Note 3 – Stock Based Compensation and Employee Stock Option Plan

Stock Based Compensation

As part of his compensation package, Mr. James J. Cotter, our Chairman of the Board and Chief Executive Officer, was granted $750,000, $750,000, and $500,000, respectively, of restricted class A non-voting common stock ("Class A Stock") for each of the years ending December 31, 2011, 2010, and 2009. The 2011, 2010, and 2009 stock grants of 155,925, 174,825, and 125,945 shares, respectively, were granted fully vested with a stock grant prices of $4.81, $4.29, and $3.97, respectively. Mr. Cotter's stock compensation is granted fully vested with a five-year restriction on sale. As of December 31, 2011, the 2011 stock grant had not yet been issued to Mr. Cotter. During 2011, we issued to Mr. Cotter 174,825 of Class A Stock for his 2010 vested stock grants which had a stock grant price of $4.29 and a grant date fair value of $750,000.

On August 21, 2008, as part of their executive compensation, 37,388 shares of fully vested restricted Class A Stock were granted to three of our executives as stock bonuses having a grant date fair value of $340,000. During 2009, these shares were issued to these executives.

On February 11, 2010, $100,000 of restricted Class A Stock vested, related to Mr. Hunter's 2009 and 2008 stock grants. During 2010, we issued to Mr. Hunter 5,154 shares related to his 2009 vested stock compensation. In July 2008, Mr. Jay Laifman started with the Company as our Corporate General Counsel. As part of his compensation package, Mr. Laifman was granted $100,000 of Class A Stock or 10,638 shares with stock grant price of $9.40 upon acceptance of his employment agreement. This stock grant had an employment-vesting period of two years. Upon his departure from our company during 2009, Mr. Laifman forfeited the unvested portion of this grant in the amount of 5,319 shares.

During the years ended December 31, 2011, 2010, and 2009, we recorded compensation expense of $750,000, $754,000, and $725,000, respectively, for the vesting of all our restricted stock grants. The following table details the grants and vesting of restricted stock to our employees (dollars in thousands):

				Weighted
				Average Fair
	Non-Vested			Value at Grant
	Restricted Stock			Date
Outstanding – January 1, 2009	33,621		$	574
Granted	125,945			500
Vested	(159,566	)		(1,074	)
Outstanding – December 31, 2009	--		$	--
Granted	174,825			750
Vested	(174,825	)		(750	)
Outstanding – December 31, 2010	--		$	-
Granted	155,925			750
Vested	(155,925	)		(750	)
Outstanding – December 31, 2011	--		$	--

On April 1, 2010, we terminated our then existing contractual relationship with Doug Osborne, at that time the chief executive officer of our Landplan real estate operations. Mr. Osborne's incentive interest in our various Landplan projects, which was valued at $0, was revoked at that time. Mr. Osborne continues to provide services to us on a non-exclusive independent contractor basis. During the year ended December 31, 2009, we expensed $157,000 associated with Mr. Osborne's previous contractual interest in the properties associated with Landplan Property Partners, Pty Ltd.

Employee Stock Option Plan

We have a long-term incentive stock option plan that provides for the grant to eligible employees, directors, and consultants of incentive or nonstatutory options to purchase shares of our Class A Nonvoting Common Stock. Our 1999 Stock Option Plan expired in November 2009, and was replaced by our new 2010 Stock Incentive Plan, which was approved by the holders of our Class B Voting Common Stock in May 2010. For the stock options exercised during the years ended December 31, 2010 and 2009, we issued 90,000 and 3,000 shares of Class A Stock for cash to employees of the corporation under this stock based compensation plan at exercise prices of $2.76 and $3.80, respectively. During the year ended December 31, 2011, we did not issue any shares under this stock based compensation plan.

Effective January 1, 2006, we adopted FASB ASC 718-10 – Stock Compensation ("ASC 718-10"). ASC 718-10 requires that all stock-based compensation be recognized as an expense in the financial statements and that such costs be measured at the fair value of the award. This statement was adopted using the modified prospective method, which requires that we recognize compensation expense on a prospective basis for all newly granted options and any modifications or cancellations of previously granted awards. Therefore, prior period consolidated financial statements have not been restated. Under this method, in addition to reflecting compensation expense for new share-based payment awards, modifications to awards, and cancellations of awards, expense is also recognized to reflect the remaining vesting period of awards that had been included in pro-forma disclosures in prior periods. We estimate the valuation of stock based compensation using a Black-Scholes option-pricing model.

When our tax deduction from an option exercise exceeds the compensation cost resulting from the option, a tax benefit is created. ASC 718-10 requires that excess tax benefits related to stock option exercises be reflected as financing cash inflows instead of operating cash inflows. For the years ended December 31, 2011, 2010, and 2009, there was also no impact to the consolidated statements of cash flows because there were no recognized tax benefits during these periods.

ASC 718-10 requires companies to estimate forfeitures. Based on our historical experience, we did not estimate any forfeitures for the granted options during the years ended December 31, 2011, 2010, and 2009.

In accordance with ASC 718-10, we estimate the fair value of our options using the Black-Scholes option-pricing model, which takes into account assumptions such as the dividend yield, the risk-free interest rate, the expected stock price volatility, and the expected life of the options. The dividend yield is excluded from the calculation, as it is our present intention to retain all earnings. We estimated the expected stock price volatility based on our historical price volatility measured using daily share prices back to the inception of the Company in its current form beginning on December 31, 2001. We estimate the expected option life based on our historical share option exercise experience during this same period. We expense the estimated grant date fair values of options issued on a straight-line basis over their vesting periods.

No options were granted during 2011. For the 157,700 and 50,000 options granted during 2010 and 2009, respectively, we estimated the fair value of these options at the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions:

	2010		2009
Stock option exercise price	$	5.07	$	4.01
Risk-free interest rate		2.736%		3.309%
Expected dividend yield		--		--
Expected option life		7.23 yrs		9.60 yrs
Expected volatility		33.01%		33.74%
Weighted average fair value	$	1.88	$	1.98

Using the above assumptions and based on our use of the modified prospective method, we recorded $189,000, $67,000, and $241,000 in compensation expense for the total estimated grant date fair value of stock options that vested during the years ended December 31, 2011, 2010, and 2009, respectively. The effect on earnings per share of the compensation charge was $0.01, $0.00, and $0.01 per share for the years ended December 31, 2011, 2010, and 2009, respectively. At December 31, 2011 and 2010, the total unrecognized estimated compensation cost related to non-vested stock options granted was $109,000 and $247,000, respectively, which is expected to be recognized over a weighted average vesting period of 0.67 and 1.37 years, respectively. No options were exercised in 2011. The total realized value of stock options exercised during the years ended December 31, 2010 and 2009 was $138,000 and $1,000, respectively. The grant date fair value of options that vested during the years ending December 31, 2011, 2010, and 2009 was $189,000, $67,000, and $241,000, respectively. We recorded cash received from stock options exercised of $248,000 and $11,000 during the years ended December 31, 2010 and 2009, respectively. The intrinsic, unrealized value of all options outstanding, vested and expected to vest, at December 31, 2011 and 2010 was $175,000 and $280,000, respectively, of which 88.6% and 70.1%, respectively, were currently exercisable.

Pursuant to both our 1999 Stock Option Plan and our 2010 Stock Incentive Plan, all stock options expire within ten years of their grant date. The aggregate total number of shares of Class A Stock and class B voting common stock authorized for issuance under our 2010 Stock Option Plan is 1,250,000. At the time that options are exercised, at the discretion of management, we will either issue treasury shares or make a new issuance of shares to the employee or board member. Dependent on the grant letter to the employee or board member, the required service period for option vesting is between zero and four years.

We had the following stock options outstanding and exercisable:

					Weighted						Weighted Average
		Common Stock			Average Exercise			Common Stock			Price of
		Options			Price of Options			Exercisable			Exercisable
		Outstanding			Outstanding			Options			Options
		Class A	Class B	Class A		Class B		Class A	Class B	Class A		Class B
Outstanding- January 1, 2009		577,850	185,100	$	5.60	$	9.90	525,350	110,100	$	5.19	$	9.67
	Granted	50,000	--	$	4.01	$	--
	Exercised	(3,000)	--	$	3.80	$	--
	Expired	(35,100)	(35,100)	$	5.13	$	8.47
Outstanding- December 31, 2009		589,750	150,000	$	5.51	$	10.24	534,750	150,000	$	5.62	$	10.24
	Granted	122,600	35,100	$	4.23	$	8.47
	Exercised	(90,000)	--	$	2.76	$	--
Outstanding-December 31, 2010		622,350	185,100	$	5.65	$	9.90	449,750	150,000	$	6.22	$	10.24
	No activity during the period	--	--	$	--	$	--
Outstanding-December 31, 2011		622,350	185,100	$	5.65	$	9.90	544,383	167,550	$	5.86	$	10.05

The weighted average remaining contractual life of all options outstanding, vested and expected to vest, at December 31, 2011 and 2010 were approximately 4.13 and 5.13 years, respectively. The weighted average remaining contractual life of the exercisable options outstanding at December 31, 2011 and 2010 was approximately 3.85 and 4.38 years, respectively.