Note

- Shareholders' Equity

a.	Stock-Based Compensation Expense

We recorded non-cash stock compensation expense in each period as follows:

	2016		201 5
Stock Options	$	676	$	489
Restricted Stock Grants		34		82
Total	$	710	$	571

These are more fully discussed as follows:

b.	Stock Options

We have various stock-based employee compensation plans, for which compensation cost is recognized in the financial statements. The cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).

Our shareholders have approved various equity-based plans that permit the grant of stock options, restricted stock and other equity-based awards. In addition, our shareholders have approved the grant of stock options outside of these plans.

June

2004,

our shareholders adopted the

2004

Long-Term Incentive Plan

(“2004

LTIP”) pursuant to which we were authorized to issue up to

750,000

shares of common stock and grant stock options, restricted stock awards, stock appreciation rights and other stock-based awards. Through shareholder approved amendments to the LTIP in

2006,

2008,

2011,

and

2013,

the total number of shares authorized under the LTIP was increased to

2,900,000.

June

2014,

our shareholders approved the

2014

Long-Term Incentive Plan

(“2014

LTIP”) as the successor plan to the

2004

LTIP that expired on

June

10,

2014.

Under the

2014

LTIP, a total of

1,750,000

shares of Common Stock will be available for grant of awards. However, of the total number of shares of common stock available for awards under the

2014

LTIP, no more than

800,000

shares of Common Stock

may

be used for awards other than stock options and stock appreciation rights. Grants under the

2014

LTIP

may

be awarded through

June

2024.

Stock options granted under the LTIPs are either Incentive Stock Options (“ISOs”) or Non-Qualified Stock Options (“NQSOs”). Key employees are eligible to receive ISOs and NQSOs; however, directors and consultants are eligible to receive only NQSOs. Most ISOs vest over a

three

- year period and expire on the

seventh

anniversary of the grant date. All NQSOs issued to non-employee directors vest immediately and expire on the

seventh

anniversary of the grant date. As of

December

31,

2016,

there were

1,243,697

stock options outstanding under the

2004

LTIP and

679,884

stock options outstanding under the

2014

LTIP.

December

30,

2010,

pursuant to the terms of his employment agreement, we granted our President and Chief Executive Officer, Michael D. Popielec, options to purchase shares of common stock under the

2004

LTIP as follows: (i)

50,000

shares at

$6.42,

vesting in annual increments of

12,500

shares over a

four

-year period commencing

December

30,

2011;

(ii)

250,000

shares at

$6.42,

vesting in annual increments of

62,500

shares over a

four

-year period commencing

December

30,

2011;

(iii)

200,000

shares at

$10.00,

with vesting to begin on the date the stock reaches a closing price of

$10.00

per share for

trading days within a

-day trading period, with such vesting in annual increments of

50,000

shares over the

four

anniversary dates of that date; and (iv)

200,000

shares at

$15.00,

with vesting to begin on the date the stock reaches a closing price of

$15.00

per share for

trading days within a

-day trading period, with such vesting in annual increments of

50,000

shares over the

four

anniversary dates of that date. All such options in items (i) and (ii) shall expire on

December

30,

2017.

All such options in items (iii) and (iv) shall expire as of the later of

December

30,

2017

and

five

years after the initial vesting commences, but in no event later than

December

30,

2020.

The market-based conditions for the stock options in items (iii) and (iv) had not been met as of

December

31,

2016.

The options set forth in items (ii), (iii) and (iv) were subject to shareholder approval of an amendment to the

2004

LTIP, which approval was obtained on

June

2011.

January

2011,

pursuant to the terms of his employment agreement, we granted our President and Chief Executive Officer, Michael D. Popielec, an option to purchase

50,000

shares of common stock at

$6.58

under the

2004

LTIP. The option vested in annual increments of

12,500

shares over a

four

-year period commencing

December

30,

2011.

The option expires on

December

30,

2017.

As of

December

31,

2016,

there was

$505

of total unrecognized compensation costs related to outstanding stock options, which we expect to recognize over a weighted average period of

1.1

years.

We use the Black-Scholes option-pricing model to estimate fair value of stock-based awards. The following weighted average assumptions were used to value options granted during the years ended

December

31,

2016

and

2015:

	Years Ended December 31,
	2016			2015
Risk-free interest rate		1.36	%		0.72	%
Volatility factor		48.20	%		48.54	%
Dividends		0.00	%		0.00	%
Weighted average expected life (years)		4.83			4.15
Forfeiture rate		10.0	%		13.8	%

We used a Monte Carlo simulation option-pricing model to estimate the fair value of market performance stock-based awards, of which there were

new awards in the years ended

December

31,

2016

2015.

We calculate expected volatility for stock options by taking an average of historical volatility over the expected term. The computation of expected term was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield in effect at the time of grant. Forfeiture rates are calculated by dividing unvested shares forfeited by beginning shares outstanding. The pre-vesting forfeiture rate is calculated yearly and is determined using a historical

twelve

-quarter rolling average of the forfeiture rates.

The following tables summarize data for the stock options issued by us:

Year Ended December 31, 201 6
	Number of Shares			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Shares under Option – January 1		2,257,969		$	6.30
Options Granted		369,550			4.69
Options Exercised		(152,789	)		3.86
Options Forfeited or Expired		(151,149	)		6.09
Shares under option – December 31		2,323,581		$	6.22		3.31	$	1,101
Vested and Expected to Vest - December 31		2,192,138		$	6.31		2.98	$	1,006

Options Exercisable – December 31		1,302,390		$	5.05		1.92	$	669

Year Ended December 31, 201 5
	Number of Shares			Weighted Average Exercise Price Per Share
Shares under Option – January 1		2,056,122		$	6.66
Options Granted		411,250			4.68
Options Exercised		(137,937	)		3.90
Options Forfeited or Expired		(71,466	)		11.86
Shares under option – December 31		2,257,969		$	6.30

Options Exercisable – December 31		1,255,736		$	5.22

The following table represents additional information about stock options outstanding at

December

31,

2016:

			Option Outstanding						Options Exercisable
Range of Exercise Prices			Number of Outstanding Options – December 31, 2016		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Number of Options Exercisable at December 31, 2016		Weighted- Average Exercise Price
$3.22	-	$3.99		608,200		3.68	$	3.76		394,218	$	3.75
$4.00	-	$4.99		686,548		3.62	$	4.40		396,006		4.45
$5.00	-	$9.99		628,833		2.17	$	6.58		512,166		6.52
$10.00	-	$15.00		400,000		4.00	$	12.50		-		-

$3.22	-	$15.00		2,323,581		3.31	$	6.22		1,302,390	$	5.05

The weighted average fair value of options granted during the years ended

December

31,

2016

and

2015

was

$2.01

and

$2.32,

respectively. The total intrinsic value of options (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) exercised during the years ended

December

31,

2016

and

2015

was

$149

and

$364,

respectively.

Cash received from option exercises under our stock-based compensation plans for the years ended

December

31,

2016

and

2015

was

$460

and

$538,

respectively. There were

excess tax benefits realized in accumulated paid-in capital on exercised options for the years ended

December

31,

2016

and

2015.

c.	Restricted Stock Awards

During

2014,

we awarded

49,200

restricted stock units under the

2014

LTIP to certain key employees. These units vest over

three

years and we estimated their weighted average grant date fair value to be

$3.24

per share.

$34

and

$82

of expense was recorded in

2016

and

2015,

respectively, relating to these units. In

September

2016,

15,900

shares of the awarded restricted stock vested and the Company repurchased

4,131

shares to satisfy the statutory tax withholding on shares vested for certain employees.

December

31,

2016,

there was

$11

of unrecognized compensation expense related to restricted stock grants.

d.	Reserved Shares

We have reserved

901,700

shares of common stock under the various stock option plans, warrants and restricted stock awards as of

December

31,

2016.