Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Stock-Based Compensation

Note 9.  Stock-Based Compensation

The Company has stock option agreements with its directors and officers for serving on the Company’s Board of Directors and as officers. The options activity is as follows:

				Weighted		Weighted		Weighted
				Average		Average		Average
	Number			Exercise Price		Fair Value at		Remaining		Intrinsic
	of Shares			per Share		Grant Date		Contractual Life		Value
Balance January 1, 2010		225,000		$	3.20						-
Options granted		140,500			2.91	$	121,125	2.8 Years			-
Options exercised		(25,000	)		1.50						-
Options expired		(87,500	)		3.50				-		-
Balance, January 1, 2011		253,000		$	3.08			3.1 years		$	-
Options granted		25,000			2.06	$	13,500	4.9 years			-
Options expired		(25,000	)		3.76				-		-
Balance, September 30, 2011		253,000		$	2.92			3.0 years		$	-

Prior to June 30, 2010 the Company had not adopted a formal stock option plan.  The number of options issued and the grant dates were determined at the discretion of the Company’s Board. Certain options vest at the date of grant and others vest over a one year period. The options are exercisable for periods not exceeding three to five years from the date of grant. On July 1, 2010 at its annual meeting of stockholders, the 2010 Stock Option and Award Plan was approved.

The fair values of stock options are estimated using the Black-Scholes method, which takes into account variables such as estimated volatility, expected holding period, dividend yield, and the risk free interest rate. The risk free interest rate is the five year treasury rate at the date of grant. The expected life is based on the contractual life of the options at the date of grant. With a change in management in 2008, it was determined that the Company would seek acquisitions in railroad related businesses.  Accordingly, the 2010 and 2011 expected volatility rate was estimated using the average volatility rates of public companies in the railroad industry. The Company uses an estimated forfeiture rate of 0% due to limited experience with historical forfeitures.

The assumptions used in the option-pricing models were as follows:

	2011			2010
Risk free interest rate		1.51	%		1.39-2.37	%
Expected life (years)		5			5
Expected volatility		26	%		29	%
Dividend yield		0			0