8. Shareholders’ Equity and Stock-based Compensation

The Company has a 2006 Equity Incentive Plan and a 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan, which was approved by the shareholders on April 24, 2015, replaced the 2006 Equity Incentive Plan. New grants may not be made under the 2006 plan; however certain option grants under the 2006 plan remain exercisable as of September 30, 2016. The aggregate number of shares of common stock for which awards could be granted under the 2015 Equity Incentive Plan as of the date of adoption was 500 shares. Additionally, as outstanding options under the 2006 plan expire, the shares of the Company’s common stock subject to the expired options will become available for issuance under the 2015 Equity Incentive Plan.

Under the 2015 Equity Incentive Plan, executives, employees and outside directors receive awards of options to purchase common stock. In addition, the Company may also grant stock awards, stock appreciation rights, restricted stock units and other equity-based awards, although no such awards, other than awards under the director program and management purchase program described below, had been granted as of September 30, 2016. Under all awards, the terms are fixed on the grant date. Generally, the exercise price of stock options equals the market price of the Company’s stock on the date of the grant. Options under the plans generally vest over three years, and have a maximum term of 10 years.

Additionally, the board has established the non-employee directors’ stock fee election program, referred to as the director program, as an award under the 2015 Equity Incentive Plan. The director program gives each non-employee director the right under the 2015 Equity Incentive Plan to elect to have some or all of his quarterly director fees paid in common shares rather than cash. No shares were issued in lieu of cash for director fees under the director program for the nine months ended September 30, 2016 and 2015, respectively.

On July 23, 2008, the Compensation Committee of the Board of Directors approved the non-employee director and executive officer stock purchase program, referred to as the management purchase program, as an award under the 2015 Plan. The purpose of the management purchase program is to permit the Company’s non-employee directors and executive officers to purchase shares of the Company’s Common Stock directly from the Company. Pursuant to the management purchase program, as amended, participants may elect to purchase shares of Common Stock from the Company not exceeding an aggregate of $100 during any fiscal year. Participants may make such election one time during each twenty business day period following the public release of the Company’s earnings announcement, referred to as a window period, and only if such participant is not in possession of material, non-public information concerning the Company and subject to the discretion of the Board to prohibit any transactions in Common Stock by directors and executive officers during a window period. There were no shares purchased under the management purchase program during the nine months ended September 30, 2016 and 2015, respectively.

Stock option activity as of and during the nine months ended September 30, 2016 was as follows:



			Weighted-average		Aggregate
	Number of Shares		Exercise Price		Intrinsic Value

Outstanding at December 31, 2015	1,324	$	6.36
Options forfeited or cancelled	-		-
Options expired	(60)		5.81
Options granted	180		7.08
Options exercised	(1)		3.16

Outstanding at September 30, 2016	1,443	$	6.47	$	988

Exercisable at September 30, 2016	1,083	$	6.38	$	933

Available for future grant at December 31, 2015	490

Available for future grant at September 30, 2016	371

The number of shares available for future grants at September 30, 2016 does not include a total of up to 1,221 shares subject to options outstanding at September 30, 2016 under the 2006 plan which will become available for grant under the 2015 Equity Incentive Plan in the event of the expiration of such options.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of subjective assumptions, including the expected stock price volatility. Because the Company’s options have characteristics different from those of traded options, in the opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of its options. The weighted average fair value of options granted was $4.15 for options granted during the nine months ended September 30, 2016. The weighted average fair value of options granted was $7.14 for options granted during the nine months ended September 30, 2015.

The Company calculates expected volatility for stock options and awards using the Company’s historical volatility.

The Company currently estimates a zero percent forfeiture rate for stock options, but will continue to review this estimate in future periods.

The risk-free rates for the expected terms of the stock options and awards are based on the U.S. Treasury yield curve in effect at the time of grant.

The weighted average remaining contractual life of options exercisable at September 30, 2016 was 4.16 years.

The Company recorded $159 and $506 of non-cash stock option expense for the three and nine months ended September 30, 2016. The Company recorded $131 and $445 of non-cash stock option expense for the three and nine months ended September 30, 2015. As of September 30, 2016, there was $1,002 of total unrecognized compensation costs related to non-vested awards that are expected to be recognized over a weighted-average period of 1.0 years.

The Company also has an Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan, as amended in September 30 of 2016, provides that a maximum of 300 shares may be sold under the Purchase Plan. There were 5 and 14 shares purchased under the plan for the three and nine months ended September 30, 2016 and a total of 3 and 10 shares purchased for the three and nine months ended September 30, 2015.

On May 18, 2016, the Company completed a public offering and sale of 805 shares of common stock at a price to the public of $5.25 per share less an underwriting discount of $0.3675 per share. The net proceeds from this offering, after deducting underwriting discounts and offering expenses, totaled approximately $3,678 and were used for working capital and general corporate purposes.