E)	*Stock-Based Compensation.* The following table presents stock-based employee compensation expenses included in our unaudited consolidated statements of comprehensive income (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016

Cost of services	$	4	$	2	$	8	$	5
Research and development		34		29		82		59
Selling and marketing		5		4		11		7
General and administrative		155		149		364		303
Stock-based compensation expense	$	198	$	184	$	465	$	374

Stock Option Grants. We may grant stock options under our 2001 Nonqualified Stock Plan although we have not granted any stock options since the first quarter of 2012. When we grant stock options, we estimate their fair value using the Black-Scholes valuation model. This valuation model takes into account the exercise price of the award, as well as a variety of significant assumptions. The assumptions used to estimate the fair value of stock options include the expected term, the expected volatility of our stock over the expected term, the risk-free interest rate over the expected term, and our expected annual dividend yield. We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of our stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

Unrestricted Stock Grants. We also grant unrestricted shares of stock under our 2001 Nonqualified Stock Plan. Stock-based compensation expense for stock grants is determined based on the fair market value of our stock on the date of grant, provided the number of shares in the grant is fixed on the grant date.

We granted shares of unrestricted stock in 2017 and 2016 that affected financial results for the three and nine month periods ended September 30, 2017 and 2016. These grants are described below.

2017 Grant. On February 27, 2017, we granted 134,000 shares of unrestricted stock to directors, officers and employees. The shares will be issued in two equal installments shortly after June 30, 2017 and December 31, 2017, provided each grantee is serving as a director, officer or employee on those dates. The total stock-based compensation expense related to this grant is $663,000, of which $198,000 and $465,000 was charged to expense in the three and nine months ended September 30, 2017 and we anticipate the remaining $198,000 will be charged to expense in the fourth quarter of 2017.

The shares we issued on July 3, 2017 for the first installment of the 2017 grant included 54,014 net shares of common stock after employees surrendered 12,986 shares for which we paid $67,000 of withholding taxes on their behalf.

2016 Grant. In March 2016, we granted 152,000 shares of unrestricted stock to directors, officers and employees. The shares were issued in two equal installments shortly after June 30, 2016 and December 31, 2016. We expensed the entire $558,000 stock-based compensation expense related to this grant in 2016. We issued shares of common stock related to this grant as follows: i) 58,902 net shares of common stock were issued in early July 2016 after employees surrendered 17,098 shares for which we paid $74,000 of withholding taxes on their behalf; and ii) 56,443 net shares of common stock were issued in early January 2017 after employees surrendered 19,557 shares for which we paid $119,000 of withholding taxes on their behalf.