NOTE

– Stockholders’ equity

1989

Non-Qualified Stock Option Plan

June

15,

1989,

the Company instituted a non-qualified stock option plan (the “Plan”). In connection therewith,

700,000

shares of the Company’s common stock were reserved for

issuance pursuant to options granted under the Plan through

June

30,

2009.

All options granted vested over a

four

-year period and expire between

five

seven

years after the date of grant. This

1989

Non-Qualified Stock Option Plan expired in

June

2009.

2001

Non-Qualified Stock Option Plan

November

2006,

the Company registered a non-qualified stock option plan that the shareholders had approved in

July

2001,

covering key employees, officers, directors and other persons that

may

be considered as service providers to the Company. Options were awarded by the Board of Directors or by a committee appointed by the Board. Under the plan, an aggregate

300,000

shares of Company common stock,

$.01

par value, were reserved for issuance or transfer upon the exercise of options which were granted. Unless otherwise provided in the option agreement, options granted under the plan would vest over a

four

year period commencing

one

year from the anniversary date of the grant. The stock option plan expired on

July

22,

2011.

2007

Share Incentive Plan

December

12,

2007,

shareholders approved the Company’s

2007

Share Incentive Plan (“Incentive Plan”), in connection therewith,

750,000

shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that

may

be granted under the Share

Incentive Plan through

December

12,

2017.

2016,

42,320

shares of stock were granted and issued to directors and key employees, additionally, options were granted to a key employee for

100,000

shares of the Company’s common stock. In

2015,

36,108

shares of stock were granted and issued to directors and key employees.

The purchase price of the common stock under each option plan shall be determined by the Committee, provided, however, that such purchase price shall not be less than the fair market

value of the shares on the date such option is granted. The stock options generally expire

seven

ten

years after the date of grant. The Company recorded stock-based compensation of

$776,000

and

$751,000

for the years ended

December

31,

2016

and

2015,

respectively.

A summary of the stock option activity related to the

1989

and

2001

Stock Option Plans and the

2007

Share Incentive Plan for the period from

January

2015

through

December

31,

2016

is as follows:

1989

Non-Qualified Stock Option Plan

	Beginning		Granted		Exercised		Canceled		Ending
	Balance		During		During		During		Balance
	Outstanding		Period		Period		Period		Outstanding		Exercisable

Year ended December 31, 2015
Number of shares		35,250		-0-		-0-		0		35,250		35,250
Weighted average exercise price
Per share	$	4.62		-0-		-0-		-0-	$	4.62	$	4.62
Year ended December 31, 2016
Number of shares		35,250		-0-		35,250		-0-		-0-		-0-
Weighted average exercise price
Per share	$	4.62		-0-	$	4.62		-0-		-0-		-0-

2001

Non-Qualified Stock Option Plan

	Beginning		Granted		Exercised		Canceled		Ending
	Balance		During		During		During		Balance
	Outstanding		Period		Period		Period		Outstanding		Exercisable

Year ended December 31, 2015
Number of shares		124,480		-0-		-0-		-0-		124,480		124,480
Weighted average exercise price
Per share	$	4.57		-0-		-0-		-0-	$	4.57	$	4.57
Year ended December 31, 2016
Number of shares		124,480		-0-		64,750		-0-		59,730		59,730
Weighted average exercise price
Per share	$	4.57		-0-		4.62		-0-	$	4.51	$	4.51

2007

Share Incentive Plan

	Beginning		Granted		Exercised		Canceled		Ending
	Balance		During		During		During		Balance
	Outstanding		Period		Period		Period		Outstanding		Exercisable

Year ended December 31, 2015
Number of shares		100,000		-0-		-0-		-0-		100,000		20,000
Weighted average exercise price
Per share	$	11.17		-0-		-0-		-0-	$	11.17	$	11.17
Year ended December 31, 2016
Number of shares		100,000		125,000		-0-		-0-		225,000		65,000
Weighted average exercise price
Per share	$	11.17		8.04		-0-		-0-	$	9.43	$	9.97

The Company has

284,730

of outstanding stock options under the

three

plans at

December

31,

2016.

The following table summarizes information about the outstanding and exercisable options at

December

31,

2016.

			Options Outstanding								Options Exercisable
					Weighted		Weighted						Weighted
					Average		Average						Average
Exercise			Number		Remaining		Exercise		Intrinsic		Number		Exercise		Intrinsic
Price Range			Outstanding		Contractual		Price		Value		Exercisable		Price		Value

$3.00	-	3.99		34,000		1.95	$	3.65	$	171,020		34,000	$	3.65	$	171,020
$4.00	-	4.49		15,930		4.04	$	4.25	$	70,570		15,930	$	4.25	$	70,570
$5.00	-	7.99		9,800		5.04	$	7.90	$	7,644		9,800	$	7.90	$	7,644
$8.00	-	12.00		225,000		6.64	$	9.43	$	0		65,000	$	9.43	$	0

The intrinsic value of the

100,000

options exercised during the year ended

December

31,

2016

was

$203,000.

There were

options exercised during the year ended

December

31,

2015.

Restricted Stock Awards

The following table summarizes restricted stock awards for the years ended

December

31,

2016

and

2015:

				Weighted
	Shares of			Average Grant
	Restricted			Date Fair
	Stock			Value
Unvested outstanding at January 1, 2015		8,000		$	10.97

Granted		9,211		$	13.66
Vested		(13,211	)	$	12.84
Forfeited/Cancelled		-

Unvested outstanding at December 31, 2015		4,000		$	10.97

Granted		17,524		$	8.45
Vested		(21,524	)	$	12.84
Forfeited/Cancelled		-

Unvested outstanding at December 31, 2016		-0-

The total fair value of shares of restricted stock awards vested for the years ended

December

31,

2016

and

2015

was approximately

$276,000

and

$170,000

respectively.

The fair value of the outstanding restricted stock awards will be recorded as stock compensation expense over the vesting period. As of

December

31,

2015

there was

$44,000

of unrecognized compensation costs related to restricted stock awards, which is to be recognized over a period of

0.35

years.

Restricted Stock Units

The following table summarizes restricted stock units for the years ended

December

31,

2016

and

December

31,

2015:

				Weighted
	Shares of			Average Grant
	Restricted			Date Fair
	Stock Units			Value
Unvested outstanding at January 1, 2015		103,319		$	11.71

Granted		24,210		$	14.61
Vested		(24,892	)	$	11.55
Forfeited/Cancelled		(8,057	)	$	10.54

Unvested outstanding at December 31, 2015		94,580		$	12.55

Granted		60,400		$	8.56
Vested		(33,890	)	$	12.43
Forfeited/Cancelled		(7,000	)	$	11.68

Unvested outstanding at December 31, 2016		114,090		$	10.47

The total fair value of vested restricted stock units was

$421,000

and

$288,000

respectively for the years ended

December

31,

2016

and

2015.

The fair value of the outstanding restricted stock units will be recorded as stock compensation expense over the vesting period. As of

December

31,

2016,

there was

$1,194,000

of total unrecognized compensation costs related to restricted stock units, which is expected to be recognized over a weighted-average period of

1.18

years.

During the years ended

December

31,

2016

and

2015,

the Company recorded into selling and general administrative expense approximately

$776,000

and

$751,000

for the cost of employee and director services received in exchange for equity instruments based on the grant-date fair value of those instruments in accordance with the provisions of ASC

718.