Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Capital Stock, Stock Plans and Stock-based Compensation

Note 5 - Capital Stock, Stock Plans and Stock-based Compensation

6 Months Ended

Jun. 30, 2016

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

5.	Capital Stock, Stock Plans and Stock-Based Compensation

The Company has certain stock option plans under which it awards incentive and non-qualified stock options to employees, officers, and outside directors.

On May 15, 2016, the Company granted 50,000 incentive stock options (“ISOs”) from the Company’s 2010 Stock Option Plan to our newly named Executive Vice President. The ISOs granted were for a contractual term of six years with one-third yearly vesting over a three year period. The exercise price of the NQSOs was $3.97 per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.

The summary of the Company’s total Stock Option Plans as of June 30, 2016, and 2015, and changes during the periods then ended, are presented below. The Company’s Plans consist of the 2010 Stock Option Plan and the 2003 Outside Directors Stock Plans:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term ( years)		Aggregate Intrinsic Value (2)
Options outstanding January 1, 2016		218,200	$	7.65
Granted		50,000		3.97
Exercised		─		─
Forfeited/expired		─		─
Options outstanding end of period (1)		268,200	$	6.96		4.6	$	134,102
Options exercisable at June 30, 2016 (1)		181,533	$	8.18		4.4	$	74,802
Options exercisable and expected to be vested at June 30, 2016		254,883	$	7.10		4.6	$	125,230

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (2)
Options outstanding Janury 1, 2015		239,023		$	7.81
Granted		─			─
Exercised		(2,388	)		2.79			$	3,248
Forfeited/expired		(15,000	)		7.10
Options outstanding end of period (1)		221,635			7.91		4.7	$	18,869
Options exercisable at June 30, 2015 (1)		166,635		$	8.88		4.6	$	18,869
Options exercisable and expected to be vested at June 30, 2015		212,835		$	8.04		4.7	$	18,869

(1)

Options with exercise prices ranging from $2.79 to $14.75

(2)

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price

of the option.

The Company estimates the fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield.

	Employee Stock Option Granted May 15, 2016
Weighted-average fair value per share	$	2.00
Risk -free interest rate (1)		1.27	%
Expected volatility of stock (2)		53.12	%
Dividend yield		None
Expected option life (in years) (3)		6.0

(1)

The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date over the expected term of the option.

(2)

The expected volatility is based on historical volatility from our traded Common Stock over the expected term of the option.

)

The expected option life is based on historical exercises and post-vesting data.

The following table summarizes stock-based compensation recognized for the three and six months ended June 30, 2016 and 2015 for our employee and director stock options.

Stock Options	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Employee Stock Options	$	17,000	$	13,000	$	31,000	$	26,000
Director Stock Options		—		—		14,000		20,000
Total	$	17,000	$	13,000	$	45,000	$	46,000

As of June 30, 2016, the Company has approximately $109,000 of total unrecognized compensation cost related to unvested options, of which $32,000 is expected to be recognized in remaining 2016, $46,000 in 2017, $30,000 in 2018, with the remaining $1,000 in 2019.

During the six months ended June 30, 2016, the Company issued a total of 30,741 shares of our Common Stock under the 2003 Outside Directors Stock Plan to our outside directors as compensation for serving on our Board of Directors. The Company has recorded approximately $124,000 in compensation expenses (included in selling, general and administration (“SG&A”) expenses) in connection with the issuance of shares of our Common Stock to our outside directors.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References + Details