10. Share-Based Employee Compensation

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

10. Share-Based Employee Compensation

The Company has an employee and non-employee director incentive compensation equity plan. Related to these programs, the Company recorded $95 and $55 of share-based employee compensation expense during the years ended December 31, 2018 and 2017, respectively, which is included as a component of cost of products and SG&A expenses in the accompanying consolidated statements of operations. No amount of share-based employee compensation expense was capitalized as part of capital expenditures or inventory for the years presented.

The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The share-based employee compensation expense recorded in the years ended December 31, 2018 and 2017 was calculated using the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s common stock over the period of time, commensurate with the expected life of the stock options. The dividend yield assumption is based on the Company’s expectations of dividend payouts at the grant date. In 2018, the Company paid dividends on January 16, for a dividend declared in 2017, April 16, July 16 and October 15. In 2018, the Company’s Board of Directors also declared a quarterly dividend that was paid on January 16, 2019. The Company has estimated its future stock option exercises. The expected term of option grants is based upon the observed and expected time to the date of post vesting exercises and forfeitures of options by the Company’s employees. The risk-free interest rate is derived from the average U.S. Treasury rate for the period, which approximates the rate at the time of the stock option grant.

	FY 2018			FY 2017
Expected Volatility		51.9	%		53.6	%
Expected Dividends		2.0	%		5.0	%
Expected Term (in years)		6.5			3.0-6.5
Risk-Free Rate		2.76	%		2.10	%
Estimated Forfeitures		0.0	%		0.0	%

A summary of stock option activity under the Company’s equity compensation plans as of December 31, 2018, and changes during the year ended December 31, 2018, are presented below:

	Stock		Wgt. Avg. Exercise Price ($)		Wgt. Avg. Remaining Contractual		Wgt Avg. Grant Date Fair Value ($)		Aggregate Intrinsic
As of January 1, 2018	Options		Per Share		Life (Years)		Per Share		Value ($)
Outstanding		354,500		4.46		—		1.79		—
Vested		113,000		3.75		—		2.23		—
Nonvested		241,500		4.80		—		1.58		—
Period activity
Issued		130,000		3.72		—		1.62		—
Exercised		—		—		—		—		—
Forfeited		24,000		5.10		—		1.37		—
Expired		—		—		—		—		—
As of December 31, 2018
Outstanding		460,500		4.22		7.08		1.76		43,860
Vested		156,900		4.03		3.87		2.05		39,860
Nonvested		303,600		4.32		8.73		1.61		4,000

Outstanding:

Range of Exercise Prices ($) Per Share		Stock Options Outstanding		Wgt. Avg. Exercise Price ($) Per Share		Wgt. Avg. Remaining Contractual Life (Years)
	1.89-3.75		156,000		3.47		8.41
	3.83-5.10		304,500		4.60		6.39
			460,500		4.22		7.08

Exercisable:

Range of Exercise Prices ($) Per Share	Stock Options Exercisable		Wgt. Avg. Exercise Price ($) Per Share
1.89-3.75		26,000		2.22
3.83-5.10		130,900		4.39
		156,900		4.03

The weighted-average grant-date fair value per option granted during the years ended December 31, 2018 and 2017 was $1.61 and $1.58, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018 and 2017 was approximately $0 and $107, respectively.

In connection with the restricted stock units granted to non-employee directors, the Company accrues compensation expense based on the estimated number of shares expected to be issued, utilizing the most current information available to the Company at the date of the consolidated financial statements. The Company estimates the fair value of the restricted stock unit awards based upon the market price of the underlying common stock on the date of grant.

As of December 31, 2018, there was approximately $703 of total unrecognized compensation cost related to non-vested share-based compensation arrangements, including stock options and restricted stock units. This compensation cost is expected to be recognized approximately over four years.