Note 3 - Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

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

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

3. Stock-Based Compensation

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

The Company records compensation expense for the fair value of stock-based awards determined as of the grant date, including employee stock options.

For the three and six months ended June 30, 2014 and 2013, there were no stock options granted under the Company’s option plan. The Company recognized $16,000 and $108,000 in stock-based compensation expense for the six months ended June 30, 2014 and 2013, respectively, related to the vesting of previously issued options.

Stock options to purchase 974,800 and 1,693,334 shares of common stock were outstanding as of June 30, 2014 and 2013, respectively.

The Company uses the Black-Scholes option-pricing model to value the options. 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 US Treasury yield curve in effect at the time of grant. The estimated volatility is based on historical volatility and management’s expectations of future 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 for the six months ended June 30, 2014:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Options outstanding as of December 31, 2013		1,070,000	$	1.58		1.97
Granted		-		-		-
Exercised		95,200		1.59		-
Canceled/expired/forfeited		-		-		-
Options outstanding as of June 30, 2014		974,800		1.58		1.58
Options exercisable as of June 30, 2014		834,800		1.60		1.18

As of June 30, 2014, $55,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 2.2 years.