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STOCK-BASED COMPENSATION

As of

September 30, 2018,

we have unvested restricted stock awards and stock options granted under stock-based compensation plans that are described more fully in Note

to the consolidated financial statements in our

2017

Form

-K. On

June 27, 2018,

our stockholders approved the amendment and restatement of the

2014

Stock Plan (the “Plan”) to increase the number of shares of common stock that

may

be delivered pursuant to awards granted under the Plan from

500,000

1,000,000

shares.

As of

September 30, 2018,

total unrecognized compensation expense related to unvested restricted stock awards and stock options was

$1,434.

The weighted average period over which this expense is expected to be recognized is

3.1

years. The following table shows the allocation of the compensation expense we recorded during the

three

and

nine

months ended

September 30, 2018

and

2017,

respectively, related to stock-based compensation:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Cost of revenues	$	-	$	1	$	-	$	5
Selling expense		-		-		-		-
Engineering and product development expense		3		1		6		5
General and administrative expense		177		104		466		282
	$	180	$	106	$	472	$	292

There was

stock-based compensation expense capitalized in the

three

nine

months ended

September 30, 2018

2017.

Restricted Stock Awards

We record compensation expense for restricted stock awards based on the quoted market price of our stock at the grant date and amortize the expense over the vesting period. Restricted stock awards generally vest over

four

years. However, in

March 2018

and

2017,

we granted

32,000

and

22,500

shares of restricted stock, respectively, to our independent directors. These shares vest

25%

at each of

March 31,

June 30,

September 30,

and

December 31

of the year in which they were granted. The total compensation expense related to these shares is

$270

and

$143,

respectively, and is recorded as the shares vest.

The following table summarizes the activity related to unvested shares of restricted stock for the

nine

months ended

September

30,

2018:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested shares outstanding, January 1, 2018		75,225		$	5.29
Granted		95,600			8.24
Vested		(47,575	)		6.96
Forfeited		-			-
Unvested shares outstanding, September 30, 2018		123,250			7.02

The total fair value of the shares that vested during the

nine

months ended

September 30, 2018

and

2017

was

$370

and

$290,

respectively, as of the vesting dates of these shares.

Stock Options

We record compensation expense for stock options based on the fair market value of the options as of the grant date.

option

may

be granted with an exercise period in excess of

ten

years from the date of grant. Generally, stock options will be granted with an exercise price equal to the fair market value of our stock on the date of grant and will vest over

four

years.

The fair value for stock options granted during the

nine

months ended

September 30, 2018

and

2017

was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	201 8			201 7
Risk-free interest rate		2.75	%		2.14	%
Dividend yield		0.00	%		0.00	%
Expected common stock market price volatility factor		.39			.39
Weighted average expected life of stock options (years)		6.25			6.25

The per share weighted average fair value of stock options issued during the

nine

months ended

September 30, 2018

and

2017

was

$3.50

and

$2.64,

respectively.

The following table summarizes the activity related to stock options for the

nine

months ended

September 30, 2018:

	Number of Shares		Weighted Average Grant Date Fair Value
Options outstanding, January 1, 2018 (4,950 exercisable)		76,400	$	5.98
Granted		189,800		8.14
Exercised		-		-
Forfeited		-		-
Options outstanding, September 30, 2018 (22,700 exercisable)		266,200		7.52