Note 2.

Stock-Based Compensation

During the six months ended June 30, 2018, we granted options to acquire: (i) 40,056 shares of our common stock to employees at prices ranging between $2.17 to $3.35 per share; (ii) 105,000 shares of our common stock to executive officers at prices ranging between $2.09 to $2.17 per share; and (iii) 90,000 shares of our common stock to non-employee board members at a price of $2.17 per share. During the six months ended June 30, 2017, we granted options to acquire 7,536 shares of our common stock to an employee at a price of $1.80 per share.

The weighted average fair market value of the options granted in the six months ended June 30, 2018 and 2017 was estimated on the date of grant, using a Black-Scholes option pricing model with the following assumptions:

	June 30, 2018	June 30, 2017
Expected life of options (using the “simplified” method)	4 years	6 years
Average risk-free interest rate	2.63%	1.82%
Average expected volatility of stock	69%	107%
Expected dividend rate	None	None
Fair value of options granted	$246,300	$11,100

Compensation cost related to stock options recognized in operating results (included in general and administrative expenses) totaled $120,800 and $112,000 in the six months ended June 30, 2018 and 2017, respectively. Approximately $597,600 of total unrecognized compensation costs related to non-vested stock options is expected to be recognized over the next four years, depending on the vesting provisions of the options. There was no tax benefit from recording the non-cash expense as it relates to the options granted to employees, as these were qualified stock options which are not normally tax deductible.

In 2005, we adopted a stock option plan for our employees, officers and directors (the “2005 Plan”). In 2015, we adopted a stock option plan for our employees, officers and directors (the “2015 Plan”) to replace the 2005 Plan, which expired on March 31, 2015.

Activity under our two stock option plans is as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
2005 Plan
Outstanding, December 31, 2017		492,063		$	0.73	3.8 years	$	1,067,000
Granted		-		$	-
Exercised		(101,563	)	$	0.42
Cancelled/Expired		-		$	-
Outstanding, June 30, 2018		390,500		$	0.81	4.2 years	$	522,600
Exercisable, June 30, 2018		327,897		$	0.80	3.8 years	$	442,100

2015 Plan
Outstanding, December 31, 2017		784,684		$	1.32	6.4 years	$	1,238,200
Granted		235,056		$	2.26
Exercised		(36,563	)	$	1.25
Cancelled/Expired		-		$	-
Outstanding, June 30, 2018		983,177		$	1.55	5.7 years	$	624,000
Exercisable, June 30, 2018		471,805		$	1.32	5.5 years	$	397,400