4) Stock-based Compensation

3 Months Ended

Mar. 31, 2013

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 $52,969 and $47,218 has been recognized for these plans for the quarters ended March 31, 2013 and 2012, respectively.

Options to purchase 5,000 shares of the Company’s common stock were granted December 7, 2012. The fair value relating to stock-based compensation is $15,920 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 7, 2013.

Options to purchase 342,000 shares of the Company’s common stock were granted April 13, 2012. The fair value relating to stock-based compensation is $219,881 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 was expensed as options became available to exercise at the rate of 25% at the end of each quarter over the twelve months ended December 2, 2012.

The weighted-average fair value of each option granted in 2012 under the 2006 Plan, is estimated at $3.18 for the December 7, 2012 options as of the grant date using the Black Scholes Option Pricing Model with the following weighted-average assumptions: dividend yield of 5%, volatility of 73.89%, risk-free interest rate of 0.70%, and an expected term of 5.31 years.

The weighted-average fair value of each option granted in 2012 under the 2003 Plan and the 2006 Plan, is estimated at $0.66 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%, volatility of 72.58%, risk-free interest rate of 1.04%, and an expected term of 5.32 years, respectively.

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.

A summary of the status of the Company’s stock incentive plans as of March 31, 2013, and the changes during the three months ended March 31, 2013, is presented below:

	Number of Class A Shares	Weighted Average Exercise Price	Number of Class C Shares(1)	Weighted Average Exercise Price(1)
Outstanding at January 1, 2013	972,253	$      2.07	5,838,505	$      2.18
Granted	-	-	-	-
Exercised	(105,277)	2.38	(690,510)	1.33
Cancelled	(76,032)	3.36	(638,138)	3.33
Outstanding at March 31, 2013	790,944	$      1.90	4,509,857	$      2.15
As of March 31, 2013:
Options Exercisable	724,224	$      1.90	4,509,857	$      2.15
Weighted average contractual term of options
outstanding at March 31, 2013	4.87 years		2.55 years
Weighted average contractual term of options
exercisable at March 31, 2013	4.66 years		2.55 years
Aggregated intrinsic value of options
outstanding at March 31, 2013	$4,175,255		$2,270,018
Aggregated intrinsic value of options
exercisable at March 31, 2013	$3,820,834		$2,270,018
(1) Class “C” shares are converted to Class “A” shares on a 10 to 1 ratio. The Weighted Average Exercise Price is based on Class A Common shares.

The total intrinsic value (which is the amount by which the fair value of the underlying stock exceeds the exercise price of an option on the exercise date) of stock options exercised during the three months ended March 31, 2013 and 2012 was $1,027,181 and $-0-, respectively.