9. Stock Options

12 Months Ended

Dec. 31, 2017

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

Stock Options

On February 21, 2000, the Company's Board of Directors approved the adoption of the 2000 Incentive Stock Option Plan (the “Plan”) for TOR Minerals International, Inc. The Plan provides for the award of a variety of incentive compensation arrangements, including restricted stock awards, performance units or other non-option awards, to such employees and directors as may be determined by a Committee of the Board.  At the Annual Shareholders’ meeting on May 11, 2012, the maximum number of shares of the Company’s common stock that may be sold or issued under the Plan was increased to 500,000 shares subject to certain adjustments upon recapitalization, stock splits and combinations, merger, stock dividend and similar events; in addition the Plan was extended to May 23, 2022. 

For the years ended December 31, 2017 and 2016, the Company recorded $131,000 and $170,000, respectively, in stock-based employee compensation.  This compensation cost is included in the general and administrative expenses and cost of sales in the accompanying consolidated statements of operations.

On April 21, 2016, the Board of Directors granted the officers of the Company non-qualifying stock options (the “Performance Awards”). The Performance Awards, which are subject to the terms, definitions and provisions of the 2000 Incentive Plan as amended, consist of the following grants:

Officer's Name	Position	Five Year Performance Grant Award
Olaf Karasch	President & Chief Executive Officer	150,000
Mark Schomp	Executive Vice President, Sales & Marketing	50,000
Barbara Russell	Treasurer & Chief Financial Officer	15,000

The Performance Awards, which vest over a five year period, are based solely on the basis of satisfaction of the performance criteria established annually by the Company’s Board of Directors. The Performance Periods begin on January 1 of each calendar year and ending on December 31 of such year. The first Performance Period began on January 1, 2016 and ended on December 31, 2017. The final Performance Period shall begin on January 1, 2020 and shall end on December 31, 2020. The exercise price for the Performance Awards was set at the closing price of the Company’s stock on January 4, 2016, as established by NASDAQ, at $4.51 per share.

The 2017 Performance Awards consisted of 43,000 or one fifth of the five year total. Based on the satisfaction of the performance criteria established by the Company’s Board of Directors for the year ended December 31, 2017, the actual number of Performance Awards vested consisted of 5,138 or approximately 12% of the annual grant.

The Company granted options to purchase 6,000 shares of common stock in each of the years ended December 31, 2017 and 2016. The weighted average fair value per option at the date of grant for options granted in the years ended December 31, 2017 and 2016 was $3.79 and $2.73, respectively, as valued using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Twelve Months Ended December 31,
	2017	2016
Risk-free interest rate	2.10%	1.90%
Expected dividend yield	0.00%	0.00%
Expected volatility	0.48	0.59
Expected term (in years)	7.00	7.00

The risk free interest rate is based on the Treasury Constant Maturity Rate as quoted by the Federal Reserve at the time of the grant for a term equivalent to the expected term of the grant.  The estimated volatility is based on the historical volatility of our stock and other factors.  The expected term of options represents the period of time the options are expected to be outstanding from grant date.

The following table summarizes certain information regarding stock option activity:

			Options
	Total Reserved		Outstanding			Weighted Avg Exercise Price	Range of Exercise Prices
Balances at December 31, 2015		385,369		146,305		$13.24	$2.70 – $30.55
Granted				19,975		$4.51	$4.51 – $4.50
Forfeited or expired				(13,116	)	$10.38	$29.50 – $30.55
Balances at December 31, 2016		385,369		153,164		$10.84	$2.70 – $18.22
Granted				11,138		$6.04	$7.35 – $7.35
Forfeited or expired				(31,300	)	$10.79	$4.51 – $13.45
Balances at December 31, 2017		385,369		133,002		$5.33	$2.70 – $18.22

Of the 500,000 shares included in the Plan, there have been 114,631 options exercised. At December 31, 2017, there were 133,002 options outstanding and 252,367 were available for future issuance.

The number of shares of common stock underlying options exercisable at December 31, 2017 was 122,502 and the weighted-average remaining contractual life of those options is 5.32 years. Exercise prices on options outstanding at December 31, 2017, ranged from $2.70 to $18.22 per share as noted in the following table.

Options Outstanding at December 31,
2017		2016		Range of Exercise Prices
	23,563		22,725	$   2.70 - $   4.99
	22,439		16,439	$   5.00 - $   9.99
	23,000		38,000	$ 10.00 - $ 10.99
	40,500		40,500	$ 11.00 - $ 12.99
	23,500		35,500	$ 13.00 - $ 18.22
	133,002		153,164

As of December 31, 2017, there was approximately $46,000 of compensation expense related to non-vested awards. This expense is expected to be recognized over a weighted average period of 0.85 years.