9. Shareholders’ Equity and Stock-based Compensation

The Company has a 2001 stock option plan, a non-employee directors’ stock option plan, a 2006 Equity Incentive Plan and a 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan, which was approved by the shareholders on April 24, 2015, replaced the 2006 Equity Incentive Plan. New grants may not be made under the 2001, 2006 and the non-employee directors’ stock option plans; however certain option grants under these plans remain exercisable as of June 30, 2015. The aggregate number of shares of common stock for which awards can be granted under the 2015 Equity Incentive Plan as of the date of adoption was 500 shares. Additionally, as outstanding options under the 2001, 2006 and non-employee directors’ plans expire, the shares of the Company’s common stock subject to the expired options will become available for issuance under the 2015 Equity Incentive Plan.

Under the various plans, executives, employees and outside directors receive awards of options to purchase common stock. Under the 2015 Equity Incentive Plan, the Company may also grant stock awards, stock appreciation rights, restricted stock units and other equity-based awards, although no such awards, other than awards under the director program and management purchase program described below, had been granted as of June 30, 2015. Under all awards, the terms are fixed on the grant date. Generally, the exercise price of stock options equals the market price of the Company’s stock on the date of the grant. Options under the plans generally vest over three years, and have a maximum term of 10 years.

Additionally, the board has established the non-employee directors’ stock fee election program, referred to as the director program, as an award under the 2015 Equity Incentive Plan. The director program gives each non-employee director the right under the 2015 Equity Incentive Plan to elect to have some or all of his quarterly director fees paid in common shares rather than cash. No shares were issued in lieu of cash for director fees under the director program for the three and six months ended June 30, 2015 and 2014.

On July 23, 2008, the Compensation Committee of the Board of Directors approved the non-employee director and executive officer stock purchase program, referred to as the management purchase program, as an award under the 2015 Plan. The purpose of the management purchase program is to permit the Company’s non-employee directors and executive officers to purchase shares of the Company’s Common Stock directly from the Company. Pursuant to the management purchase program, as amended, participants may elect to purchase shares of Common Stock from the Company not exceeding an aggregate of $100 during any fiscal year. Participants may make such election one time during each twenty business day period following the public release of the Company’s earnings announcement, referred to as a window period, and only if such participant is not in possession of material, non-public information concerning the Company and subject to the discretion of the Board to prohibit any transactions in Common Stock by directors and executive officers during a window period. There were no shares purchased under the management purchase program during the three and six months ended June 30, 2015 and 2014, respectively.

Stock option activity as of and during the six months ended June 30, 2015 was as follows:



			Weighted-average		Aggregate
	Number of Shares		Exercise Price		Intrinsic Value

Outstanding at December 31, 2014	1,313	$	5.86
Options forfeited or cancelled	-		-
Options expired	-		-
Options granted	170		7.14
Options exercised	(18)		3.12

Outstanding at June 30, 2015	1,465	$	6.05	$	2,442

Exercisable at June 30, 2015	1,117	$	6.08	$	2,886

Available for future grant at December 31, 2014	175

Available for future grant at June 30, 2015	460

The number of shares available for future grants at June 30, 2015 does not include a total of up to 1,423 shares subject to options outstanding under the 2001, 2006 and non-employee directors’ plans which will become available for grant under the 2015 Equity Incentive Plan in the event of the expiration of such options.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of subjective assumptions, including the expected stock price volatility. Because the Company’s options have characteristics different from those of traded options, in the opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of its options. The weighted average fair value of options granted was $7.96 and $7.14 for options granted during the three and six months ended June 30, 2015. The weighted average fair value of options granted was $4.55 and $3.17 for options granted during the three and six months ended June 30, 2014.

The Company calculates expected volatility for stock options and awards using the Company’s historical volatility.

The Company currently estimates a five percent forfeiture rate for stock options, but will continue to review this estimate in future periods.

The risk-free rates for the expected terms of the stock options and awards are based on the U.S. Treasury yield curve in effect at the time of grant.

The weighted average remaining contractual life of options exercisable at June 30, 2015 was 4.02 years.

The Company recorded $145 and $314 of non-cash stock option expense for the three and six months ended June 30, 2015. The Company recorded $102 and $244 of non-cash stock option expense for the three and six months ended June 30, 2014. As of June 30, 2015, there was $980 of total unrecognized compensation costs related to non-vested awards that are expected to be recognized over a weighted-average period of 2.24 years.

The Company also has an Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan initially provided that a maximum of 100 shares may be sold under the Purchase Plan as of the date of adoption. On April 27, 2011, the Company’s shareholders approved an amendment to the Purchase Plan to increase the number of shares which may be purchased under the plan by an additional 100 shares. There were 4 and 7 shares purchased under the plan for the three and six months ended June 30, 2015 and a total of 3 and 8 shares purchased for the three and six months ended June 30, 2014.