Note 8 - Common Stock

12 Months Ended

Dec. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

8. COMMON STOCK

2014 Long-Term Stock Incentive Plan: The Interphase Corporation 2014 Long-Term Stock Incentive Plan has been adopted by the Company’s Board of Directors and approved by its shareholders. Awards granted subsequent to May 5, 2014 have been made under this plan. All other awards granted before May 5, 2014 were made under the Interphase Corporation 2004 Long-Term Stock Incentive Plan, which expired on May 5, 2014 (so that no new awards could be made or granted under the Interphase Corporation 2004 Long-Term Stock Incentive Plan). The total amount of Common Stock with respect to which awards may be granted under the current (2014) Plan is 400,000 shares.

2004 Long-Term Stock Incentive Plan: The Interphase Corporation Amended and Restated Stock Option Plan and the Interphase Corporation Directors Stock Option Plan were collectively amended and restated as the “Interphase Corporation 2004 Long-Term Stock Incentive Plan,” effective May 5, 2004. That plan permitted awards to be granted as (a) incentive stock options, (b) non-qualified stock options, (c) bonus stock awards, (d) stock appreciation rights, (e) performance share awards and performance unit awards, (f) phantom stock awards, and (g) any other type of award established by the Compensation Committee which is consistent with the Plan’s purposes, as designated at the time of grant. The Company issues new shares upon exercise of stock options.

Stock Options: During 2014, the Company issued 8,000 stock options that vest over a three year period and expire ten years from date of grant. The weighted average exercise price of these stock options is $4.00. During 2013, the Company issued 49,000 stock options that vest over a four year period and expire ten years from date of grant. The weighted average exercise price of these stock options is $4.33. During 2012, the Company issued 194,500 stock options that vest over a one to four year period and expire ten years from date of grant. The weighted average exercise price of these stock options is $4.56. Compensation expense related to these stock options was $179,000, $344,000 and $392,000 for the years ended December 31, 2014, 2013 and 2012, respectively.

During 2014, the Company also issued 136,000 stock options with performance-based vesting conditions for the years ending December 31, 2014, 2015, and 2016, the achievement of which would result in pro rata vesting per year in March 2015, 2016, and 2017, respectively. The weighted average exercise price of these stock options is $5.49. During 2013, the Company issued 542,500 stock options with performance-based vesting conditions for the years ending December 31, 2014, 2015, 2016, and 2017, the achievement of which would result in pro rata vesting per year in March 2015, 2016, 2017, and 2018, respectively. The weighted average exercise price of these stock options is $4.67. During 2012, the Company issued 900,500 stock options with performance-based vesting conditions for the years ending December 31, 2012, 2013, 2014, 2015, and 2016, the achievement of which would result in pro rata vesting per year in March 2013, 2014, 2015, 2016, and 2017, respectively. The weighted average exercise price of these stock options is $3.80. All stock options with performance-based conditions expire ten years from the date of grant. Of the stock options outstanding at December 31, 2014, approximately 1,074,450 are subject to the achievement of certain performance conditions. The performance conditions related to approximately 89,000 of these stock options were deemed probable as of December 31, 2014. Compensation expense related to performance-based stock options, for which vesting was deemed probable, was $239,000, $239,000 and $147,000 for the years ended December 31, 2014, 2013 and 2012, respectively. The performance conditions related to the remaining stock options were not deemed probable; therefore, no compensation expense related to these options has been recorded.

As of December 31, 2014, there were 1,166,200 unvested options expected to vest over a weighted-average period of 8.3 years. As of December 31, 2013, there were 1,586,076 unvested options expected to vest over a weighted-average period of 8.9 years.

The following table summarizes the combined stock option activity under all of the plans (in thousands, except option prices):

	Number of Options			Weighted Average Option Price		Aggregate Intrinsic Value
Balance, December 31, 2011		1,332			4.21	$	1,724
Granted		1,095			3.94
Exercised		(177	)		4.71
Canceled		(197	)		3.79
Balance, December 31, 2012		2,053			4.06		448
Granted		592			4.64
Exercised		(15	)		1.71
Canceled		(443	)		4.69
Balance, December 31, 2013		2,187			4.11		1,455
Granted		144			5.41
Exercised		(18	)		1.51
Canceled		(530	)		5.62
Balance, December 31, 2014		1,783			3.79		200
Exercisable at December 31, 2014		617		$	2.88	$	179

The following table summarizes information about options granted under the plans that were outstanding at December 31, 2014 (in thousands, except option prices):

			Options Outstanding						Options Exercisable
Range of Exercise Prices			Number Outstanding at 12/31/14		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number Exercisable at 12/31/14		Weighted Average Exercise Price
$1.36	-	$4.18		800		6.93	$	2.43		431	$	1.97
$4.19	-	$6.61		983		8.29		4.89		186		4.99
	Total			1,783		7.68	$	3.79		617	$	2.88

Option Valuation: The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with weighted-average assumptions based on the grant date.

	2014			2013			2012
Risk free interest rate range	2.63	-	2.70%	1.86	-	2.88%	1.53	-	2.26%
Weighted average life (in years)		10			10			10
Weighted average volatility		65.47%			66.81%			66.10%
Volatility range	65.30	-	66.18%	66.10	-	66.93%	65.81	-	66.34%
Expected dividend yield		-			-			-
Weighted average grant-date fair value per share of options granted		$4.06			$3.48			$2.87

Restricted Stock: Each of the Interphase Corporation 2014 Long-Term Stock Incentive Plan and the Interphase Corporation 2004 Long-Term Stock Incentive Plan provides for grants of bonus stock awards (“restricted stock”) to its directors and certain employees at no cost to the recipient. The total amount of restricted stock with respect to which awards may be granted under the current (2014) Plan is 75,000 shares. Holders of restricted stock are entitled to cash dividends, if any, and to vote their respective shares. Restrictions limit the sale or transfer of these shares during a predefined vesting period, currently ranging from three to six years, and in some cases vesting is subject to the achievement of certain performance conditions. During 2014 and 2013, the Company issued no restricted stock shares. During 2012, the Company issued 9,000 restricted stock shares at a market price of $5.72. Upon issuance of restricted stock under the plan, unearned compensation equivalent to the market value at the date of grant is recorded as a reduction to shareholders’ equity and subsequently amortized to expense over the respective restriction periods. Compensation expense related to restricted stock was $59,000, $103,000 and $135,000 for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, there was $61,000 of total unamortized compensation cost related to unvested restricted stock remaining to be recognized. The expense is expected to be recognized over a weighted-average period of 0.2 years. As of December 31, 2013, there was $124,000 of total unamortized compensation cost related to unvested restricted stock remaining to be recognized. The expense was expected to be recognized over a weighted-average period of 1.2 years.

The following summarizes the restricted stock activity for 2014 and 2013 (in thousands, except weighted average grant date value):

	Restricted Stock Shares			Weighted Average Grant Date Value
Nonvested restricted stock at December 31, 2012		112		$	3.17
Granted		-			-
Vested		(40	)		3.08
Cancelled/Forfeited		(10	)		3.35
Nonvested restricted stock at December 31, 2013		62			3.21
Granted		-			-
Vested		(31	)		3.21
Cancelled/Forfeited		(2	)		1.82
Nonvested restricted stock at December 31, 2014		29		$	3.29