NOTE 6: Restricted Stock Plan

On March 11, 2010, shareholders approved the Panhandle Oil and Gas Inc. 2010 Restricted Stock Plan (2010 Stock Plan), which made available 100,000 shares of common stock to provide a long-term component to the Company’s total compensation package for its officers and to further align the interest of its officers with those of its shareholders. The 2010 Stock Plan is designed to provide as much flexibility as possible for future grants of restricted stock so that the Company can respond as necessary to provide competitive compensation in order to retain, attract and motivate officers of the Company and to align their interests with those of the Company’s shareholders.

In June 2010, the Company awarded 8,500 shares of the Company’s common stock as restricted stock to certain officers. The restricted stock vests at the end of five years and contains nonforfeitable rights to receive dividends and voting rights during the vesting period. The fair value of the shares at the time of their award, based on the closing price of the shares on their award date, was $240,550 and will be recognized as compensation expense ratably over the vesting period.

On December 21, 2010, the Company awarded 8,780 shares of the Company’s common stock as restricted stock to certain officers. The restricted stock vests at the end of three years and contains nonforfeitable rights to receive dividends and voting rights during the vesting period. The fair value of the shares at the time of their award, based on the closing price of the shares on their award date, was $245,840 and will be recognized as compensation expense ratably over the vesting period.

The impact of these awards on G&A expense in the quarter and nine months ended June 30, 2011 was $32,515 and $77,058, respectively. There was no such expense in the corresponding 2010 periods. As of June 30, 2011, there was $397,305 of total unrecognized compensation cost related to these awards. The cost is to be recognized over a weighted average period of 3.22 years. Upon vesting, shares are expected to be issued out of shares held in treasury.

A summary of the status of unvested shares of restricted stock awards and changes during 2011 is presented below:


	Unvested		Weighted
	Restricted		Average Grant-
	Shares		Date Fair Value

Unvested shares as of September 30, 2010		8,500	$	28.30
Granted		8,780	$	28.00
Vested		-	$	-
Forfeited		-	$	-


Unvested shares as of June 30, 2011		17,280	$	28.15

On December 21, 2010, the Company also awarded 8,782 shares of the Company’s common stock, subject to certain share price performance standards, as restricted stock to certain officers. Vesting of these shares is based on the performance of the market price of the common stock over the vesting period (three years). The fair value of the performance shares was estimated on the grant date using a Monte Carlo valuation model that factors in information, including the expected price volatility, risk-free interest rate and the probable outcome of the market condition, over the expected life of the performance shares. Compensation expense for the performance shares is a fixed amount determined at the grant date and is recognized over the vesting period (three years) regardless of whether performance shares are awarded at the end of the vesting period. The impact of these awards on G&A expense in the quarter and nine months ended June 30, 2011 was $14,303 and $28,606, respectively. As of June 30, 2011, there was $143,030 of total unrecognized compensation cost related to this performance-based, restricted stock. The cost is to be recognized over a weighted average period of 2.49 years.