Stock-Based Compensation; Changes in Equity

6 Months Ended

Jun. 30, 2011

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

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

Note 2 - Stock-Based Compensation; Changes in Equity

We have adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated financial statements based on their grant-date fair values.

We have applied the Black-Scholes model to value stock-based awards.  That model incorporates various assumptions in the valuation of stock-based awards relating to the risk-free rate of interest to be applied, the estimated dividend yield and expected volatility of our common stock.  The risk-free rate of interest is the related U.S. Treasury yield curve for periods within the expected term of the option at the time of grant.  The dividend yield on our common stock is estimated to be 1.66%.  The expected volatility is based on historical volatility of the Company’s common stock.

The Company’s net income for the three months ended June 30, 2011 and 2010 includes approximately $35,000 and $34,000, respectively of compensation costs related to share based payments.  The Company’s net income for the six months ended June 30, 2011 and 2010 includes approximately $70,000 and $81,000, respectively of compensation costs related to share based payments.  As of June 30, 2011 there is $261,000 of unrecognized compensation expense related to non-vested stock option grants and stock grants.  We expect approximately $64,000 to be recognized over the remainder of 2011, $88,000 to be recognized during 2012, and $59,000 to be recognized during 2013, $41,000 to be recognized during 2014 and $9,000 to be recognized during 2015.

As of June 30, 2011, the Company had four stock-based compensation plans pursuant to which stock options were, or may be, granted.  The Plans provide for the award of options, which may either be incentive stock options (“ISOs”) within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the “Code”) or non-qualified options (“NQOs”) which are not subject to special tax treatment under the Code.

On April 12, 2001, the Board of Directors approved for adoption, effective December 27, 2001, the 2001 Stock Option Plan (“2001 Plan”).  The 2001 Plan authorizes the grant of options to purchase up to an aggregate of 119,050, shares of the Company’s Common Stock.  As of June 30, 2011 , 139,958 shares have been granted and were fully vested at the time of grant.  Options to purchase 7,500 remain outstanding.

On April 24, 2002, the Board of Directors approved for adoption, effective October 12, 2002, the 2002 Stock Option Plan (“2002 Plan”).  The 2002 Plan authorizes the grant of options to purchase up to an aggregate of 142,860 shares of the Company’s Common Stock.As of June 30, 2011, 123,430 shares have been granted and were fully vested at the time of grant, 27,500 remain outstanding.

On April 30, 2007, the Board of Directors approved for adoption, effective October 1, 2007, the 2007 Stock Option Plan (“2007 Plan”).  The 2007 Plan authorizes the grant of options to purchase up to an aggregate of 150,000 shares of the Company’s Common Stock.   As of June 30, 2011, 165,750 options had been granted and 89,500 remain outstanding.

On April 10, 2009, the Board of Directors approved for adoption, and on June 5, 2009, the shareholders of the Corporation approved, a 2009 Stock Incentive Plan (“2009 Plan”).  The 2009 Plan authorizes the issuance of up to 250,000 shares of stock or options to purchase stock of the Company.  As of June 30, 2011, 82,000 options had been granted and 81,500 remain outstanding.

A summary of the Company’s stock option activity and related information is as follows:

	Shares under Option			Weighted Avgerage Exercise Price	Weighted Average Contractual Life		Aggregate Intrinsic Value
Balance at December 31, 2010	202,750		$	4.28
Granted	8,000		$	5.96
Cancelled	(4,250	)	$	4.67
Exercised	(500	)	$	6.12
Outstanding at June 30, 2011	206,000		$	4.31		2.90	$	265,120
Exercisable at June 30, 2011	107,875		$	3.30		2.00	$	210,381

During the three and six months ended June 30, 2011 there was no activity related to stock warrants.

A summary of the Company’s stock option activity by grant date as of June 30, 2011 is as follows:

	Options Outstanding								Options Vested
Options by Grant Date	Shares		Wtd Avg		Remain. Life		Intrinsic Val		Shares		Wtd Avg		Remain. Life		Intrinsic Val
Dec 2005		35,000	$	2.88		4.5	$	82,950		35,000	$	2.88		4.5	$	82,950
Oct 2007		40,500	$	4.70		0.3	$	22,089		40,500	$	4.70		0.3	$	22,089
Oct 2008		2,500	$	4.97		1.3	$	700		1,875	$	4.97		1.3	$	525
Nov 2008		46,500	$	1.82		1.4	$	159,381		30,500	$	1.81		1.4	$	104,817
Dec 2010		73,500	$	6.13		4.5	$	-		-	$	-		-	$	-
Jan 2011		8,000	$	5.96		4.5	$	-		-	$	-		-	$	-
TOTAL		206,000	$	4.31		2.9	$	265,120		107,875	$	3.30		2.0	$	210,381

The aggregate intrinsic value in the tables above represents the total pre-tax intrinsic value (the difference between the closing price of the Company’s common stock on the last trading day of the quarter ended June 30, 2011 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all the holders exercised their options on June 30, 2011.

During 2010, the Company declared and paid dividends of five cents ($0.05) per share on the Company’s outstanding common stock to shareholders of record on June 18, 2010 and December 20, 2010.  The total amount of the dividends paid on June 28, 2010 was $156,135 and on December 28, 2010 was $158,306.  Under the terms of its current loan agreement, the amount of dividends the Company may pay is limited by the terms of the financial covenants of our Credit Agreement with Harris N.A.