Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Note 6: Stock-Based Compensation

Incremental stock-based compensation expense recognized was $10,141 during the first nine months of 2011 and $11,903 for the same period in 2010. As of September 30, 2011, there was unrecognized compensation expense of $4,387 related to stock options.

Stock option compensation expense is the estimated fair value of options granted using the Black-Scholes Model amortized on a straight-line basis over the vesting period of the award. There were 43,350 options granted and no options exercised during the nine month period ended September 30, 2011.

The weighted average fair value of incentive stock options granted during the first nine months of 2011 and 2010 was $0.60 and $0.55, respectively. The weighted average fair value of non-employee director's stock options granted during the first nine months of 2011 and 2010 was $0.55 and $0.59, respectively. The variables used in these calculations include the historical dividend yield, expected life of the options, expected stock price volatility, and a risk-free interest rate, which is assumed to be the rate on 10-year U.S. Treasury bonds.

Stock option plan activity for the nine months ended September 30, 2011, is summarized below:


	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (1)

Options outstanding, January 1		210,819		$	11.35		5.6

Granted		43,350			4.79
Forfeited		(25,686	)		6.41
Exercised		—			—
Expired		(19,345	)		15.61

Options outstanding, September 30		209,138			10.21		5.9	$	—


Options exercisable, September 30		171,788			11.37		5.4	$	—

(1)

The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on September 30, 2011. This amount changes based on changes in the market value of the Company's stock.

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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