Stock-based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

NOTE 10 - STOCK-BASED COMPENSATION

Stock Option Plans

The Company adopted the 1995 Stock Option Plan, pursuant to which the Company had the right to grant options to purchase up to an aggregate of 1,250,000 shares of common stock. The Company also adopted the 1999 Stock Option Plan, pursuant to which the Company had the right to grant stock awards and options to purchase up to 2,813,000 shares of common stock. The Company also adopted the 1999 Director Option Plan, pursuant to which the Company had the right to grant options to purchase up to an aggregate of 600,000 shares of common stock. The 1995 Stock Option Plan and 1999 Stock and Director Option Plans expired and the Company cannot issue additional options under these plans.

The Company adopted the 2007 Equity Compensation Plan, pursuant to which, as amended, the Company may grant stock options, restricted stock and other equity-based awards with respect to up to an aggregate of 2,500,000 shares of common stock. The Company also adopted the 2009 Non-Employee Director Equity Compensation Plan, pursuant to which, as amended (the “2009 Director Plan”), the Company may grant options to purchase up to an aggregate of 600,000 shares of common stock. In June 2015, the Company adopted the 2015 Equity Compensation Plan (the “2015 Plan”) pursuant to which the Company may grant stock options, restricted stock and other equity-based awards with respect to up to an aggregate of 1,200,000 shares of common stock. The plans are administered by the Compensation Committee of the Company’s Board of Directors, which has the authority to determine, among other things, the term during which an option may be exercised (not more than 10 years), the exercise price of an option and the vesting provisions.

The Company recognizes all employee share-based payments in the statement of operations as an operating expense, based on their fair values on the applicable grant date. As a result, the Company recorded stock-based compensation expense of $69,000 and $156,000, respectively, for the three- and six-month periods ended June 30, 2015 and $83,000 and $161,000, respectively, for the three- and six-month periods ended June 30, 2016, in connection with awards made under the stock option plans.

The following table summarizes the activity relating to the Company’s stock options for the six-month period ended June 30, 2016:

					Weighted-
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at beginning of year	1,212,000		$	6.94
Granted	150,000			4.37
Exercised	(5,000	)		3.29
Forfeited or expired	(140,000	)		20.10
Outstanding at end of period	1,217,000		$	5.13		6 years	$	455,000
Exercisable at end of period	804,000		$	5.12		5 years	$	389,000

There were no stock options issued during the six-month period ended June 30, 2015. The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model reflecting the following weighted-average assumptions:

	June 30,
	2015		2016
Expected volatility		-		45.5	%
Expected life of options (in years)		-		4
Risk free interest rate		-		1.2
Dividend yield		-		0	%
Weighted average fair value of options granted during the period	$	-	$	1.60

Expected volatility is based on historical volatility of the Company’s common stock and the expected life of options is based on historical data with respect to employee exercise periods.

The fair value of options vested during the six-month periods ended June 30, 2015 and 2016 was $349,000 and $113,000, respectively. The total intrinsic value of options exercised during the three-month periods ended June 30, 2015 and 2016 was $1,504,000 and $10,000, respectively.

As of June 30, 2016, there was approximately $597,000 of unrecognized compensation cost related to non-vested options granted under the Company’s stock option plans. That cost is expected to be recognized over a weighted-average period of 2.44 years.

The Company estimates forfeitures at the time of valuation and reduces expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

Restricted Stock

The Company grants restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested stock at the time of grant and, upon vesting, there are no contractual restrictions on the stock. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of all non-vested restricted stock for the six-month period ended June 30, 2016 is as follows:

				Weighted-
	Number of			Average
	Non-vested			Grant Date
	Shares			Fair Value
Restricted stock, non-vested, beginning of year		575,000		$	5.79
Granted		88,000			4.30
Vested		(102,000	)		6.08
Forfeited		(6,000	)		5.69
Restricted stock, non-vested, end of period		555,000		$	5.50

The Company recorded stock-based compensation expense of $310,000 and $609,000, respectively, for the three- and six-month periods ended June 30, 2015 and $285,000 and $616,000, respectively, for the three- and six-month periods ended June 30, 2016, in connection with restricted stock grants. As of June 30, 2016, there was $2,197,000 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 2.59 years.

Performance Shares

In January 2016, the Company granted performance shares to employees pursuant to the 2015 Equity Compensation Plan. The shares are unvested at the time of grant and, upon vesting, there are no contractual restrictions on the shares. The vesting of the shares is subject to the achievement of performance goals during a two-year period from the date of issuance, with the ability to achieve prorated vesting of the shares during interim annual measurement periods. If the performance goals are not met, the performance shares will not vest and will automatically be returned to the plan. If the performance goals are met, then the shares will be issued to the employees. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of all non-vested performance shares for the six-month period ended June 30, 2016 is as follows:

				Weighted-
	Number of			Average
	Non-vested			Grant Date
	Shares			Fair Value
Performance shares, non-vested, beginning of year		-			-
Granted		295,000		$	4.07
Vested		-			-
Forfeited		(7,000	)		4.07
Performance shares, non-vested, end of period		288,000		$	4.07

Stock-based compensation expense related to performance shares for the three-and six-month periods ended June 30, 2015 was insignificant. The Company recorded stock-based compensation expense of $137,000 and $250,000, respectively, for the three- and six-month periods ended June 30, 2016, in connection with the performance share grants. As of June 30, 2016, there was $862,000 of total unrecognized compensation cost related to non-vested performance shares. That cost is expected to be recognized over a weighted-average period of 1.55 years.