Stock-based Compensation

9 Months Ended

Sep. 30, 2017

Stock-based Compensation

Stock-based Compensation

NOTE (8) – Stock-based Compensation

The Company issues stock-based compensation awards to its directors and employees under the 2008 Long-Term Incentive Plan (“2008 LTIP”).  The 2008 LTIP permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards for up to 2,000,000 shares of common stock.  As of September 30, 2017, there were 1,308,890 shares available for future awards under the 2008 LTIP.

No stock options were granted during the nine months ended September 30, 2017, compared to 450,000 stock options granted to senior executive officers under the 2008 LTIP during the nine months ended September 30, 2016.  These options have an exercise price of $1.62 per share, vest over five years and expire ten years from the grant date.  The Company estimated the compensation costs and fair value per share of these stock options to be $194 thousand and $0.43 per share, respectively, using the Black-Scholes option pricing model and the following assumptions: (i) expected volatility of 27.36%; (ii) risk free interest rate of 1.21%; (iii) expected option term of five years; and (iv) 0% dividend yield.

The following table summarizes stock option activity during the nine months ended September 30, 2017 and 2016:

	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Nine Months Ended September 30, 2017:
Outstanding at January 1, 2017	540,625	$    2.18
Granted	-	-
Exercised	-	-
Forfeited	-	-
Outstanding at September 30, 2017	540,625	$    2.18	7.24	$  315,000
Exercisable at September 30, 2017	180,625	$    3.29	4.94	$    63,000
Nine Months Ended September 30, 2016:
Outstanding at January 1, 2016	90,625	$    4.95
Granted	450,000	1.62
Exercised	-	-
Forfeited	-	-
Outstanding at September 30, 2016	540,625	$    2.18	8.24	$   63,000
Exercisable at September 30, 2016	90,625	$    4.95	2.50	$             -

The Company recorded $10 thousand of stock-based compensation expense related to stock options during the three months ended September 30, 2017 and the three months ended September 30, 2016, and $29 thousand and $23 thousand during the nine months ended September 30, 2017 and 2016, respectively.  As of September 30, 2017, unrecognized compensation cost related to non-vested stock options granted under the plan was $132 thousand.  The cost is expected to be recognized over a period of 3.4 years.

In March 2016, the Company awarded 120,483 shares of restricted stock to its Chief Executive Officer (“CEO”) under the 2008 LTIP.  A restricted stock award is valued at the closing price of the Company’s stock on the date of such award.  Subject to certain performance restrictions, 100,000 shares of restricted stock shall vest over a two-year period and the remaining 20,483 shares shall vest over a three-year period.  Stock-based compensation expense is recognized on a straight-line basis over the vesting period.  The Company recorded $26 thousand and $27 thousand of stock-based compensation expense related to this award during the three months ended September 30, 2017 and 2016, respectively, and $79 thousand and $53 thousand during the nine months ended September 30, 2017 and 2016, respectively.  As of September 30, 2017, unrecognized compensation cost related to non-vested restricted stock award was $66 thousand, of which $47 thousand is expected to be recognized over a period of six months and $19 thousand is expected to be recognized over a period of 18 months.

In April 2017, the Company awarded 30,002 shares of common stock to its directors under the 2008 LTIP, all of which are fully vested.  The Company recorded $52 thousand of compensation expense based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award.

In April 2017, the Company also awarded 129,270 of cash-settled restricted stock units (“RSUs”) to its CEO under the 2008 LTIP.  All RSUs vest at the end of two years from the date of the grant and are subject to forfeiture until vested.  Each RSU entitles the CEO to receive cash equal to the fair market value of one share of common stock on the applicable payout date.  Compensation expense is determined based on the fair value of the award and is re-measured at each reporting period.  During the three and nine months ended September 30, 2017, the Company recorded compensation expense related to this award of $40 thousand and $62 thousand, respectively.