2. STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2012

Equity [Abstract]

NOTE 2. STOCK BASED COMPENSATION

The Company has a stock incentive plan, originally created in 1992, most recently amended in 2001.  No additional grants may be made under the plan.  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					Nine months ended
	September 30, 2012					September 30, 2012
	Weighted Average Exercise					Weighted Average Exercise
	Shares			Price		Shares			Price
Outstanding at beginning of period		356,200		$	3.71		356,200		$	3.71
Granted		-			-		-			-
Exercised		-			-		-			-
Forfeited		(30,000	)		3.09		(30,000	)		3.09
Outstanding at end of period		326,200		$	3.76		326,200		$	3.76

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.  Pretax compensation expense related to stock options for the three months ended September 30, 2012 and 2011 were $4,100 and $5,708, respectively.  Pretax compensation expense related to stock options for the nine months ended September 30, 2012 and 2011 were $13,902 and $5,708, respectively.

During the nine months ended September 30, 2012 and 2011, there were no transactions related to stock options exercise activity.