Stock-Based Employee Compensation Plans

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

In May 2010, our shareholders approved the adoption of our 2010 Equity Incentive Plan, which was amended at the Annual Shareholders meeting held in May 2013 (the “2010 Incentive Plan”), and which superseded our shareholder-approved 2008 and 2004 Equity Incentive Plans (the “Previously Approved Plans”). As of September 30, 2020, there were no options to purchase shares of our common stock granted under the Previously Approved Plans. As of September 30, 2020, there were options to purchase a total of 342,428 shares of our common stock and 55,653 shares of our unvested restricted stock grants under the 2010 Incentive Plan.

In May 2019, our shareholders approved the adoption of our 2019 Equity Incentive Plan (the “2019 Incentive Plan”), which authorized and set aside a total of 2,000,000 shares of our common stock for issuance on the exercise of stock options or the grant of restricted stock or other equity incentives to our officers, and other key employees and directors. There were 250,000 options to purchase shares of our common stock granted during 2019 under the 2019 Incentive Plan and outstanding at September 30, 2020. Since approval of the 2019 Incentive Plan, no additional awards will be issued under the 2010 Incentive Plan, although awards outstanding under the 2010 Incentive Plan will remain outstanding and will continue to be governed by the terms of the 2010 Incentive Plan and any applicable award agreements. Under the terms of the 2019 Incentive Plan, any forfeited options or unvested restricted stock grants that had been issued under the Previously Approved Plans or the 2010 Incentive Plan will not be available for future equity incentive grants. Each restricted stock option or restricted stock unit issued under the terms of the 2019 Incentive Plan will be counted against the share limit as 2.5 shares, while each stock option or SAR issued will be counted as one share against the share limit. As of September 30, 2020, there were outstanding options to purchase a total of 250,000 shares of our common stock, 75,000 shares of our unvested restricted stock units, and 54,192 shares of our unvested restricted stock grants under the 2019 Incentive Plan. As of September 30, 2020, there remain 1,364,520 shares available for future grants under the 2019 Incentive Plan.

A stock option entitles the recipient to purchase shares of our common stock at a price per share that may not be less than 100% of the fair market value of the Company’s shares on the date the option is granted. Restricted shares may be granted at such purchase prices and on such other terms, including restrictions and Company repurchase or reacquisition rights, as are fixed by the Compensation Committee at the time rights to purchase such restricted shares are granted. Stock Appreciation Rights (“SARs”) entitle the recipient to receive a cash payment in an amount equal to the difference between the fair market value of the Company’s shares on the date of vesting and a “base price” (which, in most cases, will be equal to the fair market value of the Company’s shares on the date the SAR is granted), subject to the right of the Company to make such payment in shares of its common stock at their then fair market value. Stock units may be payable in cash or shares of common stock, or a combination of the two. A stock unit is a bookkeeping entry representing the equivalent of one common share. Options, restricted shares, SARs and stock units may vest immediately or in installments over various periods generally ranging up to five years, subject to the recipient’s continued employment or service or the achievement of specified performance goals, as determined by the Compensation Committee at the time it grants or awards the options, the restricted shares, the SARs or the stock units. Stock options, SARs and stock units may be granted for terms of up to 10 years after the date of grant, but will terminate sooner upon or shortly after a termination of service occurring prior to the expiration of the term of the option, SAR or stock unit. The Company will become entitled to repurchase any unvested restricted shares, at the same price that was paid for the shares by the recipient, or to cancel those shares in the event of a termination of employment or service of the holder of such shares or if any performance goals specified in the award are not satisfied. To date, the Company has not granted any SARs.

Under FASB ASC 718-10, we are required to recognize, in our financial statements, the fair value of the options, restricted shares, SARs and stock units that we grant as compensation cost over their respective service periods. The fair values of the options that were outstanding at September 30, 2020 under the 2010 Incentive Plan and the 2019 Incentive Plan were estimated as of their respective dates of grant using the Black-Scholes option-pricing model. The Company, under the 2010 Incentive Plan and the 2019 Incentive Plan, has also granted restricted stock and stock units for the benefit of its employees and directors. These restricted shares vest over a period ranging from three to five years for employees and one year for directors while the stock units vest over a period of one to five years. The recipients of restricted shares have the right to vote all shares subject to such grant and receive all dividends with respect to such shares whether or not the shares have vested. The recipients of stock units have no rights of a stockholder. The recipients do not pay any cash consideration for the shares or stock units.

Stock Options

The table below summarizes the weighted average assumptions used to determine the fair values of the options granted during the following periods:


	Three Months Ended September 30,						Nine Months Ended September 30,
Assumptions with respect to:	2020			2019			2020			2019
Expected volatility	—		%	27		%	—		%	27		%
Risk-free interest rate	—		%	1.35		%	—		%	1.35		%
Expected dividends	—		%	—		%	—		%	—		%
Expected term (years)	0.0			5.1			0.0			5.1
Weighted average fair value of options granted during period	$	—		$	1.97		$	—		$	1.97

The following table summarizes the stock option activity under the Company’s equity incentive plans during the nine months ended September 30, 2020 and 2019, respectively.


	Number of Shares	Weighted- Average Exercise Price Per Share		Number of Shares	Weighted- Average Exercise Price Per Share
	2020			2019
Outstanding – January 1,	1,009,466	$	6.98	864,330	$	6.86
Granted	—	—		250,000	7.33
Exercised	(10,728)	4.66		(18,250)	5.57
Forfeited/Canceled	(406,310)	6.98		(7,404)	8.15
Outstanding – September 30,	592,428	7.01		1,088,676	6.98
Options Exercisable – September 30,	358,821	$	6.74	720,402	$	6.68
Options Vested – September 30,	358,821	$	6.74	720,402	$	6.68

Options to purchase zero and 3,250 shares of our common stock were exercised during the three months ended September 30, 2020 and 2019, respectively, and 10,728 and 18,250 during the nine months ended September 30, 2020 and 2019, respectively. The aggregate intrinsic value of options exercised during the three months ended September 30, 2020 and 2019 was $0 and $3 thousand, respectively, and $29 thousand and $41 thousand during the nine months ended September 30, 2020 and 2019, respectively. The fair value of options that vested during the three months ended September 30, 2020 and 2019 was $100 thousand and $8 thousand, respectively, and $196 thousand and $420 thousand during the nine months ended September 30, 2020 and 2019, respectively.

The following table provides additional information regarding the vested and unvested options that were outstanding at September 30, 2020.


Options Outstanding as of September 30, 2020						Options Exercisable as of September 30, 2020(1)
Exercise Price	Vested	Unvested	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Shares	Weighted Average Exercise Price Per Share
$2.97 – $3.99	12,000	—	$	3.74	1.32	12,000	$	3.74
$4.00 – $5.99	16,000	—	4.34		0.55	16,000	4.34
$6.00 – $6.99	203,489	5,950	6.61		4.38	203,489	6.60
$7.00 – $7.99	84,157	200,000	7.30		8.38	84,157	7.24
$8.00 – $8.40	43,175	27,657	8.21		7.39	43,175	8.19
	358,821	233,607	$	7.01	6.50	358,821	$	6.74

(1)The weighted average remaining contractual life of the options that were exercisable as of September 30, 2020 was 4.45 years.

The aggregate intrinsic value of options that were outstanding and exercisable at September 30, 2020 and December 31, 2019 was $0 and $952 thousand, respectively.

A summary of the status of the unvested options outstanding as of September 30, 2020 and 2019, and changes in the weighted average grant date fair values of the unvested options during the nine months ended September 30, 2020 and 2019, are set forth in the following table.


	For the nine months ended September 30,
	2020			2019
	Number of Shares Subject to Options	Weighted Average Grant Date Fair Value Per Share		Number of Shares Subject to Options	Weighted Average Grant Date Fair Value Per Share
Unvested at the beginning of the period	334,322	$	2.19	275,457	$	2.79
Granted	—	—		250,000	1.97
Vested	(84,809)	2.32		(150,439)	2.79
Forfeited/Canceled	(15,906)	2.81		(6,744)	2.83
Unvested at the end of the period	233,607	2.10		368,274	2.23

At September 30, 2020, the weighted average period over which nonvested awards were expected to be recognized was 3.61 years.

Restricted Stock

The following table summarizes the activity related to restricted stock granted, vested and forfeited under our equity incentive plans during the nine months ended September 30, 2020 and 2019.


	For the nine months ended September 30,
	2020			2019
	Number of Shares	Average Grant Date Fair Value Per Share		Number of Shares	Average Grant Date Fair Value Per Share
Outstanding at the beginning of the period	124,202	$	8.44	115,031	$	8.04
Granted	63,256	5.57		126,552	8.58
Vested	(49,211)	8.47		(93,859)	8.07
Forfeited	(28,402)	7.99		(7,376)	8.77
Outstanding at the end of the period	109,845	$	6.89	140,348	$	8.47

Stock Units

The following table summarizes the activity related to stock units granted, vested and forfeited under our equity incentive plans during the nine months ended September 30, 2020 and 2019.


	For the nine months ended September 30,
	2020			2019
	Number of Shares	Average Grant Date Fair Value Per Share		Number of Shares	Average Grant Date Fair Value Per Share
Outstanding at January 1,	100,000	$	7.33	—	$	—
Granted	—	—		100,000	7.33
Vested	(25,000)	7.33		—	—
Forfeited	—	—		—	—
Outstanding at September 30,	75,000	$	7.33	100,000	$	7.33

Compensation Expense

We expect that the compensation expense that will be recognized during the periods presented below in respect to stock options, restricted stock, and stock units outstanding at September 30, 2020, will be as follows:


	Estimated Stock Based Compensation Expense Stock Options		Estimated Stock Based Compensation Expense Restricted Stock		Estimated Stock Based Compensation Expense Stock Units		Estimated Stock Based Compensation Expense Total
(Dollars in thousands)
For the years ending December 31,
Remainder of 2020	$	43	$	112	$	61	$	216
2021	123		253		244		620
2022	109		119		164		392
2023	101		50		—		151
2024 and beyond	67		11		—		78
	$	443	$	545	$	469	$	1,457

The aggregate amounts of stock based compensation expense recognized in our consolidated statements of operations for the three months ended September 30, 2020 and 2019 were $152 thousand and $293 thousand, respectively, in each case net of taxes, and $453 thousand and $589 thousand for the nine months ended September 30, 2020 and 2019, respectively, in each case net of taxes.