Note 8. Stock Options and Restricted Stock Units

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Stock Options and Restricted Stock Units

On May 23, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan (the “2014 Plan”).  Under the terms of the 2014 Plan, the Company is authorized to issue incentive awards for up to 200,000 shares of common stock to employees and other personnel.  The awards may be in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units and performance awards.  The 2014 Plan is effective through March 31, 2024.  The Company has issued 160,000 and 40,000 awards as of December 31, 2015 and 2014, respectively.

On August 9, 2010, the shareholders of the Company approved the 2010 Equity Incentive Plan (the “2010 Plan”).  Under the terms of the 2010 Plan, 150,000 shares of the Company’s common stock were authorized for the issuance of stock options and restricted stock.  The 2010 Plan also provides for an automatic annual increase in the number of authorized shares of common stock issuable beginning in 2011 equal to the lesser of (a) 2% of shares outstanding on the last day of the immediate preceding year, (b) 50,000 shares, or (c) such lesser number of shares as the Company’s board of directors shall determine, provided, however, in no event shall the maximum number of shares that may be issued under the Plan pursuant to stock awards be greater than 15% of the aggregate shares outstanding on the last day of the immediately preceding year.  With the automatic increases, there were 220,416 shares of common stock on January 1, 2012.  On January 20, 2012, the Company’s Board of Directors approved an increase in the number of shares authorized under the 2010 Plan from 220,416 to 420,416.This increase was ratified by the shareholders of the Company on June 29, 2012. On December 31, 2015, there were no shares remaining for awards to be issued under the 2010 Plan.

  The following is a summary of stock options issued during the year ended December 31, 2015 and 2014:

	Number of Options Outstanding			Range of Exercise Price		Weighted Average Exercise Price		Aggregate Intrinsic Value
Balance at December 31, 2013		280,836		$	0.01 - $8.25	$	4.97	$	1,340,684
Options granted		54,000		$	9.26 - $13.49	$	12.39		-
Options exercised		(76,665	)	$	0.01 - $7.76	$	2.23	$	646,266
Balance at December 31, 2014		258,171		$	0.01 - $13.49	$	7.32	$	608,750
Options granted		10,000		$	6.80	$	6.80		-
Options exercised		(20,671	)	$	0.01 - $2.81	$	2.55	$	106,868
Options forfeited		(1,500	)	$	9.26	$	9.26		-
Balance at December 31, 2015		246,000		$	0.01 - $13.49	$	7.69	$	187,798

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e. the aggregate difference between the closing price of our common stock on December 31, 2015 and 2014 of $5.77 and $8.96, respectively, and the exercise price for in-the-money options) that would have been received by the holders if all instruments had been exercised on December 31, 2015 and 2014. As of December 31, 2015, there was $754,288 of unrecognized compensation cost related to our unvested stock options, which will be recognized through 2018.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2015:

		Options Outstanding						Options Exercisable
Exercise Price		Number		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Number
$	0.01 - $1.00		19,700	$	0.01		6.06		19,700
$	1.01 - $2.00		4,550	$	1.70		5.40		4,550
$	2.01 - $3.00		6,500	$	2.65		2.23		1,500
$	3.01 - $4.00		14,000	$	3.33		6.25		14,000
$	4.01 - $8.00		108,750	$	7.67		5.74		55,001
$	8.01 - $9.00		40,000	$	8.25		2.64		25,000
$	9.01 - $10.00		12,500	$	9.26		8.99		3,125
$	10.01-$13.49		40,000	$	13.49		3.19		17,500
Total			246,000	$	7.69		4.94		140,376

 Of the 246,000 stock options outstanding, 147,200 are non-qualified stock options.  Of the outstanding options, 223,500 issued under the 2010 Plan have been registered with the SEC, and 22,500 issued under the 2014 Plan have not yet been registered with the SEC.

The fair value of common stock options issued during the year ended December 31, 2015 and 2014 were estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used:

	Year ended  December 31, 2015			Year ended  December 31, 2014
Expected dividend yield		1.76	%		0.33	%
Expected stock price volatility		158	%		161	%
Weighted-average risk-free interest rate		1.84	%		1.32	%
Weighted-average expected life of options (in years)		5.97			4.5

During the year ended December 31, 2015, the Company also issued 110,000 restricted stock units with an average intrinsic value of $7.32 per share on the date of issuance and a two-year vesting period. These awards have not yet been registered with the SEC. Vesting on a majority of these restricted stock units is tied to the achievement of certain milestones related to the development of the Company’s cloud-based disclosure reporting software. During the year ended December 31, 2015, 25,000 of the restricted stock units vested and the Company capitalized a total of $180,000. These costs are included in capitalized software on the Consolidated Balance Sheet as of December 31, 2015. It is anticipated that a majority of the remaining expense associated with the vesting of any future shares will be capitalized as well. During the year ended 2014, the Company issued 26,000 shares of restricted stock units with an intrinsic value of $9.26 per share on the date of issuance and a three-year vesting period. These awards have not yet been registered with the SEC.  As of December 31, 2015, there was $641,840 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2017.

During the year ended December 31, 2015 and 2014, we recorded expense of $485,498 and $360,865, respectively, related to stock options and restricted stock units. Additionally, $195,411 of expense was included as capitalized software on the Consolidated Balance Sheet as of December 31, 2015.