(7) Stock-based Compensation

Effective May 5, 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”), pursuant to which the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other stock and cash awards to eligible participants. The Company also maintains an Amended and Restated 2005 Stock Incentive Plan (the “2005 Plan”). Together, the 2015 Plan and 2005 Plan are referred to herein as the “Plans.” The 2005 Plan prohibits the granting of incentives after May 12, 2015, the tenth anniversary of the date the 2005 Plan was approved by the Company’s shareholders. There were no shares available for grant pursuant to either of the Plans as of April 1, 2018. Nonetheless, the 2005 Plan will remain in effect until all outstanding incentives granted thereunder have either been satisfied or terminated. For purposes of earnings per share, there were approximately 430,000 and 614,000 stock options outstanding as of April 1, 2018 and April 2, 2017, respectively that were not included in the computation of diluted EPS because their impact was antidilutive. As of April 1, 2018, the total compensation cost related to unvested stock option awards was approximately $459,000, which is expected to be recognized over a period of approximately 2.65 years

Stock options granted to employees and directors generally vest over two to five years, in monthly or annual installments, as outlined in each agreement. Options generally expire ten years from the date of grant. Compensation expense equal to the grant date fair value of the options is recognized in general and administrative expense over the applicable service period.

The incentive compensation of the Company’s Chief Executive Officer is tied to increases in the Company’s share price and calls for the issuance of freely tradable shares of the Company’s common stock upon the achievement of certain milestones.

The Company utilizes the Black-Scholes option pricing model when determining the compensation cost associated with stock options issued using the following significant assumptions:

Stock price – Published trading market values of the Company’s common stock as of the date of grant.

Exercise price – The stated exercise price of the stock option.

Expected life – The simplified method as outlined in ASC 718.

Expected dividend – The rate of dividends that the Company expects to pay over the term of the stock option.

Volatility – Actual volatility over the most recent historical period equivalent to the expected life of the option.

Risk-free interest rate – The daily United States Treasury yield curve rate.

The Company recognized stock-based compensation expense in its consolidated statements of operations for the three months ended April 1, 2018 and April 2, 2017, respectively, as follows:


	Three Months Ended
(in thousands)	April 1, 2018		April 2, 2017
Stock options	$	47	$	100
Restricted stock		—		7
	$	47	$	107

Information regarding the Company’s stock options is summarized below:


				Weighted
				Average
				Remaining
	Number of	Weighted Average		Contractual
(number of options in thousands)	Options	Exercise Price		Life in Years
Options outstanding at December 31, 2017	539	$	6.60	6.6
Granted	20		7.05
Exercised	(85)		5.39
Forfeited or expired	(44)		6.23
Options outstanding at April 1, 2018	430	$	6.78	6.6


	Three Months Ended
	April 1, 2018			April 2, 2017
Weighted-average fair value of options granted during the period	$	3.39		$	2.93
Expected life (in years)		6.1			5.0
Expected dividend	$	—		$	—
Expected stock volatility		46.66	%		65.70	%
Risk-free interest rate		2.7	%		2.0	%