Stock Compensation Plan

12 Months Ended

Dec. 31, 2017

Compensation Related Costs [Abstract]

Stock Compensation Plan

NOTE 6 – STOCK COMPENSATION PLAN

On June 13, 2013, the shareholders approved and ratified the Company’s 2013 Stock Option and Stock Award Plan (the “2013 Plan”) authorizing the grant of stock options or restricted stock awards to directors, officers and key employees of options to purchase up to 3,000,000 shares of common stock. The option price shall not be below the fair market value at date of grant. If and to the extent that an award made under the 2013 Plan is forfeited, terminated, expires or is canceled unexercised, the number of shares associated with the forfeited, terminated, expired or canceled portion of the award shall again become available for additional awards under the 2013 Plan. The 2013 Plan replaced the Company’s 2003 Stock Option Plan (the “2003 Plan”), which, pursuant to its terms, terminated in 2013. The outstanding options under the 2003 Stock Option and Award Plan, as amended, remain outstanding until exercised, forfeited or expired. Not more than 200,000 shares of the Company’s common stock may be granted as options in any one fiscal year to a participant under the 2013 Plan. In general, each option may be exercised only after one year of continued service with the Company. The maximum number of shares underlying restricted stock awards that may be granted in any one fiscal year to a participant is 100,000 shares.

The Compensation Committee determines the recipients of restricted stock awards; the number of restricted shares to be awarded; the length of the restricted period of the award; the restrictions applicable to the award including, without limitation, the employment or retirement status of the participant; rules governing forfeiture and restrictions applicable to any sale, assignment, transfer, pledge or other encumbrance of the restricted stock during the restricted period; and the eligibility to share in dividends and other distributions paid to the Company’s stockholders during the restricted period.

Unless otherwise provided for in an underlying restricted stock award agreement, if a participant’s status as an employee or director of the Company is terminated by reason of death or disability, the restrictions will lapse on such date. Unless otherwise provided for in an underlying restricted stock award agreement, the Plan provides that if an individual’s status as an employee or director is terminated by reason of retirement following an involuntary termination (other than for “cause” as defined in the 2013 Plan), the restrictions will generally lapse, unless the restricted stock award is intended to constitute “performance based” compensation for purposes of Section 162(m) of the Internal Revenue Code. If a participant’s status as an employee or director terminates for any other reason, the Plan provides that a participant will generally forfeit any outstanding restricted stock awards, unless otherwise indicated in the applicable award agreement. Shares of restricted stock that are forfeited become available again for issuance under the 2013 Plan. The Compensation Committee has the authority to accelerate the time at which the restrictions may lapse whenever it considers that such action is in the best interests of the Company and of its stockholders, whether by reason of changes in tax laws, a “change in control” as defined in the 2013 Plan or otherwise.

The Company accounts for stock options and restricted stock in accordance with ASC 718-10, Compensation-Stock Compensation. ASC 718-10 requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period).

Stock Options

During the year ended December 31, 2017, thirty-four employees were granted options to purchase a total of 576,000 shares. During the year ended December 31, 2016, thirty-four employees were granted options to purchase a total of 527,000 shares. During the year ended December 31, 2015, twenty-four employees were granted options to purchase a total of 425,000 shares. The fair value of these options for the years ended December 31, 2017, 2016 and 2015 was approximately $1,042,000, $425,000 and $393,000, respectively, based on assumptions noted below and is being amortized over the 1-year vesting period. The remaining unamortized stock option expense was $191,360 as of December 31, 2017, which will be expensed in 2018.

The Company calculates the fair value of each option grant on the grant date using the Black-Scholes option-pricing model which requires the Company to provide certain inputs, as follows:

● The assumed dividend yield is based on the Company’s expectation of an annual dividend rate for regular dividends over the estimated life of the option.

● Expected volatility is based on the historical volatility of the Company’s stock over a period relevant to the related stock option grant.

● The risk-free interest rate utilized is the interest rate on U.S. Government Bonds and Notes having the same life as the estimated life of the Company’s option awards.

● Expected life of the options granted is estimated based on historical data reflecting actual hold periods.

● Estimated forfeiture is based on historical data reflecting actual forfeitures.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the following years:

	2017			2016			2015
Dividend yield		5.80	%		7.32	%		7.37	%
Expected volatility		26.30	%		26.30	%		27.17	%
Risk-free interest rate		2.37	%		1.49	%		2.12	%
Expected lives		10			8			8
Estimated forfeitures		-0-			-0-			-0-

During the year ended December 31, 2017, options to twenty seven employees to purchase a total of 547,900 shares were exercised. During the year ended December 31, 2016, options to twenty employees to purchase a total of 277,500 shares were exercised. During the year ended December 31, 2015, options to five employees to purchase a total of 22,500 shares were exercised. During the year ended December 31, 2017, options to one employee to purchase a total of 10,000 shares were forfeited. During the year ended December 31, 2016, options to one employee to purchase a total of 50,000 shares expired. During the year ended December 31, 2015, options to sixteen employees to purchase a total of 143,000 shares expired or were forfeited.

A summary of the status of the Company’s stock option plans as of December 31, 2017, 2016 and 2015 and changes during the years then ended are as follows:

	2017					2016					2015
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding at  beginning of year		1,760,000		$	9.97		1,560,500		$	9.92		1,301,000		$	10.34
Granted		576,000			14.96		527,000			9.77		425,000			9.82
Exercised		(547,900	)		9.92		(277,500	)		8.96		(22,500	)		7.56
Forfeited		(10,000	)		9.77		-0-			-0-		(37,000	)		10.63
Expired		-0-			-0-		(50,000	)		11.97		(106,000	)		14.84
Outstanding at end of year		1,778,100			11.60		1,760,000			9.97		1,560,500			9.92
Options exercisable at end of year		1,202,100					1,233,000					1,135,500
Weighted average fair value of options granted during the year				$	1.81				$	0.81				$	0.93

The following is a summary of stock options outstanding as of December 31, 2017:

Date of Grant	Number of Employees		Number of Shares			Option Price		Expiration Date
07/27/10		4		34,000			11.40	07/27/18
07/05/11		4		34,000			11.16	07/05/19
08/29/12		6		44,000			11.29	08/29/20
06/26/13		10		232,100			10.08	06/26/21
06/11/14		11		175,000			9.85	06/11/22
06/24/15		12		303,000			9.82	06/24/23
04/05/16		21		380,000			9.77	04/05/24
01/19/17		2		60,000	*		14.25	01/19/27
04/04/17		34		516,000	*		15.04	04/04/27
				1,778,100

* Unexercisable

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money. The aggregate intrinsic value of options outstanding as of December 31, 2017, 2016 and 2015 was $5,935,112, $8,939,488 and $669,098, respectively, of which $5,896,112, $6,156,928 and $541,598 relate to options exercisable. The intrinsic value of options exercised in 2017, 2016 and 2015 was $3,030,119, $1,018,730 and $62,230, respectively, determined as of the date of option exercise. The weighted average remaining contractual term of the above options was 6.8, 5.6 and 5.4 years as of December 31, 2017, 2016 and 2015, respectively. For the years ended December 31, 2017, 2016 and 2015, amounts charged to stock compensation expense relating to stock option grants, which is included in General and Administrative Expenses, totaled $928,977, $463,864 and $365,560, respectively.

Restricted Stock

On April 4, 2017, the Company awarded 45,000 shares of restricted stock to two participants. On September 27, 2017, the Company awarded 11,000 shares of restricted stock to ten participants. On April 5, 2016, the Company awarded 40,500 shares of restricted stock to two participants. On September 14, 2016, the Company awarded 20,000 shares of restricted stock to one participant. On February 5, 2015, the Company awarded 25,000 shares of restricted stock to one participant. On September 16, 2015, the Company awarded 10,000 shares to ten participants. The grant date fair value of restricted stock grants awarded to participants was $845,870, $627,085 and $334,450 for the years ended December 31, 2017, 2016 and 2015, respectively. These grants vest in equal installments over five years. As of December 31, 2017, there remained a total of $1,147,859 of unrecognized restricted stock compensation related to outstanding non-vested restricted stock grants awarded and outstanding at that date. Restricted stock compensation is expected to be expensed over a remaining weighted average period of 3.7 years. For the years ended December 31, 2017, 2016 and 2015, amounts charged to stock compensation expense related to restricted stock grants, which is included in General and Administrative Expenses, totaled $385,514, $600,814 and $490,208, respectively.

A summary of the status of the Company’s non-vested restricted stock awards as of December 31, 2017, 2016 and 2015, and changes during the year ended December 31, 2017, 2016 and 2015 are presented below:

	2017					2016					2015
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Grant Date					Grant Date					Grant Date
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Non-vested at beginning of year		133,315		$	10.04		121,242		$	9.83		137,346		$	10.37
Granted		56,000			15.10		60,500			10.37		35,000			9.56
Dividend Reinvested Shares		6,867			14.83		8,430			10.82		10,736			9.09
Forfeited		-0-			-0-		(2,160	)		9.83		-0-			-0-
Vested		(49,229	)		10.67		(54,697	)		10.07		(61,840	)		9.63
Non-vested at end of year		146,953		$	11.98		133,315		$	10.04		121,242		$	9.83

As of December 31, 2017, there were 613,500 shares available for grant as stock options or restricted stock under the 2013 Plan.