6. STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

NOTE 6. 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 were generally granted based on employee performance with vesting periods ranging from date of grant to seven years.  At the date of the grant, the maximum term before expiration is ten years.

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

	Three months ended				Six months ended
	June 30, 2013				June 30, 2013
	Weighted Average Exercise				Weighted Average Exercise
	Shares		Price		Shares		Price
Outstanding at beginning of period		311,200	$	3.76		311,200	$	3.76
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Outstanding at end of period		311,200	$	3.76		311,200	$	3.76

At June 30, 2013, the Company had 88,000 unvested stock options with associated unrecognized compensation cost of $73,640 that will be recognized over a weighted-average period of 3.06 years.  The intrinsic value of the 223,200 stock options exercisable at June 30, 2013 was $148,380.

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 June 30, 2013 and 2012 were $4,099 and $4,500, respectively.  Pretax compensation expense related to stock options for the six months ended June 30, 2013 and 2012 were $8,200 and $9,802, respectively.

During the six months ended June 30, 2013 and 2012, there were no transactions related to stock options exercise activity.