We have three share-based compensation plans that are administered by the Compensation Committee of the Board of Directors. We have an Employee Stock Incentive Plan for officers, other employees, consultants and independent contractors under which we have granted options and restricted stock units to officers and other employees, an Employee Stock Purchase Plan under which shares of our common stock may be acquired by employees at discounted prices, and a Non-Employee Director Stock Plan that provides for automatic grants of shares of our common stock to non-employee directors. New shares of our common stock are issued upon stock option exercises, vesting of restricted stock units, issuances of shares to board members and issuances of shares under our Employee Stock Purchase Plan.

As of December 31, 2018, there are 259,789 shares of common stock reserved in the aggregate for issuance pursuant to future awards under our Employee Stock Incentive Plan and 559,453 shares of common stock reserved in the aggregate for issuance pursuant to outstanding awards under our Employee Stock Incentive Plan. Although our Compensation Committee has authority to issue options, restricted stock, restricted stock units, share grants and other share-based benefits under our Employee Stock Incentive Plan, to date only restricted stock units and stock options have been granted under the plan. Options have been granted at an option price per share equal to the market value of our common stock on the date of grant, vest over a four year period and expire seven years after the date of grant. Restricted stock units vest over a four year period and entitle the holders to one share of our common stock for each restricted stock unit. Reserved shares underlying outstanding awards, including options and restricted shares, that are forfeited are available under the Employee Stock Incentive Plan for future grant.

As of December 31, 2018, there were 60,000 shares of common stock reserved in the aggregate for issuance pursuant to future restricted share awards under our Non-Employee Director Stock Plan and 16,000 shares of common stock reserved in the aggregate for issuance pursuant to outstanding stock option awards under our Non-Employee Director Stock Plan. Under the terms of the plan, each non-employee director will automatically be granted 2,000 shares of our common stock on the date of each annual meeting at which such director is elected to serve on the board. At our May 11, 2017 annual meeting, our shareholders, upon recommendation of the Board of Directors, approved amendments to the Non-Employee Director Stock Plan that eliminated annual stock option grants for non-employee directors and provided for annual restricted share grants of 2,000 shares of common stock which vest in four equal quarterly installments during the year after the grant date, provided the non-employee director is still serving as a director on the applicable vesting date.

On the date of our 2018 annual meeting, we issued a total of 8,000 shares of our common stock to our non-employee directors. The shares had an aggregate fair market value on the date of grant equal to $130,000 (grant date fair value of $16.25 per share). As of December 31, 2018, 4,000 of these shares were vested. The aggregate fair value of the outstanding unvested shares based on the closing price of our common stock on December 31, 2018 was $71,000.

On the date of our 2017 annual meeting, we issued a total of 8,000 shares of our common stock to our non-employee directors. The shares had an aggregate fair market value on the date of grant equal to $167,000 (grant date fair value of $20.90 per share).


	Options Outstanding		Weighted Average Exercise Price Per Share
Outstanding, December 31, 2017	568,525		$	10.24
Granted	52,850		19.46
Exercised	(89,183	)	7.94
Expired	(500	)	26.40
Forfeited	(8,650	)	14.10
Outstanding, December 31, 2018	523,042		$	11.48
Exercisable, December 31, 2018	360,318		$	9.40

The intrinsic value of an option is the amount by which the market price of the underlying common stock exceeds the option's exercise price. For options outstanding at December 31, 2018, the weighted average remaining contractual term of all outstanding options was 4.0 years and their aggregate intrinsic value was $3.6 million. At December 31, 2018, the weighted average remaining contractual term of options that were exercisable was 3.22 years and their aggregate intrinsic value was $3.1 million. The aggregate intrinsic value of stock options exercised was $1.0 million in 2018 and $782,000 in 2017. We received proceeds from stock option exercises of $525,000 in 2018 and $378,000 in 2017. The aggregate fair value of options that vested was $616,000 in 2018 and $443,000 in 2017.

The fair value of stock options granted to our employees and non-employee directors was estimated on the date of grant using the Black-Scholes model. The Black-Scholes valuation model incorporates ranges of assumptions that are disclosed in the table below. The risk-free interest rate is based on the United States Treasury yield curve at the time of grant with a remaining term equal to the expected life of the awards. We used historical experience to estimate the expected term, representing the length of time in years, that the options are expected to be outstanding. Expected volatility was computed based on historical fluctuations in the daily price of our common stock.

For stock options granted in the two year period ended December 31, 2018, we utilized the fair value of our common stock on the date of grant and employed the following key assumptions in computing fair value using the Black-Scholes option-pricing model:


	2018	2017
Risk-free interest rates	2.70% - 2.71%	2.14% - 2.15%
Expected life in years	5.00 - 5.35	5.00 - 5.29
Expected volatility	52.79% - 53.68%	52.30% - 52.86%
Dividend yield	0.00%	0.00%
Weighted average fair value on grant date	$9.59	$7.36

Restricted shares are granted under our Non-Employee Director Stock Plan. Restricted stock units are granted under our Employee Stock Incentive Plan. There were 32,350 restricted shares and restricted stock units granted in 2018 (weighted average grant date fair value of $18.67 each). There were 32,200 restricted shares and restricted stock units granted in 2017 (weighted average grant date fair value of $16.77 each). The aggregate fair value of outstanding restricted shares and restricted stock units based on the closing share price of our common stock as of December 31, 2018 was $995,000. The aggregate fair value of restricted shares and stock units that vested, based on the closing share price of our common stock on the vesting date, was $553,000 in 2018 and $453,000 in 2017.

The following is a summary of activity in restricted shares and restricted stock units for 2018:

Non-vested restricted stock units	Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2017	54,212		$	14.86
Granted	32,350		18.67
Vested	(30,151	)	13.84
Forfeited	—		—
Non-vested at December 31, 2018	56,411		$	17.59

We have an Employee Stock Purchase Plan available to eligible U.S. employees. Under terms of the plan, eligible employees may designate from 1% to 10% of their compensation to be withheld through payroll deductions, up to a maximum of $6,500 in each plan year, for the purchase of common stock at 85% of the lower of the market price on the first or last day of the offering period. Purchases under this plan were 16,403 shares in 2018 and 18,404 shares in 2017. At our 2018 annual meeting, our shareholders adopted amendments to the plan increasing the number of shares authorized for issuance under the plan by 150,000 and extending the expiration date of the plan to August 1, 2028. As of December 31, 2018, 174,469 shares remain available for future issuance under this plan.

Pre-tax share-based compensation expense for 2018 includes $675,000 for stock options and restricted stock units, $117,000 for our employee stock purchase plan, and $144,000 for 8,000 restricted shares issued to board members for compensation purposes. Pre-tax stock-based compensation expense for 2017 includes $667,000 for stock options and restricted stock units, $121,000 for our employee stock purchase plan, and $107,000 for 8,000 restricted shares issued to board members for compensation purposes.

At December 31, 2018, the total unrecognized compensation cost related to non-vested share-based compensation arrangements was $2.2 million and the related weighted average period over which such cost is expected to be recognized is 2.96 years.

In 2018, we recognized a $303,000 income tax benefit from the exercise of stock options and vesting of share-based payments, including $155,000 of excess tax benefits. In 2017, we recognized a $421,000 income tax benefit from the exercise of stock options and vesting of share-based payments, including $227,000 of excess tax benefits.