Note 3 - Stock-Based Compensation

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

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 six months ended June 30, 2016, 810,000 stock options were granted under the Company’s option plan. For the six months ended June 30, 2015, no stock options were granted under the Company’s option plan. The Company recognized $34,000 and $11,000 in stock-based compensation expense for the six months ended June 30, 2016 and 2015, respectively, related to the vesting of previously issued options.

Stock options to purchase 1,035,000 shares of common stock were outstanding as of June 30, 2016, and stock options to purchase 225,000 shares of common stock were outstanding as of December 31, 2015.

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, 2016:

			Weighted
			Average
			Exercise Price
	Shares		Per Option
Options outstanding, December 31, 2015		225,000	$	1.52
Granted to employees and non-employee directors		810,000		2.12
Exercised		-		-
Canceled/expired/forfeited		-		-
Options outstanding, June 30, 2016		1,035,000		1.99
Options exercisable, June 30, 2016		65,000		1.43

As of June 30, 2016, $883,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 2.89 years.