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8. STOCK INCENTIVE PLAN

12 Months Ended

Dec. 31, 2014

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 granted, resides 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 on stock options outstanding for the periods shown:

	2014					2013
	Weighted Average Exercise					Weighted Average Exercise
	Shares			Price		Shares			Price

Outstanding at beginning of period		260,200		$	3.82		311,200		$	3.76
Granted		-			-		-			-
Exercised		(37,229	)		3.99		(51,000	)		3.48
Forfeited		-			-		-			-

Outstanding at end of period		222,971		$	3.79		260,200		$	3.82

The following table presents information on stock options outstanding for the periods shown:

	2014		2013

Intrinsic value of options exercised in the period	$	64,383	$	92,952
Stock options fully vested and expected to vest		222,971		260,200
Weighted average exercise price	$	3.79	$	3.82
Aggregate intrinsic value	$	447,611	$	642,548
Weighted average contractual term of options	1.64 years		2.47 years
Stock options vested and currently exercisable		188,971		199,200
Weighted average exercise price	$	3.90	$	4.01
Aggregate intrinsic value	$	358,561	$	453,528
Weighted average contractual term of options	1.28 years		1.92 years

Weighted-average options outstanding and exercisable at December 31, 2014 are as follows:

		Options Outstanding						Options Exercisable
				Weighted
		Number		Average		Weighted		Number		Weighted
		Outstanding at		Remaining		Average		Exercisable at		Average
Exercise		December 31,		Contractual		Exercise		December 31,		Exercise
Price		2014		Life		Price		2014		Price
	2.99		4,000		0.12		2.99		4,000		2.99
	3.09		22,971		6.56		3.09		8,971		3.09
	3.24		80,000		1.55		3.24		60,000		3.24
	3.76		62,000		0.58		3.76		62,000		3.76
	5.00		54,000		0.99		5.00		54,000		5.00

$2.99 - $ 5.00			222,971		1.64	$	3.79		188,971	$	3.90

All share-based compensation is measured at the grant date based on the fair value of the award, and is recognized as an expense in earnings over the requisite service period. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes based stock option valuation model. This model uses the assumptions listed in the table below. Expected volatilities are based on implied volatilities from the Company’s stock, historical volatility of the Company’s stock, and other factors. Expected dividends are based on the Company’s plan not to pay dividends for the foreseeable future. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. There were no stock options granted during the years ended December 31, 2014 and 2013.

Stock compensation expense was $21,164 and $22,839 for the years ended December 31, 2014 and 2013, respectively, and is included in selling, general & administrative expenses on the statement of income.

As of December 31, 2014, unrecognized compensation expense related to stock options was $17,409.