| Share-based Compensation | 6. Share-based Compensation Employee Stock Option Plans The Company’s share-based incentive
plans offering stock options primarily consists of two plans. Under both plans, one new share is issued for each stock option exercised.
The plans are described below. The Company’s 1998 Incentive Plan
(the “1998 Plan”) was the Company’s primary plan through November 2007. Under this plan shares of common stock
were made available for issuance to employees and directors. Through December 1999, 1,066,000 options were granted that would cliff
vest after 9.8 years; however, such vesting was accelerated for 637,089 of these options upon meeting certain earnings per share
goals through the fiscal year ended September 30, 2003. Subsequent to December 1999 and through March 2002, 1,248,250 options were
granted that would cliff vest after 6.0 years; however, such vesting was accelerated for 300,494 of these options upon meeting
certain earnings per share goals through the fiscal year ended September 30, 2005. The Company’s 2007 Equity Incentive
Plan (the “2007 Plan”) was restated and approved by the shareholders on December 12, 2015. Provisions of the restated
2007 Plan include the granting of up to 2,000,000 incentive and non-qualified stock options, stock appreciation rights, restricted
stock and restricted stock units. Options may be granted to employees, officers, non-employee directors and other service providers
and may be granted upon such terms as the Compensation Committee of the Board of Directors determines in their sole discretion. Of the options granted subsequent to
March 2002, all vesting schedules are based on 3 or 4-year vesting schedules, with either one-third or one-fourth vesting on the
first anniversary and the remaining options vesting ratably over the remainder of the vesting term. Generally, directors and officers
have 3-year vesting schedules and all other employees have 4-year vesting schedules. Additionally, in the event of a change in
control or the occurrence of a corporate transaction, the Company’s Board of Directors has the authority to elect that all
unvested options shall vest and become exercisable immediately prior to the event or closing of the transaction. All options outstanding
as of September 30, 2017 had contractual lives of ten years. Under the 1998 Plan, 2,500,000 shares
were authorized for grant. As of September 30, 2017, there are no options outstanding under the 1998 Plan. The remaining 50,000
of these options were exercised on July 11, 2017. As of September 30, 2017, there were
767,156 options outstanding under the 2007 Plan. As of September 30, 2017, the 2007 Plan had 471,500 authorized unissued options. A summary of the stock option activity
under the Company’s plans for the nine months ended September 30, 2017 is as follows:
Number of shares Weighted average exercise price
Options outstanding at beginning of year 850,232 $ 8.06
Granted 105,000 9.90
Less:
Exercised (178,662 ) 5.90
Forfeited prior to vesting (7,103 ) 10.88
Canceled or expired (2,311 ) 9.68
Options outstanding at September 30, 2017 767,156 8.79
Options exercisable at end of September 30, 2017 502,940 $ 7.71 As of September 30, 2017, the total
remaining unrecognized compensation cost related to non-vested stock options, net of forfeitures, was approximately $975, which
will be recognized over a weighted average period of 1.99 years. Stock Option Repurchase From March 11, 2016 to March 17, 2016,
the Company offered to repurchase eligible vested options to purchase shares under the 1998 Plan and the 2007 Plan from employees.
The Company repurchased delivered options at a repurchase price equal to the difference between the closing market price on the
date of the employee’s communication of accepting the repurchase offer and the exercise price of such employee’s delivered
options, subject to applicable withholding taxes and charges. The Company repurchased 225,542 stock options from employees at an
average purchase price of $7.77. Employee Stock Purchase Plan The Company issues shares to employees
under the Company’s 2014 Employee Stock Purchase Plan (the “ESPP”). The ESPP was approved by the Company’s
shareholders on December 12, 2014. As of September 30, 2017, 471,160 of the originally approved 500,000 shares were available for
offerings under the ESPP. Offering periods under the ESPP commence on each January 1 and July 1, and continue for a duration of
six months. The ESPP is available to all employees who do not own, or not are deemed to own, shares of stock making up an excess
of 5% of the combined voting power of the Company and its subsidiaries. During each offering period, each eligible employee may
purchase shares under the ESPP after authorizing payroll deductions. Under the ESPP, each employee may purchase up to the lesser
of 2,500 shares or $25 of fair market value (based on the established purchase price) of the Company’s stock for each offering
period. Unless the employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used
to purchase common stock on the last business day of the period at a price equal to 85% (or a 15% discount) of the fair market
value of the common stock on the first or last day of the offering period, whichever is lower. Share-based compensation expense related
to ESPP has been recorded as follows:
Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Cost of goods sold $ 5 $ 7 $ 16 $ 18
Sales and marketing 10 15 31 42
Research and product development 25 40 80 106
General and administrative 122 113 341 328
$ 162 $ 175 $ 468 $ 494 |
