Note 8 - Shareholders' Equity

12 Months Ended

Dec. 31, 2011

Shareholders' Equity and Share-based Payments [Text Block]

8.        Shareholders' Equity

Repurchase Program

As of December 31, 2010, the Company had $2,863,000 available for additional purchases under its share repurchase program.  During the year ended December 31, 2011, the Company repurchased and retired 1,315,000 shares of its common stock for $1,553,000.  During the year ended December 31, 2010, the Company did not repurchase or retire any common stock.  As of December 31, 2011, the Company had $1,310,000 available to repurchase common shares under the repurchase plan.

Option Activity

The 2004 Stock Option Plan (the “2004 Plan”) is an equity compensation plan that provides for grants of both incentive stock options and non-qualified stock options to eligible individuals.  The 2004 Plan is intended to recognize the contributions made to the Company by key employees of the Company and its subsidiaries and affiliated companies, provide key employees with additional incentive to devote themselves to the future success of the Company and improve the ability of the Company to attract, retain and motivate individuals.  The 2004 Plan also is intended as an additional incentive to certain members of the Board of Directors of the Company to continue to serve on the Board of Directors and to devote themselves to the future success of the Company.

Under the 2004 Plan, 2,500,000 shares were initially available for grant.  In light of the Company’s continued growth, the Board of Directors recommended to the shareholders at the 2010 Annual Meeting of Shareholders, and the shareholders approved, an amendment to the 2004 Plan to increase the number of shares available for issuance by an additional 2,500,000 shares of common stock, such that the 2004 Plan now provides for a total of 5,000,000 shares eligible for issuance.

Under the 2004 Plan, approximately 3,110,000 options have been granted as of December 31, 2011.  Under the 2004 Plan, option grants have a three-year vesting period and, since 2005, expire no later than the fifth anniversary from the date of grant.  In 2004 and 2005, options granted had an expiration date of 10 years after the date of grant.  The exercise price of the options is determined based on the fair value of the stock on the date of grant.

The following table summarizes option activity for the two years ended December 31, 2011 and 2010:

				Weighted
				Average
				Exercise Price
	Shares			Per Option
Options outstanding, January 1, 2010		1,571,670		$	1.56
Granted to employees and non-employee directors		995,000			1.60
Exercised		(5,000	)		1.23
Canceled/expired/forfeited		(20,000	)		1.51
Options outstanding, December 31, 2010		2,541,670			1.57
Granted to employees and non-employee directors		60,000			1.15
Exercised		(13,333	)		1.23
Canceled/expired/forfeited		(443,334	)		1.91
Options outstanding, December 31, 2011		2,145,003			1.49
Options exercisable, December 31, 2011		1,416,670			1.47

Stock options to purchase 2,145,003 and 2,541,670 shares of common stock were outstanding as of December 31, 2011 and 2010, respectively.  All of the stock options were excluded from the computation of the number of dilutive common shares for the year ended December 31, 2011 because their effect would have been anti-dilutive.  There were 261,116 incremental shares included in diluted earnings per common share for the year ended December 31, 2010. 

The Company used the Black-Scholes-Merton option-pricing model to value the options.  Prior to 2008, the Company used the simplified method as discussed in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, for estimating the expected life of the options.  For options granted during a quarter or fiscal period, the Company uses historical data to estimate the expected life of the options.  The risk-free interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on historical volatility of the expected life in years.  The Company uses an estimated dividend payout ratio of zero, as the Company has not paid dividends in the past and, at this time, does not expect to do so in the future.

The fair values of the share-based payment awards were estimated using the Black-Scholes-Merton option pricing model with the following assumptions and weighted average fair values:

	Stock Options (1)
	For the Years Ended December 31,
	2011			2010
Exercise price	$	1.15		$	1.60
Risk-free interest rate		0.96	%		1.49	%
Expected volatility		50.30	%		52.00	%
Expected life in years		4.30			4.30
Black-Scholes-Merton fair value	$	0.47		$	0.68

(1) The fair value calculation was based on the stock options granted during the period.

The following table summarizes information about stock options as of December 31, 2011:

	Options Outstanding								Options Exercisable
Range of Exercise Prices	Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Life		Aggregate Intrinsic Value		Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Life		Aggregate Intrinsic Value
$1.10-$1.98		2,145,000	$	1.49		2.64	$	0		1,417,000	$	1.47		2.11	$	0

The intrinsic value is the amount by which the market value of the underlying common stock exceeds the exercise price of the respective stock option. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2011 and 2010 was $6,000 and $15,000 respectively.

As of December 31, 2011, $389,000 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average remaining period of 1.95 years.  Cash received from options exercised for the year ended December 31, 2011 was $16,000, as 13,333 options were exercised.