4) Stock-based Compensation

3 Months Ended

Sep. 30, 2012

Notes

4) Stock-based Compensation

4)         Stock-Based Compensation

The Company has four fixed option plans (the “1993 Plan,” the “2000 Plan”, the “2003 Plan” and the “2006 Plan”). Compensation expense for options issued of $93,074 and $64,344 has been recognized for these plans for the quarters ended September 30, 2012 and 2011, respectively, and $187,510 and $193,032 for the nine months ended September 30, 2012 and 2011, respectively. Deferred tax credit has been recognized related to the compensation expense of $31,645 and $21,877 for the quarters ended September 30, 2012 and 2011, respectively, and $63,753 and $65,631 for the nine months ended September 30, 2012 and 2011, respectively.

Options to purchase 342,500 shares of the Company’s common stock were granted April 13, 2012. The fair value relating to stock-based compensation is $207,167 and will be expensed as options become available to exercise at the rate of 25% at the end of each quarter over the twelve months ended April 13, 2013.

Options to purchase 346,500 shares of the Company’s common stock were granted December 2, 2011. The fair value relating to stock-based compensation is $205,175 and will be expensed as options become available to exercise at the rate of 25% at the end of each quarter over the twelve months ended December 31, 2012.

The weighted-average fair value of each option granted in 2012 under the 2003 Plan and the 2006 Plan, is estimated at $0.62 and $0.66, respectively for the April 13, 2012 options as of the grant date using the Black Scholes Option Pricing Model with the following weighted-average assumptions: dividend yield of 5% and 5%, volatility of 69.26% and 72.58%, risk-free interest rate of 0.76% and 1.04%, and an expected term of 4.19 to 5.32 years, respectively.

The weighted-average fair value of each option granted in 2011 under the 2003 Plan and the 2006 Plan, is estimated at $0.52 and $0.71 for the December 2, 2011 options as of the grant date using the Black Scholes Option Pricing Model with the following assumptions: dividend yield of 5%, volatility of 59%, risk-free interest rate of 3.4%, and an expected life of five to ten years.

The Company generally estimates the expected life of the options based upon the contractual term of the options adjusted for actual experience. Future volatility is estimated based upon the a weighted historical volatility of the Company’s Class A common stock and three peer company stocks over a period equal to the estimated life of the options. Common stock issued upon exercise of stock options are generally new share issuances rather than from treasury shares.