STOCK BASED COMPENSATION

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

STOCK BASED COMPENSATION

2) STOCK BASED COMPENSATION

The Company has two stock option plans, the 1992 Stock Incentive Plan (“1992 Plan”) and 2001 Stock Option Plan (“2001 Plan”). No additional grants may be made under the 1992 Plan. The 2001 Plan, which was approved by the shareholders, permits the grant of stock options and restricted stock awards for up to 900,000 shares. All stock options have an exercise price that is equal to the fair market value of the Company’s stock on the date the options were granted. Administration of the plan, including determination of the number, term, and type of options to be granted, lies with the Board of Directors or a duly authorized committee of the Board of Directors. Options are generally granted based on employee performance with vesting periods ranging from date of grant to seven years. The maximum term before expiration for all grants is ten years.

The following table presents information related to the value of outstanding stock options for the periods shown:

	Three months ended March 31, 2012
		Weighted Average Exercise
	Shares	Price
Outstanding at beginning of period	356,200	$         3.71
Granted	-	-
Exercised	-	-
Forfeited	-	-
Outstanding at end of period	356,200	$        3.71

In accordance with the current accounting guidance for share-based payments, the Company recognizes compensation expense for options awarded under its stock incentive plans. Current accounting guidance requires the grant-date fair value of all share-based payment awards, including employee stock options, to be recognized as employee compensation expense over the requisite service period. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes stock option valuation model.

The Company expenses stock options on a straight-line basis over the options’ related vesting term. For the three months ended March 31, 2012, the Company recognized pretax compensation expense related to stock options of $5,302, in comparison to pretax compensation expense related to stock options of $0 for the three months ended March 31, 2011.

During the three months ended March 31, 2012 and March 31, 2011, there were no transactions related to stock options exercise activity.