Stock-Based Compensation

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Stock-Based Compensation

NOTE 3. Stock-Based Compensation

The Company has two stock-based compensation plans: the 2006 Equity Incentive Plan (“2006 Plan”) and the 2015 Equity Incentive Plan (“2015 Plan”), both of which were approved by our stockholders. As of March 31, 2017, options to purchase 810,000 and 265,000 shares were outstanding under the 2006 Plan and the 2015 Plan, respectively, and a total of 1,080,000 shares were available for grant under the 2015 Plan. No options are available for grant under the 2006 Plan.

The Company’s stock options vest on an annual or a monthly basis. Stock options generally are exercisable for up to seven years after grant, subject to continued employment or service. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Such amount may change as a result of additional grants, forfeitures, modifications in assumptions and other factors. Income tax effects of share-based payments are recognized in the financial statements for those awards which will normally result in tax deductions under existing tax law. During the three months ended March 31, 2017 and 2016, we recorded an expense of $40,000 and $77,000, respectively, related to options previously granted. Under current U.S. federal tax law, we receive a compensation expense deduction related to non-qualified stock options only when those options are exercised and vested shares are received. Accordingly, the financial statement recognition of compensation expense for non-qualified stock options creates a deductible temporary difference that results in a deferred tax asset and a corresponding deferred tax benefit in our consolidated statements of operations.

During the three months ended March 31, 2017 and 2016, the Company did not grant any stock options. As of March 31, 2017, there was $90,000 of total unrecognized compensation expense related to non-vested stock options. That expense is expected to be recognized over the remaining weighted-average period of 0.67 years.

A summary of option activity under both the 2006 Plan and the 2015 Plan as of March 31, 2017 and changes during the three months then ended is presented in the table below (shares in thousands):

	Shares		Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contractual Life in Years
Outstanding at December 31, 2016		1,075	$	1.04		3.82
Granted		—	$	—		—
Exercised		—	$	—		—
Expired		—	$	—		—
Forfeited		—	$	—		—
Outstanding at March 31, 2017		1,075	$	1.04		3.58
Vested and expected to vest		1,060	$	1.03		3.55
Exercisable at March 31, 2017		976	$	0.99		3.36

A summary of the status of the Company’s non-vested options at March 31, 2017 and changes during the three months then ended is presented below (shares in thousands):

	Shares			Weighted-average grant-datefairvalue
Non-vested at December 31, 2016		133		$	1.19
Granted		—		$	—
Vested		(34	)	$	1.19
Forfeited		—		$	—
Non-vested at March 31, 2017		99		$	1.19

The Company’s share-based compensation is classified in the same expense line item as cash compensation. Information about share-based compensation included in the unaudited results of operations for the three months ended March 31, 2017 and 2016 is as follows (in thousands):

	FortheThreeMonthsEnded March 31,
	2017		2016
Officer compensation	$	19	$	33
Non-employee directors		9		16
Sales, general and administrative		12		28
Total stock option expense, included in    total operating expenses	$	40	$	77