11.	Share-based Compensation

All stock option awards are amortized based on their graded vesting over the requisite service period of the awards. Compensation costs are recognized over the requisite service period using the accelerated method and included in selling expenses and general and administrative expenses, based upon the department to which the associated employee or non-employee resides.

Stock Incentive Plan

The Company has various stock option and stock-based incentive plans and agreements whereby stock options and restricted stock awards were made available to certain employees, directors and others approved by the Company’s Board of Directors (the “Board) or Compensation Committee. Stock options are granted at, or above, fair market value and generally expire in three to ten years from the grant date. Restricted stock awards are granted at the fair market value on the date of grant and generally become exercisable over a period of up to four years. Awards typically vest and are issued only if the participants remain employed by the Company through the vesting date. Stock options and restricted stock awards are issued from shares under one of the Company’s plans described below. Grants may be made in the form of stock options, restricted stock units or unrestricted common stock.

 

On April 23, 2014, the Company’s Board adopted the 2014 Amended and Restated Stock Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the Company’s shareholders at the 2014 Annual Meeting and became effective as of the date it was adopted by the Board of Directors. The 2014 Plan provides for the issuance of a maximum of 2.0 million shares of common stock in connection with the grant of stock-based or stock-denominated awards. As of December 31, 2016, a total of 0.7 million common shares remained available for future grant under the 2014 Plan. The 2014 Plan replaced our 2007 Stock Incentive Plan (the “Plan”) and provided for the issuance of a maximum of 2.0 million shares of common stock in connection with the grant of stock-based or stock-denominated awards. On May 27, 2011, the Company’s stockholders approved the reservation of an additional 3.0 million shares to be issued under the Plan. The Plan is no longer in effect other than for stock options that were previously granted and remain outstanding. Options representing approximately 0.5 million and rights representing less than 0.1 million remain outstanding under this plan. Restricted stock awards currently outstanding under the Plan will remain outstanding in accordance with the terms of that plan.

The Company granted restricted shares and stock options under the Plan and 2014 Plan during the year ended December 31, 2015 and stock options under the 2014 Plan during the year ended December 31, 2016.

Shares Forgone to Satisfy Minimum Statutory Withholdings

During the years ended December 31, 2016 and 2015, shares of common stock were issued to employees and directors as their restricted stock awards vested or stock options were exercised. Under the terms of the Company’s stock plans, at the election of each employee, the Company can authorize a net settlement of distributable shares to employees after satisfaction of an individual employees’ tax withholding obligations. For the years ended December 31, 2016 and 2015, respectively, the Company received 0.1 million shares from employees for tax withholding obligations.

Restricted Shares

During the year ended December 31, 2016, the Company did not grant any restricted shares. During the year ended December 31, 2015, the Company granted 0.1 million restricted shares, which vest over a three- or four-year period only if the participants remain employed by the Company through the vesting date. Restricted shares entitle the holder to receive, upon meeting certain vesting criteria, a specified number of shares of the Company’s common stock. Stock-based compensation cost of restricted shares is measured by the market value of the Company’s common stock on the date of grant. Compensation cost associated with certain restricted share grants also takes into account market conditions in its measurement.

The following table summarizes restricted share activity, excluding the Company’s employee stock purchase plan, for the years ended December 31:

 

		Number of shares				Weighted average grant date fair value				Aggregate fair value
Unvested at December 31, 2014			256,003			$	1.78
Granted			61,663				2.60
Vested			(83,029	)			1.53			$	244,319
Vested shares forgone to satisfy minimum statutory withholding			(24,031	)			2.96			$	71,445
Forfeitures			(39,774	)			1.79
Unvested at December 31, 2015			170,832				2.09
Granted			—				—
Vested			(64,182	)			1.74			$	236,161
Vested shares forgone to satisfy minimum statutory withholding			(16,484	)			2.81			$	49,592
Forfeitures			(32,833	)			2.18
Unvested at December 31, 2016			57,333			$	2.21

 

As of December 31, 2016, there was less than $0.1 million of pre-tax total unrecognized compensation cost related to non-vested restricted shares, which will be adjusted for future forfeitures, if any. The Company expects to recognize such cost over the period ending in 2019.

Employee Stock Purchase Plan

In May 2014, the Company received approval from stockholders to adopt an employee stock purchase plan (“ESPP”) effective October 2014 (collectively the “Original ESPP”). Under the Original ESPP, 200,000 shares of common stock are authorized for purchase by eligible employees at a 15% discount through payroll deductions during the six month offering periods. Shares were purchased in whole numbers and generally would be the last day of the offering period. On September 7, 2016, the Company received approval from shareholders for an additional 350,000 shares. No employee may purchase more than $25,000 worth of fair market value shares in any calendar year. As allowed under the ESPP, a participant may elect to withdraw from the plan, effective for the purchase period in progress at the time of the election with all accumulated payroll deductions returned to the participant at the time of withdrawal. As of December 31, 2016, there were 363,821 shares remaining available for future issuance. The following table summarizes the activity relating to the Company’s ESPP program for the years ended December 31:

 

		2016				2015
Compensation expense		$	113,531			$	40,233
Shares of stock sold to employees			88,109				98,070
Weighted average fair value per ESPP award		$	2.73			$	2.73

Stock Options

The Company calculates the fair value of stock option awards using the Black-Scholes option pricing model, which incorporates various assumptions including volatility, expected term, risk-free interest rates and dividend yields. The expected volatility assumption is based on historical volatility of the Company’s common stock over the most recent period commensurate with the expected life of the stock option granted. The Company uses historical volatility because management believes such volatility is representative of prospective trends. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of the stock option awarded. The Company determines expected lives as the average of the vesting period and the contractual period. Dividend yields have not been a factor in determining fair value of stock options granted as the Company has never issued cash dividends and does not anticipate issuing cash dividends in the future.

 

During the year ended December 31, 2016, the Company granted 0.6 million stock options, none of which were issued to Board members. During the year ended December 31, 2015, the Company granted 0.5 million stock options, of which 0.2 million were issued to Board members, at exercise prices which were a preceding five-day average price on the date of grant and a vesting period of 12-months. The following table details the various stock option and inducement stock option activity for the years ended December 31:

 

2007 Plan (Options)		Number of Authorized Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in Years)				Aggregate Intrinsic Value
Outstanding at December 31, 2014			595,000			$	2.19				1.51			$	571,717
Granted			—				—				—
Exercised			(52,030	)			1.64								140,368
Exercised shares forgone to satisfy minimum statutory withholding			(7,688	)			1.76
Cashless exercise			(41,950	)			1.70
Forfeited			(5,000	)			1.93
Outstanding at December 31, 2015			488,332			$	2.31				0.41			$	348,415
Granted			—				—				—
Exercised			—				—								—
Exercised shares forgone to satisfy minimum statutory withholding			—				—
Cashless exercise			—				—
Forfeited			—				—
Outstanding at December 31, 2016			488,332			$	2.31				0.25			$	118,899
Exercisable at December 31, 2016			483,332			$	2.29

Aggregate Intrinsic Value = Excess of market value over the option exercise price of all in-the-money stock options.

 

2014 Plan (Options)		Number of Authorized Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in Years)				Aggregate Intrinsic Value
Outstanding at December 31, 2014			530,000			$	2.69				5.00			$	243,800
Granted			470,000			$	2.90				3.25			$	—
Exercised			—
Exercised shares forgone to satisfy minimum statutory withholding			—
Forfeited			(30,000	)			2.69
Outstanding at December 31, 2015			970,000			$	2.79				3.58			$	222,200
Exercisable at December 31, 2015			410,903			$	2.85
Granted			600,000				2.76				4.60
Exercised			(1,866	)			2.69
Exercised shares forgone to satisfy minimum statutory withholding			(798	)			2.69
Cashless exercise			(12,614	)			2.69
Forfeited			(304,723	)			2.70
Outstanding at December 31, 2016			1,249,999			$	2.80				4.26			$	—
Exercisable at December 31, 2016			616,597			$	2.87

 

Aggregate Intrinsic Value = Excess of market value over the option exercise price of all in-the-money stock options.

 

Inducement Options		Number of Authorized Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in Years)				Aggregate Intrinsic Value
Outstanding at December 31, 2014			800,000			$	2.25				3.89			$	720,000
Granted			—				—				—				—
Exercised			—				—				—				—
Forfeited			—				—				—				—
Outstanding at December 31, 2015			800,000			$	2.25				2.90			$	616,000
Granted			—				—				—				—
Exercised			—				—				—				—
Forfeited			—				—				—				—
Outstanding at December 31, 2016			800,000			$	2.25				2.26			$	240,000
Exercisable at December 31, 2016			756,250			$	2.25

Aggregate Intrinsic Value = Excess of market value over the option exercise price of all in-the-money stock options.

The following table summarizes information about stock options outstanding at December 31, 2016:

 

2007 Plan (Options):		Options Outstanding												Options Exercisable
Range of Exercise Prices		Number of Shares Outstanding				Weighted- Average Remaining Contractual Life				Weighted- Average Exercise Price				Number of Shares Exercisable				Weighted- Average Exercise Price
$1.50 - $1.75			110,000				—			$	1.51				110,000			$	1.51
$1.76 - $2.00			91,666				—				1.93				91,666				1.70
$2.01 - $3.00			286,666				0.25				2.71				281,666				2.71
Outstanding at December 31, 2016			488,332				0.25			$	2.31				483,332			$	2.29

 

2014 Plan (Options):		Options Outstanding												Options Exercisable
Range of Exercise Prices		Number of Shares Outstanding				Weighted- Average Remaining Contractual Life				Weighted- Average Exercise Price				Number of Shares Exercisable				Weighted- Average Exercise Price
$2.01 - $3.00			1,249,999				4.26			$	2.80				616,597			$	2.87
Outstanding at December 31, 2016			1,249,999				4.26			$	2.80				616,597			$	2.87

 

Inducement Options:		Options Outstanding												Options Exercisable
Range of Exercise Prices		Number of Shares Outstanding				Weighted- Average Remaining Contractual Life				Weighted- Average Exercise Price				Number of Shares Exercisable				Weighted- Average Exercise Price
$1.50 - $1.75			400,000				2.26			$	1.75				381,250			$	1.75
$2.26 - $2.75			400,000				2.26				2.75				375,000				2.75
Outstanding at December 31, 2016			800,000				2.26			$	2.25				756,250			$	2.25

 

The following is the average fair value per share estimated on the date of grant and the assumptions used for options granted during the years ended December 31:

 

Stock Options:		2016				2015
Expected volatility			35%				50% to 54%
Risk free interest rate			0.69%				0.25% to 0.66%
Expected lives at date of grant (in years)			5.01				4.43
Weighted average fair value of options granted		$	2.76				$    2.90

Stock-based compensation expense

The following table presents the total stock-based compensation expense, which is included in selling, general and administrative expenses for the years ended December 31 (in thousands):

 

		2016				2015
Restricted share expense		$	151			$	107
Stock option expense			311				889
Total stock-based compensation expense		$	462			$	996

Common Share Repurchase Program

Stock repurchases may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as our management deems to be appropriate. The timing and actual number of shares repurchased will depend on a variety of factors, including price, financing and regulatory requirements, as well as other market conditions. The program does not require us to repurchase any specific number of shares or to complete the program within a specific period of time. During the years ended December 31, 2016 and 2015, the Company did not repurchase any shares in the open market.