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6. STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2014

The Company has a stock incentive plan, originally created in 1992, and 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					Nine months ended
	September 30, 2014					September 30, 2014
	Weighted Average Exercise					Weighted Average Exercise
	Shares			Price		Shares			Price

Outstanding at beginning of period		245,000		$	3.84		260,200		$	3.82
Granted		-			-		-			-
Exercised		(29	)		3.09		(15,229	)		3.58
Forfeited		-			-		-			-

Outstanding at end of period		244,971		$	3.84		244,971		$	3.84

At September 30, 2014, the Company had 34,000 unvested stock options with associated unrecognized compensation cost of $22,812 that will be recognized over a weighted-average period of 1.80 years. The intrinsic value of the 210,971 stock options exercisable at September 30, 2014 was $331,060.

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, 2014 and 2013 were $5,291 and $4,100, respectively. Pretax compensation expense related to stock options for the nine months ended September 30, 2014 and 2013 were $15,873 and $12,300, respectively.

Stock options exercised during the three months ended September 30, 2014 and 2013 were 29 and 28,000, respectively. Stock options exercised during the nine months ended September 30, 2014 and 2013 were 15,229 and 28,000, respectively.