8.Shareholders’ Equity.

Stock-Based Compensation. The Company’s stock-based compensation plans are administered by the Compensation Committee of the Board of Directors, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the award.

The following table summarizes the stock-based compensation expense that was recognized in the Company’s statements of comprehensive income for the years ended December 31, 2015 and 2014:

Year ended December 31	2015		2014
Cost of sales	$	34,000	$	6,000
Selling	69,000		87,000
Marketing	15,000		12,000
General and administrative	235,000		298,000

	$	353,000	$	403,000

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

	2015		2014
Stock Options:
Expected life (years)	3.4		3.6
Expected volatility	45	%	50	%
Dividend yield	0	%	0	%
Risk-free interest rate	1.2	%	1.0	%

	2015		2014
Stock Purchase Plan Options:
Expected life (years)	1.0		1.0
Expected volatility	37	%	50	%
Dividend yield	0	%	0	%
Risk-free interest rate	0.3	%	0.1	%

The Company uses the graded attribution method to recognize expense for unvested options and restricted stock units. The amount of stock-based compensation recognized during a period is based on the value of the awards that are ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company re-evaluates the forfeiture rate annually and adjusts it as necessary.

As of December 31, 2015, there was approximately $120,000 of total unrecognized compensation costs related to the outstanding stock options, which is expected to be recognized over a weighted average period of 1.8 years.

As of December 31, 2015, there was approximately $149,000 of total unrecognized compensation costs related to restricted stock units, which is expected to be recognized over a weighted average period of 1.7 years.

Stock Options, Restricted Stock Units, and Other Stock-Based Compensation Awards. The Company maintains the 2003 Incentive Stock Option Plan (the “2003 Plan”) and the 2013 Omnibus Stock and Incentive Plan (the “2013 Plan”). The 2013 Plan replaced the 2003 Plan upon its ratification by shareholders in 2013. Awards granted under the 2003 Plan will remain in effect until they are exercised or expire according to their terms. Since May 2013, all equity awards are made under the 2013 Plan.

In May 2015, the 2013 Plan was amended to increase the total number of shares available to a total of 1,100,000 shares. Under the terms of the 2013 Plan, as amended, the Company may grant up to 1,100,000 awards in a variety of instruments including incentive or non-qualified stock options and restricted stock units to employees, consultants and directors generally at an exercise price at or above 100% of fair market value at the close of business on the date of grant. Stock options expire 10 years after the date of grant and generally vest over three years. The Company issues new shares of common stock when stock options are exercised.

The following table summarizes activity under the 2003 and 2013 Plans:

	Plan Shares Available for Grant		Plan Options Outstanding		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Balance at December 31, 2013	95,968		1,251,442		$	2.72
Shares reserved	650,000		—
Stock awards granted	(29,701	)	—
Restricted stock units granted	(25,000	)	—
Stock options granted	(426,000	)	426,000		3.02
Stock options exercised	—		(155,407	)	1.94		$	217,694
Cancelled or forfeited - 2013 Plan	42,500		(42,500	)	3.03
Cancelled of forfeited - 2003 Plan	—		(224,458	)	2.95


Balance at December 31, 2014	307,767		1,255,077		2.86

Shares reserved	200,000		—
Stock awards granted	(37,233	)	—
Restricted stock units granted	(99,000	)	—
Stock options granted	(200,000	)	200,000		2.82
Stock options exercised	—		(113,837	)	1.90		$	105,012
Cancelled or forfeited - 2013 Plan	279,000		(279,000	)	2.87
Cancelled or forfeited - 2013 Plan restricted stock units	27,000		—		2.89
Cancelled of forfeited - 2003 Plan	—		(167,079	)	4.13


Balance at December 31, 2015	477,534		895,161		2.73

The number of options exercisable under the Plans was:

December 31, 2015		653,840

December 31, 2014		710,598

The following table summarizes information about the stock options outstanding at December 31, 2015:

	Options Outstanding				Options Exercisable
Ranges of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price Per Share		Number Exercisable	Weighted Average Exercise Price Per Share
$1.61 - $2.46	363,997	6.57 years	$	1.78	352,331	$	1.76
$2.79 - $4.22	480,164	7.73 years	3.16		250,509	3.35
$5.49	51,000	4.41 years	5.49		51,000	5.49

	895,161	7.06 years	$	2.73	653,840	$	2.66

Options outstanding under the Plans expire at various dates during the period from January 2015 through December 2024. Options outstanding at December 31, 2015 had an aggregate intrinsic value of $404,000. Options exercisable at December 31, 2015 had a weighted average remaining life of 6.45 years and an aggregate intrinsic value of $395,000. The weighted average grant-date fair value of options granted during the years ended December 31, 2015 and 2014 were $0.94 and $1.13, respectively.

In June 2015 and May 2014, equity grants were made by the Company to the Board of Directors, pursuant to the 2013 Plan in the form of shares of common stock. The total number of shares granted to the Board of Directors was 37,233 and 29,701 during the years ended December 31, 2015 and 2014, respectively. The shares were issued at $2.82 per share in 2015 and $3.03 per share in 2014, based on the stock price on the date of grant, for a total value of $105,000 in 2015 and $90,000 in 2014, which is included in stock-based compensation.

The Company issued 99,000 restricted stock units, under the 2013 Plan, during the year ended December 31, 2015. The units were assigned a weighted average value of $2.71 per share, based on the stock price on the date of the grant, and vest over a weighted average of 2.3 years. The Company issued 25,000 restricted stock units during the year ended December 31, 2014. The units were assigned a value of $3.03 per share, based on the stock price on the date of the grant, and vest over three years.

Restricted stock unit transactions during the years ended December 31, 2015 and 2014 are summarized as follows:

	Number of Shares		Weighted average grant date fair value
Unvested shares at January 1, 2014	—		$	—
Granted	25,000		3.03
Vested	—		—
Forfeited or surrendered	—		—

Unvested shares at December 31, 2014	25,000		$	3.03
Granted	99,000		2.71
Vested	(8,334	)	3.03
Forfeited or surrendered	(27,000	)	2.89

Unvested shares at December 31, 2015	88,666		2.72

Employee Stock Purchase Plan. The Company has an Employee Stock Purchase Plan (the “Plan”) that enables employees to contribute up to 10% of their base compensation toward the purchase of the Company’s common stock at 85% of its market value on the first or last day of the year. During the years ended December 31, 2015 and 2014, employees purchased 18,000 and 27,000 shares under the Plan. At December 31, 2015, 134,000 shares were reserved for future employee purchases of common stock under the Plan. For the years ended December 31, 2015 and 2014, the Company recognized $16,000 and $26,000, respectively, of stock-based compensation expense related to the Plan.

Stock Repurchase Plans. On December 3, 2013, the Board of Directors authorized the repurchase of up to $5,000,000 of the Company’s common stock on or before December 3, 2015. The Plan allowed the repurchases to be made in open market or privately negotiated transactions. This plan was terminated on November 3, 2015.

On October 30, 2015, the Board authorized the repurchase of up to $5,000,000 of the Company’s common stock on or before October 30, 2017. The plan allows the repurchases to be made in open market or privately negotiated transactions. The plan does not obligate the Company to repurchase any particular number of shares, and may be suspended at any time at the Company’s discretion.

For the years ended December 31, 2015 and December 31, 2014, the Company repurchased approximately 664,000 and 787,000 shares at a total cost of $1,762,000 and $2,450,000, respectively.