Shareholders' Equity

3 Months Ended

Mar. 31, 2017

Shareholders' Equity [Abstract]

Shareholders' Equity

Note 8. Shareholders’ Equity

Share-based compensation.  On March 31, 2017, the Company had one active plan, the Cogentix Medical 2015 Omnibus Incentive Plan, for share-based compensation grants (“the 2015 Plan”). Under the 2015 Plan, if we have a change in control (as defined in the 2015 Plan) and the Company is not the surviving entity, all outstanding grants, including those subject to vesting or other performance targets, fully vest immediately if they are not assumed or replaced with equivalent grants.  If the Company is the surviving entity, there is no accelerated vesting of equity grants solely upon a change in control.  In 2016, the Company experienced a change in control for which it was the surviving entity.  Outstanding grants will vest if a participant’s employment or other service with the Company is terminated, without cause or by the participant for good reason, within two years of the November 3, 2016 change in control.  Under the 2015 Plan, we reserved 2,500,000 shares of our common stock for share-based grants and 1,401,879 shares remain available for grant on March 31, 2017.

We grant options at the discretion of our directors.  We grant option awards with an exercise price equal to the closing market price of our stock at the date of the grant.  We have options outstanding to purchase 1,653,830 shares of common stock granted under the 2015 Plan or predecessor companies’ plans.  Options generally expire over a period ranging from seven to ten years from date of grant and vest at varying rates ranging up to three years.  The options granted under the 2015 Plan generally provide for the exercise of options during a limited period following termination of employment, death or disability.

We determined the fair value of our option awards using the Black-Scholes option pricing model.  We used the following weighted-average assumptions to value the options granted during the three months ended March 31:

	2016
Expected life in years		3.00
Risk-free interest rate		1.3	%
Expected volatility		60.00	%
Expected dividend yield		0	%
Weighted-average grant date fair value	$	0.49

There were no grants during the three months ended March 31, 2017.

The expected life for options granted represents the period of time we expect options to be outstanding based on historical data of option holder exercise and termination behavior for similar grants.  The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate over the expected life at the time of grant.  Expected volatility is based upon historical volatility of our stock.

The following table summarizes the activity related to our stock options during the three months ended March 31, 2017:

	Number of shares			Weighted average exercise price		Weighted average remaining life in years		Aggregate intrinsic value
Outstanding at December 31, 2016		1,680,990		$	3.54		6.55	$	752,290
Options granted		-			-		-		-
Options exercised		(2,411	)		-		-		-
Options surrendered		(24,749	)	$	9.62		-		-
Outstanding at March 31, 2017		1,653,830		$	3.46		6.41	$	554,695
Exercisable at March 31, 2017		788,655		$	5.91		3.63	$	16,309

The total fair value of stock options that vested during the three months ended March 31, 2017 and 2016 was approximately $2,000 and $94,000, respectively.

We grant restricted shares at the discretion of our directors with vesting terms ranging from six months to one year.  The following table summarizes the activity related to our restricted shares during the three months ended March 31, 2017:

	Number of Shares			Weighted average grant date fair value		Weighted average remaining life in years		Aggregate intrinsic value
Balance at December 31, 2016		992,548		$	1.30		1.35	$	1,995,021
Shares granted		-			-		-
Shares vested		(402,147	)		1.10		-	$	723,865
Shares surrendered		-			-
Balance at March 31, 2017		590,401		$	1.44		1.63	$	1,062,722

The aggregate intrinsic value shown above for the restricted shares represents the total pre-tax value based on the closing price of our common stock at the end of each period.

We recognize share-based compensation expense in our Condensed Consolidated Statement of Operations based on the fair value at the time of grant of the share-based payment over the requisite service period.  We incurred approximately $349,000 and $84,000 in share-based compensation expense for the three months ended March 31, 2017 and 2016, respectively.

On March 31, 2017, we had approximately $330,000 of unrecognized share-based compensation expense related to stock options that we expect to recognize over a weighted-average period of approximately 1.95 years.

On March 31, 2017, we had $479,000 of unrecognized share-based compensation expense related to restricted shares that we expect to recognize over a weighted-average period of approximately 1.63 years.