Note 10 - Shareholders' Equity

12 Months Ended

Dec. 31, 2012

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

10.      Shareholders' Equity

Repurchase Program

As of December 31, 2011, the Company had $1,310,000 available for purchases under its share repurchase program.  During the year ended December 31, 2012, the Company repurchased and retired 1,085,050 shares of its common stock for $1,581,000.  During the year ended December 31, 2011, the Company repurchased and retired 1,314,778 shares of its common stock for $1,553,000.  As of December 31, 2012, the Company had $729,000 available to repurchase common shares under the repurchase program.

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, 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.  The 2004 Plan now provides for a total of 5,000,000 common shares eligible for issuance.

Under the 2004 Plan, approximately 3,110,000 options have been granted as of December 31, 2012.  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 years ended December 31, 2012 and 2011:

	Shares			Weighted Average Exercise Price Per Option
Options outstanding, January 1, 2011		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
Granted to employees and non-employee directors		-			-
Exercised		(6,667	)		1.23
Canceled/expired/forfeited		(348,334	)		1.50
Options outstanding, December 31, 2012		1,790,002			1.49
Options exercisable, December 31, 2012		1,428,335			1.48

Stock options to purchase 1,790,002 and 2,145,003 shares of common stock were outstanding as of December 31, 2012 and 2011, respectively.  All of the stock options were excluded from the computation of the number of dilutive common shares for the years ended December 31, 2012 and 2011, respectively, because their effect would have been anti-dilutive.

The Company used the Black-Scholes-Merton option-pricing model to value the options.  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,
	2012		2011
Exercise price		N/A	$	1.15
Risk-free interest rate		N/A		0.96	%
Expected volatility		N/A		50.30	%
Expected life in years		N/A		4.30
Dividend rate		N/A		-
Black-Scholes-Merton fair value		N/A	$	0.47

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

The following table summarizes information about stock options as of December 31, 2012:

			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		1,790,002	$	1.49		2.03	$	0		1,428,335	$	1.48		1.84	$	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, 2012 and 2011 was $2,000 and $6,000, respectively.

As of December 31, 2012, $161,000 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average remaining period of 0.81 years.  Cash received from 6,667 options exercised for the year ended December 31, 2012 was $9,000.