Note 2 – Equity and Stock-Based Compensation

Stock-Based Compensation

During the six months ended June 30, 2015 and 2014, we issued 160,643 and 125,209 shares, respectively, Class A Nonvoting common stock to an executive employee associated with the vesting of his prior years’ stock grants. During the quarter and six-month period ended June 30, 2015, we accrued $300,000 and $600,000 in compensation expense associated with anticipated executive employee stock grants, respectively. During the quarter and six month period ended June 30, 2014, we accrued $300,000 and $600,000 in compensation expense associated with the vesting of executive employee stock grants, respectively.

Employee/Director Stock Option Plan

We have a long-term incentive stock option plan that provides for the grant to eligible employees, directors, and consultants of incentive or non-statutory options to purchase shares of our Class A Nonvoting Common Stock and Class B Voting Common Stock. Currently we issue options under our 2010 Stock Incentive Plan.

FASB ASC 718-20 requires companies to estimate forfeitures. Based on our historical experience and the relative market price to strike price of the options, we have not hereto estimated any forfeitures of vested or unvested options.

In accordance with FASB ASC 718-20, we estimate the fair value of our options using the Black-Scholes option-pricing model, which takes into account assumptions such as the dividend yield, the risk-free interest rate, the expected stock price volatility, and the expected life of the options. As we intend to retain all earnings, we exclude the dividend yield from the calculation. We expense the estimated fair values of options issued on a straight-line basis over the vesting period from the grant date.

For the 112,000 and 20,000 options granted during the six months ended June 30, 2015 and 2014, respectively, we estimated the fair value of these options at the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions:



	2015	2014
Stock option exercise price	$ 13.42	$ 7.40
Risk-free interest rate	2.28%	2.88%
Expected dividend yield	--	--
Expected option life in years	4	4
Expected volatility	31.87%	30.65%
Weighted average fair value	$ 3.82	$ 2.46

Based on the above assumptions and calculation, we recorded compensation expense for the total estimated fair value of $76,403 and $133,403 for the three and six months ended June 30, 2015, respectively and $34,000 and $68,000 for the same periods ended June 30, 2014, respectively. At June 30, 2015, the total unrecognized estimated compensation cost related to non-vested stock options granted was $732,956, which we expect to recognize over a weighted average vesting period of 1.94 years. 222,100 options were exercised during the six months ended June 30, 2015 having an intrinsic value of $1.4 million for which we received $1.6 million of cash and other consideration. The intrinsic, unrealized value of all options outstanding, vested and expected to vest, at June 30, 2015 was $3.3 million of which 60.2% are currently exercisable.

Pursuant to both our 1999 Stock Option Plan and our 2010 Stock Incentive Plan, all stock options expire no later than ten years from their grant date. The aggregate total number of shares of Class A Nonvoting Common Stock and Class B Voting Common Stock authorized for issuance under our 2010 Stock Incentive Plan is 1,250,000. At the discretion of our Compensation and Stock Options Committee, the vesting period of stock options is usually between zero and four years.

We had the following stock options outstanding and exercisable as of June 30, 2015 and December 31, 2014:


				Weighted						Weighted Average
	Common Stock			Average Exercise			Common Stock			Price of
	Options			Price of Options			Exercisable			Exercisable
	Outstanding			Outstanding			Options			Options
	Class A	Class B		Class A		Class B	Class A	Class B		Class A		Class B
Outstanding - December 31, 2014	568,250	185,100	$	6.88	$	9.90	348,000	185,100	$	6.82	$	9.90
Granted	12,000	--		12.34		--	13,250	--		--		--
Exercised	(47,500)	--		6.87		--	(47,500)	--		--		--
Outstanding - March 31, 2015	532,750	185,100	$	7.01	$	9.90	313,750	185,100	$	7.02	$	9.90
Granted	100,000	--		13.42		--	31,250	--		--		--
Exercised	(89,500)	(85,100)		5.29		9.51	(89,500)	(85,100)		--		--
Forfeited	(4,000)	--		6.23		--	(3,000)	--		--		--
Outstanding - June 30, 2015	539,250	100,000	$	8.49	$	10.24	252,500	100,000	$	7.56	$	10.24

The weighted average remaining contractual life of all options outstanding, vested and expected to vest at June 30, 2015 and December 31, 2014 was approximately 3.23 and 2.44 years, respectively. The weighted average remaining contractual life of the exercisable options outstanding at June 30, 2015 and December 31, 2014 was approximately 2.41 and 3.11 years, respectively.