Note 4. Stock Based Compensation

The Company follows ASC 718 in establishing standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, as well as transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements based on the fair value of the share-based payment. ASC 718 establishes fair value as the measurement objective in accounting for share-based payment transactions with employees, except for equity instruments held by employee share ownership plans.

Total stock-based compensation expense recognized in the statements of comprehensive income for the three-month period ended March 31, 2015 and 2014, was $15,993 and $25,478, respectively, before income taxes. The related total deferred tax benefit was approximately $1,371 and $2,774 for the three-month period ended March 31, 2015 and 2014, respectively. Total stock-based compensation expense recognized in the statements of comprehensive income for the nine-month period ended March 31, 2015 and 2014, was $42,051 and $77,721, respectively, before income taxes. The related total deferred tax benefit was approximately $4,113 and $8,553 for the nine-month period ended March 31, 2015 and 2014, respectively. ASC 718 requires the tax benefits related to stop options exercised resulting from tax deductions in excess of the compensation cost recognized for those options to be classified and reported as both an operating cash outflow and a financing cash inflow.

As of March 31, 2015, there was approximately $54,320 of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over the next two years. The total deferred tax benefit related to these awards is approximately $2,282.

The Company has one employee stock option plan under which options may be granted, the 2007 Stock Option and Restricted Stock Plan (the "2007 Plan"). The Board of Directors may grant options to acquire shares of common stock to employees of the Company at the fair market value of the common stock on the date of grant. Generally, options granted have a two-year vesting period based on two years of continuous service and have a ten-year contractual life. Option grants provide for accelerated vesting if there is a change in control. Shares issued upon the exercise of options are from those held in Treasury. The 2007 Plan was approved by the Company's shareholders at the Company's Annual Meeting on November 30, 2007 and supersedes the Company's 2000 Stock Option Plan (the "2000 Plan"). Options covering 400,000 shares were authorized for issuance under the 2007 Plan, of which 200,100 have been granted and 133,450 are outstanding as of March 31, 2015. While no further grants of options may be made under the 2000 Plan, as of March 31, 2015, 21,230 options remain outstanding, vested and exercisable from the 2000 Plan.

ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option valuation model, which incorporates various assumptions including those for volatility, expected life and interest rates.

The table below outlines the weighted average assumptions that the Company used to calculate the fair value of each option award for the nine months ended March 31, 2015 and 2014.

	March 31, 2015		March 31, 2014
Dividend yield		3.77%		3.67%
Expected stock price volatility		29.11%		25.31%
Risk-free interest rate		0.99%		1.23%
Expected option life (in years)		4.0 yrs		3.8 yrs
Weighted average fair value per share of options granted during the period	$	4.296	$	3.777

The Company pays dividends quarterly and paid a special cash dividend of $1.00 per share in fiscal year 2014. The Company has not paid a special dividend in fiscal year 2015. Our Board of Directors assesses the Company's dividend policy periodically. There is no assurance, that the Board of Directors will either maintain the amount of the regular cash dividend or declare a special dividend during the fiscal year ending June 30, 2015 or any future years. Expected stock price volatility is based on the historical volatility of the Company's stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options. The expected option life (in years) represents the estimated period of time until exercise and is based on actual historical experience.

The following table summarizes stock option activity during the nine months ended March 31, 2015:

	Employee Stock Options Plan
						Weighted
	Number of			Weighted		Average
	Shares			Average		Remaining		Aggregate
	Subject			Exercise		Contractual		Intrinsic
	To Option			Price		Term		Value
Balance at July 1, 2014		161,555		$	22.43		6.02
Granted		10,000		$	26.53		9.85
Exercised		(6,900	)	$	16.75		—
Forfeited or expired		(9,975	)	$	25.29		—
Outstanding at March 31, 2015		154,680		$	22.76		5.68	$	1,061,106
Vested or expected to vest at March 31, 2015		149,959		$	22.63		5.57	$	1,048,589
Exercisable at March 31, 2015		119,430		$	21.50		4.75	$	969,606

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing sale price of the Company's common stock as reported on the NYSE MKT on March 31, 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders if all option holders had exercised their options on March 31, 2015. This amount changes based on the fair market value of the Company's common stock. The total intrinsic values of the options exercised during the nine months ended March 31, 2015 and 2014 was $53,242 and $89,288, respectively.

The following table summarizes changes in non-vested stock options during the nine months ended March 31, 2015:

	Weighted Number			Average Grant
	of Shares			Date Fair
	Subject to Option			Value (per Option)
Non-Vested at July 1, 2014		25,975		$	3.777
Granted		10,000		$	4.296
Vested		—			—
Forfeited or expired		(725	)	$	3.777
Non-Vested at March 31, 2015		35,250		$	3.924