NOTE 11 – STOCK-BASED COMPENSATION

The Company maintains a stock-based compensation plan, which provides for the issuance of Company stock to certain directors, officers, key employees and affiliates.

On March 17, 2009, the shareholders of the Company approved the 2009 Incentive Compensation Plan (the “2009 Plan”). The 2009 Plan provides that the total number of shares of Company stock that may be subject to the granting of awards under the 2009 Plan (“Awards”) at any time during the term of the 2009 Plan shall be equal to 800,000 shares of common stock and 160,000 shares of Class B stock. The foregoing limit shall be increased, as provided for in the 2009 Plan. Persons eligible to receive Awards under the 2009 Plan include employees, directors, consultants and other persons who provide services to the Company. The 2009 Plan imposes individual limitations on the amount of certain Awards, in part, to comply with Internal Revenue Code, Section 162(m). The Awards can be in the form of stock options, restricted and deferred stock, performance awards and other stock-based awards, as provided for in the 2009 Plan.

As of September 30, 2017, all outstanding common stock options had been fully expensed. These options amounted to 365,000 at September 30, 2017, adjusted for the three-for-two stock split. As long as the employee remains employed by the Company, these options are exercisable through October 1, 2021.

On January 19, 2016, 30,000 Class B stock options (45,000 post stock split) were issued to an employee under the 2009 Plan. These options vest at 25% per year starting on January 19, 2017 and each year thereafter through January 19, 2020. As long as the employee remains employed by the Company, these options will be exercisable upon vesting and remain exercisable through October 1, 2021. The Company used the Black-Scholes pricing model to estimate the fair value of the options of $138,000 at time of grant. At September 30, 2017, $78,000 of compensation expense remained to be expensed through January 19, 2020. The following assumptions were used to determine the fair value of the stock options at time of grant:


Risk-free interest rate	2.5	%
Expected life of options	10.0 years
Dividend yield	0.0	%
Volatility	29.1	%

On September 26, 2016, 30,000 Class B stock options were issued to an employee under the 2009 Plan. These options vest at 25% per year starting on September 26, 2017 and each year thereafter through September 26, 2020. As long as the employee remains employed by the Company, these options will be exercisable upon vesting and remain exercisable through September 26, 2026. The Company used the Black-Scholes pricing model to estimate the fair value of the options of $147,000 at time of grant. At September 30, 2017, $110,000 of compensation expense remained to be expensed through September 26, 2020. The following assumptions were used to determine the fair value of the stock options at time of grant:


Risk-free interest rate	2.25	%
Expected life of options	10.0 years
Dividend yield	0.0	%
Volatility	29.2	%

As of September 30, 2017, 482,000 shares of Company common stock and 100,000 shares of Class B stock are available for granting of Awards under the 2009 Plan.

The following table summarizes option activity under the 2009 Plan:


	Number of Shares			Average Exercise Price Per Share
Options outstanding at September 30, 2014		474,750		$	5.103
Options exercised during fiscal 2015		(28,125	)	$	4.839

Options outstanding at September 30, 2015		446,625		$	5.120
Options granted		75,000		$	8.760
Options exercised during fiscal 2016		(37,875	)	$	5.126

Options outstanding at September 30, 2016		483,750		$	5.684
Options exercised during fiscal 2017		(43,750	)	$	5.126

Options outstanding at September 30, 2017		440,000		$	5.739

No options were granted, forfeited or cancelled during the year ended September 30, 2017. The weighted average remaining contractual life on the options outstanding as of September 30, 2017 is 4.3 years under the 2009 Plan.

The 1997 Stock Option Plan (the “1997 Plan”) provided for the issuance of incentive stock options and nonqualified stock options to purchase up to 1,200,000 shares of the Company’s common stock, 1,200,000 shares of the Company’s Class B stock and up to 15% of the authorized common stock of any subsidiary. Under the terms of the 1997 Plan, option holders may tender previously owned shares with a market value equal to the exercise price of the options at exercise date, subject to compensation committee approval. Additionally, option holders may, upon compensation committee approval, surrender shares of stock to satisfy federal withholding tax requirements. Options become exercisable in a manner and on such dates and times, as determined by a committee of the Board of Directors. Options expire not more than ten years from the date of grant. The option holders have no shareholder rights until the date of issuance of a stock certificate for such shares.

As of September 30, 2017, there were no options available for future grants and there were no options outstanding under the 1997 Plan.

The following table summarizes option activity under the 1997 Plan:


	Number of Shares			Exercise Price Per Share
Outstanding at September 30, 2014 and 2015		41,250		$	6.213
Options exercised during fiscal 2016		(30,000	)	$	6.213
Options expired during fiscal 2016		(11,250	)	$	6.213

Options outstanding at September 30, 2016		—