Earnings per Share

3 Months Ended

Sep. 30, 2012

Earnings (loss) per common share:

Earnings per Share

4. Earnings per Share

Basic earnings per share are computed by dividing net income by the weighted average shares outstanding. There are outstanding options under the Company’s Stock Option Plan and warrants expiring May 2013 that were issued to a financial advisor in May 2002 to purchase 480,000 shares of common stock at $0.066 per share. The convertible notes payable with a face value of $2,000,000 are convertible into shares of common stock at the election of the holders of the Convertible Notes at $0.06 per share as more fully explained in Note 6. The options, warrants and shares which can be issued on conversion of these convertible notes were not included in the calculation of diluted earnings per share for 2011 as they would be anti-dilutive due to the net loss. The 2012 net income used in computing diluted earnings per share represents reported net income plus interest expense of $79,450 and $249,450 (net of tax of $52,967 and $166,300, respectively) for the three and nine months ended September 30, 2012, assuming conversion of the notes at the being of the respective periods.