Note 6 - Accounting for Stock-based Compensation

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

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

6.

Accounting for Stock-Based Compensation

During the

three

month periods ended

September 30, 2017

and

2016,

the Company did

not

grant any stock options to employees or directors. The Company recognized

$6,000

and

$20,000,

respectively, of stock-based compensation expense for the

three

month periods ended

September 30, 2017

and

2016.

During the

nine

month periods ended

September 30, 2017

and

2016,

the Company granted

24,000

and

24,000,

respectively, of stock options to employees and directors. The Company recognized

$16,000

and

$82,000,

respectively, of stock-based compensation expense for the

nine

month periods ended

September 30, 2017

and

2016.

During the

three

month periods ended

September 30, 2017

and

2016,

no

options were exercised under the

2005

Plan. During the

nine

month periods ended

September 30, 2017

and

2016,

50,000

and

136,000

options were exercised under the

2005

Plan, respectively.

Valuation Assumptions

The fair values of employee and director option awards were estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

	For Three Months Ended September 30, 2017		For Three Months Ended September 30, 2016		For Nine Months Ended September 30, 2017			For Nine Months Ended September 30, 2016
Weighted average grant date fair value		-		-	$	0.26		$	0.29
Weighted average assumptions used:
Expected dividend yield		-		-		0.0	%		0.0	%
Risk-free interest rate		-		-		1.77	%		1.38	%
Expected volatility		-		-		75.0	%		96.0	%
Expected life (in years)		-		-		5.0			5.0

Expected volatility is based on historical volatility and in part on implied volatility. The expected term considers the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate is based on the rates in effect on the grant date for U.S. Treasury instruments with maturities matching the relevant expected term of the award. Options granted to non-employees are valued using the fair market value on each measurement date of the option.