NOTE 10 - SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2016

Share-based Compensation [Abstract]

NOTE 10 - SHARE-BASED COMPENSATION

For share-based awards granted, we have recognized compensation expense based on the estimated grant date fair value method.  For these awards we have recognized compensation expense using a straight-line amortization method and reduced for estimated forfeitures.  The impact on our results of operations of recording share-based compensation for the year ended December 31, 2016 and 2015 was as follows:

	Year Ended December  31,
	2016	2015
(in thousands)
Cost of goods sold	$13	$13
Research and development	106	76
Selling, general and administrative	401	346
Total share-based compensation	$520	$435
Impact on net income per share:
Basic	($0.07)	($0.05)
Diluted	($0.06)	($0.05)

An immaterial amount of share-based compensation was capitalized into inventory as overhead for the years ended December 31, 2016 and 2015, respectively.

The fair values of share-based awards for employee stock option awards are estimated at the date of grant using the Black-Scholes valuation model.  The volatility and expected life of the options used in calculating the fair value of share-based awards may exclude certain periods of historical data that we considered atypical and not likely to occur in future periods.  It was note necessary to make weighted average assumptions regarding risk-free rates, volatility factors, expected life of option in years and expected dividend yield to calculate the fair value of options as none were granted during the years ended December 31, 2016 and 2015.

The risk-free interest rate used in the Black-Scholes valuation method is based on the implied yield currently available in U.S. Treasury securities at maturity with an equivalent term.  We have not recently declared or paid any dividends and do not currently have plans to do so in the future.  The expected term of options represents the period that our stock-based awards are expected to be outstanding and has been determined based on historical weighted average holding periods and projected holding periods for the remaining unexercised shares.  Consideration was given to the contractual terms of our stock-based awards, vesting schedules and expectations of future employee behavior.  Expected volatility is based on the annualized daily historical volatility of our stock over a representative period.

The following table summarizes stock option activity under our stock option plans for the twelve months ended December 31:

	2016			2015
	Options	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Life in Years	Options	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Life in Years
Outstanding at beginning of year	574,000	$2.97		606,187	$3.02
Granted	-	0.00		-	0.00
Exercised	(130,000)	2.38		(20,625)	3.03
Cancelled, Expired or
Forfeited	(68,000)	4.25		(11,562)	5.39
Outstanding at end of year	376,000	$2.95	1.67	574,000	$2.97	2.40
Vested or expected to vest at the end of the period	375,055	$2.96	1.67	564,527	$2.99	2.39
Exercisable at end of year	357,250	$3.00	1.62	467,126	$3.19	2.24

The aggregate intrinsic value of outstanding options is $618,650.  This represents the total pretax intrinsic value, based on the closing stock price of $4.18 at December 31, 2016, which would have been received by award holders had all award holders exercised their stock options that were in-the-money as of that date.  The aggregate intrinsic value of awards exercised during the twelve month period ended December 31, 2016 was $208,148.

Restricted stock award including performance-based stock award activity under our share-based compensation plan was as follows:

	2016		2015
	Awards	Weighted - Average Grant Date Fair Value	Awards	Weighted - Average Grant Date Fair Value
Outstanding at beginning of year	389,100	$2.86	320,900	$2.57
Granted	227,100	2.61	193,800	3.16
Vested	(148,100)	2.72	(109,250)	2.58
Cancelled	(3,250)	2.73	(16,350)	2.60
Outstanding at end of year	464,850	$2.78	389,100	$2.86

The remaining unamortized expected future compensation expense and remaining amortization period associated with unvested option grants and restricted stock awards are:

	December 31, 2016	December 31, 2015
Unamortized future compensation expense	$1,093,144	$1,028,961
Remaining weighted average amortization period in years	2.53	2.59