Note 11. Common Stock Options and Stock Purchase Plan

Stock options

The 1997 Stock Option Plan (the “1997 Plan”) and 2013 Equity Incentive Plan (the “2013 Plan”) authorize the issuance of both nonqualified and incentive stock options. Payment for the shares may be made in cash, shares of the Company’s common stock or a combination thereof. Under the terms of the plans, incentive stock options and non-qualified stock options are granted at a minimum of 100% of fair market value on the date of grant and may be exercised at various times depending upon the terms of the option. All existing options expire 10 years from the date of grant or one year from the date of death.

Stock-based compensation

Pursuant to the 2013 Plan, the Company is authorized to grant options to purchase up to 300,000 shares of its common stock. As of December 31, 2015, options to purchase an aggregate of 250,000 shares were outstanding, 165,000 shares were exercisable under the 2013 Plan, and 50,000 shares were available for issuance pursuant to awards that may be granted under the plan in the future.

Pursuant to the 1997 Plan, the Company was authorized to grant options to purchase up to 450,000 shares of its common stock. As of December 31, 2015, options to purchase an aggregate of 7,500 shares were outstanding and exercisable under the 1997 Plan. The board terminated the plan in 2014. The existing grants may be exercised according to the terms of the grant agreements but no additional options will be granted under the 1997 Plan.

During the year ended December 31, 2014, options to purchase 11,980 shares of common stock expired for four employees.

The following table summarizes the activity for outstanding incentive stock options under the 2013 Plan to employees of the company:


	Options Outstanding
	Number of		Weighted-		Weighted-	Aggregate
	Shares		Average		Average	Intrinsic Value
			Exercise		Remaining	(1)
			Price		Contractual
					Term
					(in years)

Balance at January 1, 2014		61,980	$	4.20	9.7
Granted		0
Exercised		0
Canceled/forfeited/expired		(11,980)		(4.16)
Balance at December 31, 2014		50,000		4.21	8.6
Granted		0
Exercised		0
Canceled/forfeited/expired		0
Balance at December 31, 2015		50,000	$	4.21	7.6
Vested and exercisable as of December 31, 2015		50,000				$	0

(1)

The aggregate intrinsic value is calculated as approximately the difference between the weighted average exercise price of the underlying awards and the Company’s estimated current fair market value at December 31, 2015.

During the second quarter of 2014, the Company granted one outside director options to purchase 25,000 shares of common stock. The options were priced above fair market value and vested 20% on the grant date, with an additional 20% vesting on the first four anniversaries of the grant date. The options expire ten years from the date of grant.

During the year ended December 31, 2014, one former outside director forfeited options to purchase 2,500 shares of common stock.

The following table summarizes the activity for outstanding director stock options under both plans:


	Options Outstanding
	Number of		Weighted-		Weighted-	Aggregate
	Shares		Average		Average	Intrinsic Value
			Exercise		Remaining	(1)
			Price		Contractual
					Term
					(in years)

Balance at January 1, 2014		185,000	$	4.64	9.5
Granted		25,000		4.39	10.0
Exercised		0
Canceled/forfeited/expired		(2,500)		(4.15)
Balance at December 31, 2014		207,500		4.62	8.4
Granted		0
Exercised		0
Canceled/forfeited/expired		0
Balance at December 31, 2015		207,500	$	4.62	7.4
Vested and exercisable as of December 31, 2015		122,500				$	0

(1)

The weighted average grant date fair value of options granted during the year ended December 31, 2014 was $35. The Company recognized compensation expense of approximately $63 and $67 during the years ended December 31, 2015 and 2014, respectively, in connection with the issuance of the options.

The assumptions made in estimating the fair value of the options on the grant date based upon the BSM option-pricing model for the year ended December 31, 2014 are as follows:


Dividend yield	0.00%
Expected volatility	44.11%
Risk free interest rate	2.02%
Expected life	6 Years

The Company calculates expected volatility for stock options and other awards using historical volatility as the Company believes the expected volatility will approximate historical volatility.

There were no options exercised during the years ended December 31, 2015 and 2014.

As of December 31, 2015, there was approximately $109 of unrecognized compensation expense under the 2013 Plan. The Company expects to recognize this expense over the next three years. To the extent the forfeiture rate is different than we have anticipated, stock-based compensation related to these awards will be different from our expectations.

Stock purchase plan

The 1996 Employee Stock Purchase Plan (the “ESPP”) allowed employees to set aside up to 10% of their earnings for the purchase of shares of the Company’s common stock. The purchase price was the lower of 85% of the market value at the date of the grant or the exercise date, which was six months from the date of the grant. Under the ESPP, the Company was authorized to sell and issue up to 150,000 shares of its common stock to its full-time employees. There were 81,653 shares issued under the plan. The plan was terminated effective January 1, 2014.