(5)	STOCK-BASED COMPENSATION PLANS

The Company’s 2005 Equity Incentive Plan, as amended (“2005 Plan”), terminated on March 17, 2015. The 2005 Plan provided for the grant of incentive stock options, restricted stock, restricted stock units and stock grants to eligible employees (including officers and employee-directors) and non-statutory stock options to eligible employees, directors and consultants. As of September 30, 2017, there were 331,331 vested options and 49,668 unvested options granted under the 2005 Plan that remained outstanding in accordance with their terms and there were no shares available for issuance under the 2005 Plan due to its termination.

The Company’s shareholders approved the 2015 Equity Incentive Plan (“2015 Plan”) in June 2015. The 2015 Plan replaces the 2005 Plan. The maximum number of shares of Common Stock that may be delivered to participants and their beneficiaries under the 2015 Plan is 200,000. The 2015 Plan provides for the grant of incentive stock options, stock appreciation right awards, restricted stock awards, stock unit awards and other stock-based awards to eligible recipients. The objectives of the 2015 Plan are to attract and retain the best possible candidates for positions of responsibility and provide for additional performance incentives by providing eligible employees with the opportunity to acquire equity in the Company. The 2015 Plan is administered by a committee of two or more outside directors from the Company’s Board of Directors (the “Committee”). The Committee determines the eligible individuals to whom awards under the 2015 Plan may be granted, as well as the time or times at which awards will be granted, the number of shares subject to awards to be granted to any eligible individual, the term of the award, vesting terms and conditions and any other terms and conditions of the grant in addition to those contained in the 2015 Plan. Each grant under the 2015 Plan will be confirmed by and subject to the terms of an award agreement. As of September 30, 2017, there were 16,750 vested options and 145,250 unvested options granted under the 2015 Plan. On June 20, 2017, the independent directors of the Board of Directors were granted 2,000 shares each of restricted Common Stock pursuant to the 2015 Plan. Fifty percent of the shares vest 12 months from the grant date, and the remaining shares vest 24 months from the grant date. As of September 30, 2017, 28,000 shares were available under the 2015 Plan.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of each option granted with the following weighted average assumptions:

	Quarters Ended September 30,					Nine Months Ended September 30,
Valuation Assumptions	2016 ⁽⁵⁾		2017			2016			2017

Expected life ⁽¹⁾		-		4.00			3.25			4.56
Risk-free interest rate ⁽²⁾		-		1.81	%		1.21	%		1.79	%
Expected volatility ⁽³⁾		-		55	%		39	%		50	%
Expected dividend yield		-		-			7.81	%		-
Expected forfeiture ⁽⁴⁾		-		30.0	%		27.0	%		11.7	%

⁽¹⁾	The expected life, in years, of stock options is estimated based on historical experience.

⁽²⁾	The risk-free interest rate is based on U.S. Treasury bills whose term is consistent with the expected life of the stock options.

⁽³⁾	The expected volatility is estimated based on historical and current stock price data for the Company.

⁽⁴⁾	Forfeitures are estimated based on historical experience.

⁽⁵⁾	The Company did not issue any options during the quarter ended September 30, 2016.

A summary of option activity as of September 30, 2017, and changes during the nine months then ended, is presented below:

	Number of Options			Weighted- Average Exercise Price		Range of Exercise Prices		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (thousands)
Outstanding at January 1, 2017		465,666		$	15.94	$	10.04 - $19.75		3.6	$	654
Granted		92,500		$	13.04	$	11.75 - $14.45
Cancelled		(15,167	)	$	16.23	$	10.04 - $17.13

Outstanding at September 30, 2017		542,999		$	15.44	$	10.04 - $19.75		3.5	$	-

Exercisable at September 30, 2017		348,081		$	17.00	$	10.04 - $19.75		2.4	$	-

The weighted average grant date fair value of options granted during the quarter ended September 30, 2017 was $5.68 per share. No options were granted during the quarter ended September 30, 2016. As of September 30, 2017, there was approximately $472,000 of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted average period of 2.93 years and there was approximately $116,000 of total unrecognized compensation expense related to non-vested restricted Common Stock, which is expected to be recognized over a weighted average period of 1.72 years.