Note 3 - Share-Based Compensation

3 Months Ended

Mar. 31, 2013

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

3.             Share-Based Compensation

The Company maintains a stock option plan under which the Company may grant incentive stock options and non-qualified stock options to key employees and non-employee directors.  Stock options have been granted with exercise prices at or above the current market price of the underlying shares of common stock on the grant date.  Options vest and expire according to terms established at the grant date.

During the three months ended March 31, 2013 and 2012, there were no stock options granted under the stock option plan.  The Company recognized $55,000 and $57,000 in share-based compensation expense in its condensed consolidated statements of income for the three months ended March 31, 2013 and 2012, respectively, related to previously issued options.

Stock options to purchase 1,705,001 and 2,145,003 shares of common stock were outstanding as of March 31, 2013 and 2012, respectively.  As of March 31, 2013, 33,382 incremental shares were included in the computation of diluted earnings per common share because the exercise prices of these stock options were less than the average share price of the Company’s common stock for the quarter, and, therefore, the effect was dilutive.   The remaining 1,671,619 were not included in the computation of diluted earnings per common share because the exercise prices of these stock options were greater than the average share price of the Company’s common stock for the three months ended March 31, 2013, and, therefore, there was no dilutive effect.  All of the stock options were excluded from the computation of the number of dilutive common shares for the three months ended March 31, 2012 because their effect would have been anti-dilutive.

The Company uses the Black-Scholes-Merton option-pricing model to value the options.  For options granted during a quarter or fiscal period, the Company uses historical data to estimate the 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 estimated volatility is based on historical volatility.  The Company uses an estimated dividend payout 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 following table summarizes stock option activity during the three months ended March 31, 2013:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Options outstanding as of December 31, 2012		1,790,002		$	1.49		2.64
Granted at fair value		-			-		-
Exercised		(35,001	)	$	1.19		-
Canceled/expired/forfeited		(50,000	)	$	1.60		-
Options outstanding as of March 31, 2013		1,705,001		$	1.50		1.79
Options exercisable as of March 31, 2013		1,360,001		$	1.48		1.60

As of March 31, 2013, $96,000 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted average period of 0.56 years.