Stock

based Compensation

– At

September 30, 2017,

we have

three

stock-based compensation plans in effect. We record compensation cost related to unvested stock awards by recognizing the unamortized grant date fair value on a straight line basis over the vesting periods of each award. We have estimated forfeiture rates based on our historical experience. Stock option compensation expense for the

three

and

nine

month periods ended

September 30, 2017

and

2016

has been recognized as a component of general and administrative expenses in the accompanying Consolidated Financial Statements. We recorded

$12,000

and

$7,000

of stock-based compensation expense for the

three

months ended

September 30, 2017

and

2016,

respectively, and

$39,000

and

$17,000

for the

nine

months ended

September 30, 2017

and

2016,

respectively.

As of

September 30, 2017,

there is

$90,000

of unrecognized compensation cost related to stock options. During the quarter ended

September 30, 2017,

an aggregate of

5,000

options were granted to a new independent member of our board of directors pursuant to the

2011

Non-Employee Director Option Plan (Director Plan). Pursuant to the terms of the Director Plan, the options were granted at fair value on the date of the grant. During the

three

and

nine

months ended

September 30, 2017,

6,000

options and

18,000

options, respectively, expired unexercised, net of cancellation. During the

nine

months ended

September 30, 2017,

60,000

options were exercised. The following table summarizes options as of

September 30, 2017:

	# of Shares		Wgt Avg Exercise Price		Wgt Avg Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding at September 30, 2017		243,500	$	2.17		5.2	$	405,160
Vested and exercisable at September 30, 2017		206,500	$	1.87		4.5	$	403,880

The estimated fair value of options granted

is calculated using the Black-Scholes option pricing model with assumptions as previously disclosed in our

2016

Form

-K.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the company

’s closing stock price on the last trading day of the

third

quarter of

2017

and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on

September 30, 2017.

The amount of aggregate intrinsic value will change based on the market value of the company’s stock.