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Stock-Based Compensation; Changes in Equity
 9 Months Ended
Sep. 30, 2012
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 2 - Stock-Based Compensation; Changes in Equity

 

The Company has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated financial statements based on their grant-date fair values.

 

The Company has applied the Black-Scholes model to value stock-based awards and recently issued warrants related to notes. That model incorporates various assumptions in the valuation of stock-based awards relating to the risk-free rate of interest to be applied, the estimated dividend yield and expected volatility of our common stock. The risk-free rate of interest is the related U.S. Treasury yield curve for periods within the expected term of the option at the time of grant. The dividend yield on our common stock is estimated to be 1.14%. The expected volatility is based on historical volatility of the Company’s common stock.

 

The Company, at the discretion of the board, may issue options in excess of the total available, if options related to that stock plan are cancelled. In some cases, not all shares that are available to a stock plan are issued, as the Company is unable to issue options to a previous plan when a new plan is in place.

 

The Company’s net income for the three months ended September 30, 2012 and 2011 includes approximately $22,000 and $34,000, respectively of compensation costs related to share based payments. The Company’s net income for the nine months ended September 30, 2012 and 2011 includes approximately $66,000 and $104,000, respectively of compensation costs related to share based payments. As of September 30, 2012 there is $131,000 of unrecognized compensation expense related to non-vested stock option grants and stock grants. We expect approximately $22,000 of additional stock-based compensation expense to be recognized over the remainder of 2012, $59,000 to be recognized during 2013, and $41,000 to be recognized during 2014, and $9,000 to be recognized during 2015.

 

As of September 30, 2012, the Company had four stock-based compensation plans pursuant to which stock options were, or may be, granted. The Plans provide for the award of options, which may either be incentive stock options (“ISOs”) within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the “Code”) or non-qualified options (“NQOs”) which are not subject to special tax treatment under the Code as well as for stock grants.

 

On April 12, 2001, the Board of Directors approved for adoption, effective December 27, 2001, the 2001 Stock Option Plan (“2001 Plan”). The 2001 Plan authorizes the grant of options to purchase up to an aggregate of 119,050, shares of the Company’s Common Stock. As of September 30, 2012, 139,958 shares (including cancelled shares re-issued under the Plan) have been granted and were fully vested at the time of grant and 4,500 remain outstanding. During the third quarter 2012, 3,000 options were exercised.

 

On April 24, 2002, the Board of Directors approved for adoption, effective October 12, 2002, the 2002 Stock Option Plan (“2002 Plan”). The 2002 Plan authorizes the grant of options to purchase up to an aggregate of 142,860 shares of the Company’s Common Stock. As of September 30, 2012, 123,430 shares have been granted and were fully vested at the time of grant and 27,500 remain outstanding.

 

On April 30, 2007, the Board of Directors approved for adoption, effective October 1, 2007, the 2007 Stock Option Plan (“2007 Plan”). The 2007 Plan authorizes the grant of options to purchase up to an aggregate of 150,000 shares of the Company’s Common Stock. As of September 30, 2012, 165,750 options (including cancelled shares re-issued under the Plan) had been granted and 14,500 remain outstanding. During the third quarter 2012, 2,500 options were expired and 15,500 options were exercised.

 

On April 10, 2009, the Board of Directors approved for adoption, and on June 5, 2009, the shareholders of the Corporation approved, a 2009 Stock Incentive Plan (“2009 Plan”). The 2009 Plan authorizes the issuance of up to 250,000 shares of stock or options to purchase stock of the Company. As of September 30, 2012, 82,000 options had been granted and 80,500 remain outstanding.

 

A summary of the Company’s stock option activity and related information is as follows:

 

    Shares 
under
Option		     Weighted
Average
Exercise
Price		     Weighted
Average
Contractual
Life		     Aggregate
Intrinsic
Value		  
Balance at December 31, 2011     162,500     $ 4.25                  
Granted     -       -                  
Cancelled     (3,500 )     5.26                  
Exercised     (32,000 )     1.94                  
Outstanding at September 30, 2012     127,000     $ 4.81       2.90     $ 108,423  
                                 
Exercisable at September  30, 2012     51,875     $ 2.89       2.40     $ 108,423  

 

On July 17, 2012, the Company entered into a Note and Warrant Purchase Agreement with BMO Equity pursuant to which (i) BMO Equity advanced to the Company the sum of $5 million and (ii) the Company issued to BMO Equity a warrant to purchase up to Four Percent (4%) of the outstanding shares of common stock of the Company on a fully-diluted basis (140,048 shares of common stock of the Company) at the price of One Cent ($0.01) per share. The term of the loan provided for in this Agreement is five and a half years. Interest is payable on the outstanding balance of the loan at the rate of 11.5% per annum.

 

A summary of the Company’s stock warrant activity and related information is as follows:

 

    Shares
under
Warrant		     Weighted
Average
Exercise
Price		     Weighted
Average
Contractual
Life		     Aggregate
Intrinsic
Value		  
Balance at December 31, 2011     -       -                  
Granted     140,048     $ 0.01                  
Cancelled     -       -                  
Exercised     -       -                  
Outstanding at September 30, 2012     140,048     $ 0.01       9.80     $ 680,633  
                                 
Exercisable at September  30, 2012     -       -       -       -  

 

A summary of the Company’s stock option activity by grant date as of September 30, 2012 is as follows:

 

    Options Outstanding     Options Vested  
Options by
Grant Date		   Shares     Weighted
Avg.		     Remain.
Life		     Intrinsic
Val		     Shares     Weighted
Avg.		     Remain.
Life		     Intrinsic Val  
Dec 2005     32,000     $ 2.88       3.2     $ 63,680       32,000     $ 2.88       3.2     $ 63,680  
Nov 2008     14,500       1.78       0.1       44,743       14,500       1.78       0.1       44,743  
Dec 2010     72,500       6.14       3.2       -       5,375       5.97       3.2       -  
Jan 2011     8,000       5.96       3.3       -       -       -       -       -  
TOTAL     127,000     $ 4.81       2.9     $ 108,423       51,875     $ 2.89       2.4     $ 108,423  

 

The aggregate intrinsic value in the tables above represents the total pre-tax intrinsic value (the difference between the closing price of the Company’s common stock on the last trading day of the quarter ended September 30, 2012 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all the holders exercised their options on September 30, 2012.