NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: Earnings Per Share  - Basic and diluted earnings per share are calculated in accordance with SFAS No. 128, Earnings per Share .Basic earnings per share is based on the weighted average number of common shares outstanding and diluted earnings per share includes potential dilutive effects of options, warrants and convert- ible securities. The following table sets forth the computation of basic and diluted earnings per share: Year Ended December 31, Derivatives and Hedging Activities - In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,  Accounting for Derivative Instruments and Hedging Activities , which was amended by SFAS Nos. 137 and 138. SFAS 133 requires the Company to recognize all derivatives in the balance sheet at fair value. Derivatives that are not hedged must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets, liabilities, or firm commitments through income or recognized in other compre- hensive income until the hedged item is recognized in income. The ineffective portion of a derivative’s change in fair value is immediately recognized in income. The Company adopted SFAS 133 effective January 1, 2001. The adoption of SFAS 133 had no material impact on the Company’s income or financial position. Shipping and Handling Fees and Cost  - The Company records revenues earned for shipping and handling as net sales, while the cost of shipping and handling is classified as cost of goods sold. Revenues and expenses were $10,793,000 and $11,984,000 for 2002, $10,482,000 and $12,119,000 for 2001 and $11,857,000 and $12,719,000 for 2000, respectively. Reclassifications - Certain amounts for 2001 and 2000 have been reclassified to conform with the 2002 presentation. 2002 2001 2000 Numerator: Net income (loss) $ (4,705,926) $ 1,992,422 $ 26,281,086 Denominator: Denominator for basic earnings per share 19,658,032 19,441,818 19,221,754 Effect of dilutive securities: Employee stock options 0 311,408 499,534 Denominator for diluted earnings per share 19,658,032 19,753,226 19,721,288 Earnings per common share: Basic $ (0.24) $ 0.10 $ 1.37 Diluted $ (0.24) $  0.10 $ 1.33  Expected life 4 years 4 years 4 years Expected volatility 0.462 0.460 0.444 Risk-free interest rate 2.03% 3.93% 5.25% Dividend yield -- -- -- 2002 Grants 2001 Grants 2000 Grants