STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2012

STOCK BASED COMPENSATION

3. STOCK BASED COMPENSATION

The Company accounts for stock-based compensation under the provisions of ASC Topic 718, “Compensation—Stock Compensation” (formerly, FASB Statement 123R). The Company recognizes compensation cost in its financial statements for all share based payments granted, modified, or settled during the period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the related vesting period.

For the three months ended September 30, 2012 and 2011, the Company recorded compensation expense (included in general and administrative expense) of $59,000 and $58,000, respectively, related to stock options and $597,000 and $356,000, respectively, related to amortization of non-vested stock grants. For the nine months ended September 30, 2012 and 2011, the Company recorded compensation expense (included in general and administrative expense) of $238,000 and $253,000, respectively, related to stock options and $1,794,000 and $1,026,000, respectively, related to amortization of non-vested stock grants.

During the three months ended September 30, 2012 and 2011, employees exercised 31,435 and 4,500 stock options respectively, and 13,334 and 13,335 shares of non-vested stock, respectively, vested. During the nine months ended September 30, 2012 and 2011, employees exercised 77,620 and 25,800 stock options, respectively, and 49,807 and 52,744 shares of non-vested stock, respectively, vested.