All of these shares have been registered under Form S-8.

The 2008 Equity Incentive Plan is intended to: (a) provide incentive to employees of the Company and its affiliates to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encourage stock ownership by employees, directors and independent contractors by providing them with a means to acquire a proprietary interest in the Company by acquiring shares of stock or to receive compensation, which is based upon appreciation in the value of Stock; and (c) provide a means of obtaining and rewarding employees, directors, independent contractors and advisors.

The 2008 Equity Incentive Plan provides for the issuance of incentive stock options (ISOs) and Non Statutory Options (NSOs) to employees, directors and independent contractors of the Company. The Board shall determine the exercise price per share in the case of an ISO at the time an option is granted and such price shall be not less than the fair market value or  110% of fair market value in the case of a ten percent or greater stockholder. In the case of an NSO, the exercise price shall not be less than the fair market value of one share of stock on the date the option is granted. Unless otherwise determined by the Board, ISOs and NSOs granted under the both plans have a maximum duration of ten years.

On January 5, 2009 the Company board of directors received and approved a written report and recommendations of the Compensation Committee, which included a detailed executive equity compensation report and market analysis and the recommendations of Compensia, Inc., a management consulting firm that provides executive compensation advisory services to compensation committees and senior management of knowledge-based companies. The Compensation Committee used the report and analysis as a basis for its formal written recommendation to the board. Pursuant to a January 8, 2009 board resolution the 2009 Equity Incentive Plan (Executive), a Non-Qualified Stock Option Plan, was created and funded with  4,200,000 shares of $0.001 par value common stock. The Compensation Committee was appointed as the Plan Administrator to manage the plan. On October 11, 2010, CUI Global authorized an additional  3,060,382 options under the 2009 Equity Incentive Plan (Executive). On September 21, 2012, CUI Global authorized an additional  330,000 options under the 2009 Equity Incentive Plan (Executive).

The 2009 Equity Incentive Plan (Executive) provides for the issuance of Incentive Non Statutory Options to attract, retain and motivate executive and management employees and directors and to encourage these individuals to acquire an equity interest in the Company, to make monetary payments to certain management employees and directors based upon the value of the Company’s stock and to provide these individuals with an incentive to maximize the success of the Company and further the interest of the shareholders. The Administrator of the plan is authorized to determine the exercise price per share at the time the option is granted, but the exercise price shall not be less than the fair market value on the date the option is granted. Stock options granted under the 2009 Plan have a maximum duration of ten years.

At December 31, 2016, there are  1,324,578 shares of common stock available under the 2008 Equity Incentive Stock Plan and  201,361 available under the 2009 Equity Incentive Plan (Executive).

During the years ended 2016, 2015 and 2014, the Company recorded expense for services and compensation in the amount of $0.2 million, $0.5 million, and $0.7 million, respectively, for stock options that the requisite service was performed during the year. The compensation expense is recorded over the vesting period based upon fair market value of the options using the Black-Scholes option model in accordance with FASB ASC 718 as discussed in section Employee Stock Options and Warrants.

All expense related to option awards has been fully recognized as of December 31, 2016.

A summary of the options issued to employees and directors as of December 31, 2016, 2015 and 2014 and changes during the year are presented below:

	2014
			Weighted		Weighted
	Number of		Average		Average	Aggregate
	Warrants and		Exercise Price		Remaining	Intrinsic Value
	Options		($)		Contract Life	($ '000)
Balance at beginning of year		1,030,807		6.39	8.19 Years		321
Exercised		(129,265)		7.35			302
Expired		(1,000)		5.14
Granted		97,890		7.11
Balance at end of year		998,432		6.34	7.58 Years		1,206
Exercisable		673,473		6.41	7.29 Years		789

	2015
			Weighted		Weighted
	Number of		Average		Average	Aggregate
	Warrants and		Exercise Price		Remaining	Intrinsic Value
	Options		($)		Contract Life	($ '000)
Balance at beginning of year		998,432		6.34	7.58 Years		1,206
Exercised		(1,334)		5.28			1
Expired		(26,251)		7.27
Balance at end of year		970,847		6.32	6.54 Years		850
Exercisable		853,460		6.35	6.47 Years		736

	2016
			Weighted		Weighted
	Number of		Average		Average	Aggregate
	Warrants and		Exercise Price		Remaining	Intrinsic Value
	Options		($)		Contract Life	($ '000)
Balance at beginning of year		970,847		6.32	6.54 Years		850
Exercised		(2,333)		5.46			4
Expired		(1,833)		5.40
Balance at end of year		966,681		6.32	5.55 Years		751
Exercisable		966,681		6.32	5.55 Years		751

As of December 31, 2016, 2015 and 2014, there were zero, 117,387, and 324,959, respectively, of non-vested options issued to employees and directors. 

There were no options granted during 2016 and 2015. The weighted average fair value of options granted during 2014 was $2.14.

The exercise price for granted options in relation to the market price during 2014 are as follows:  

	2014
	($)
Exercise price lower than the market price		—
Exercise price equaled the market price		—
Exercise price exceeded the market price		6.92-8.15

The fair value of options granted during 2014 was estimated on the dates of the grants using the following assumptions:

	2014
Dividend yield		—	%
Expected volatilities		34%-61%
Risk-free interest rates		1.63%-1.72%
Expected lives		5 years