NOTE 12.  STOCK-BASED COMPENSATION PLAN



Under the Company’s current 2015 Stock Incentive Plan (the “2015 Plan”) and the previous 2005 Stock Incentive Plan (the “2005 Plan”), the Company’s Board of Directors (the “Board of Directors”) has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries.  The 2015 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units.  The aggregate number of shares of common stock that may be granted through awards under the 2015 Plan to any employee in any calendar year may not exceed 500 shares.  The 2005 Plan continued in effect until June 2015 when it expired in accordance with its terms.  The 2015 Plan will continue in effect until December 2025 unless terminated sooner.  As of December 31, 2017, the number of shares authorized and reserved for issuance under the 2015 Plan is 6,153, subject to automatic annual increase equal to 5% of the total number of shares of the Company’s outstanding common stock.



Options Granted:



During the year ended December 31, 2017, the Company issued stock options for an aggregate of 463 shares under the 2015 Plan to directors and employees of the Company.  Of the 463 options issued, 38 options vest in four equal consecutive quarterly tranches from the date of grant.  325 vest in three equal tranches on December 31, 2017, December 31, 2018 and December 31, 2019.  The remaining 100 options vested immediately.



For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:































Using these assumptions, the fair value of the stock options granted during the years ended December 31, 2017, 2016, and 2015 was $1,020, $299, and $320, respectively, which will be amortized over the vesting period of the options.



On June 1, 2017, the Company issued and granted to an employee a restricted stock award of 500 restricted shares under the 2015 Plan, of which (i) 250 restricted shares will vest if, on or before June 1, 2022, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $10.00 per share for twenty consecutive trading days; and (ii) 250 restricted shares will vest if, on or before June 1, 2022, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $12.00 per share for twenty consecutive trading days.  For computing the fair value of the 500 restricted shares with a market condition, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.



On July 1, 2016, the Company issued and granted to an employee a restricted stock award of 100 restricted shares under the 2015 Plan, which will vest if, on or before July 1, 2020, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $15.00 per share for twenty consecutive trading days. For computing the fair value of the 100 restricted shares subject to a market condition, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.



Market Condition Restricted Shares Granted







Using these assumptions, the fair value of the market condition restricted stock awards granted on June 1, 2017 was approximately $1,995 and July 1, 2016 was approximately $105.



The total non-cash stock compensation expense for continuing operations related to stock options and restricted stock awards recorded by the Company was as follows:







For the years ended December 31, 2017, 2016, and 2015, the majority of stock-based compensation costs were classified as selling, general and administrative expense.  A summary of changes in outstanding options and restricted stock awards during the year ended December 31, 2017 is as follows:





The following table summarizes the exercise price range, weighted average exercise price, and remaining contractual lives by significant ranges for options outstanding and exercisable as of December 31, 2017:







The intrinsic value of options exercised and restricted stock awards vested was $28,  $18, and $474 during the years ended December 31, 2017, 2016, and 2015, respectively.  Total fair value of shares vested during the years ended December 31, 2017, 2016, and 2015 was $1,123,  $938, and $5,490, respectively.



The fair value of unvested restricted stock awards is determined based on the market price of our shares of common stock on the grant date or using the Monte-Carlo pricing model.  As of December 31, 2017, there were 367 unvested stock options and unrecognized compensation cost of $988 related to unvested stock options, as well as 850 unvested restricted stock awards and unrecognized compensation cost of $1,391 related to unvested restricted stock awards.  Unrecognized compensation cost of unvested stock options and restricted stock awards are expected to be recognized over the weighted average period of less than one year.