Note 4 - Stock-based Compensation

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

4. Stock-based Compensation – At September 30, 2016, we had three stock–based compensation plans in effect. We record compensation cost related to unvested stock option awards by recognizing the unamortized grant date fair value on a straight line basis over the service periods of each award. We have estimated forfeiture rates based on our historical experience. Stock option compensation expense is recognized as a component of general and administrative expenses in the accompanying Consolidated Financial Statements. We recorded $7,000 and $5,000 of stock-based compensation expense for the three months ended September 30, 2016 and 2015, respectively, and $17,000 and $13,000 for the nine month periods ended September 30, 2016 and 2015, respectively.

As of September 30, 2016, there is $116,000 of unrecognized compensation cost related to stock options. During the quarter ended September 30, 2016, 30,000 options were granted to a new officer of the company pursuant to the 2015 Employee Stock Option Plan (Employee Plan). Pursuant to the terms of the Employee Plan, the options were granted at fair value on the date of the grant. During the three and nine months ended September 30, 2016, 12,000 options were exercised. During the nine month period ended September 30, 2016, an aggregate of 12,000 options were granted to three independent members of our board of directors pursuant to the 2011 Non-Employee Director Stock Option Plan (Director Plan). Pursuant to the terms of the Director Plan, the options were granted at fair value on the date of the Annual Shareholders meeting.

The following table summarizes stock options as of September 30, 2016:

	# of Shares		Wgt . Avg . Exercise Price		Wgt . Avg . Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding at September 30, 2016		304,500	$	2.06		5.5	$	495,300
Vested and exercisable at September 30, 2016		256,500	$	1.76		4.7	$	489,240

The estimated fair value of options granted is calculated using the Black-Scholes option pricing model with assumptions as previously disclosed in our 2015 Form 10-K.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the company’s closing stock price on the last trading day of the third quarter of 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2016. The amount of aggregate intrinsic value will change based on the fair value of the company’s stock.