Stock Compensation Plan

12 Months Ended

Dec. 31, 2018

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 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.

On June 14, 2018, the shareholders approved and ratified an amendment and restatement (and renaming) of the Company’s Amended and Restated 2013 Incentive Award Plan (formerly 2013 Stock Option and Stock Award Plan). The amendment and restatement made two substantive changes: (1) provide an additional 2,000,000 common shares for future grant of option awards, restricted stock awards, or other stock-based awards; and (2) allow for the issuance of other stock-based awards.

The Compensation Committee has the exclusive authority to administer and construe the 2013 Plan and shall determine, among other things: persons eligible for awards and who shall receive them; the terms and conditions of the awards; the time or times and conditions subject to which awards may become vested, deliverable, exercisable, or as to which any may apply, be accelerated or lapse; and amend or modify the terms and conditions of an award with the consent of the participant.

Generally, the term of any stock option may not be more than 10 years from the date of grant. The option price may 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 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, 2018, forty employees were granted options to purchase a total of 605,000 shares. 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. The fair value of these options for the years ended December 31, 2018, 2017 and 2016 was approximately $1,243,000, $1,042,000 and $425,000, respectively, based on assumptions noted below and is being amortized over the 1-year vesting period. The remaining unamortized stock option expense was $318,552 as of December 31, 2018, which will be expensed in 2019.

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:

	2018			2017			2016
Dividend yield		4.79	%		5.80	%		7.32	%
Expected volatility		25.78	%		26.30	%		26.30	%
Risk-free interest rate		2.74	%		2.37	%		1.49	%
Expected lives		10			10			8
Estimated forfeitures		-0-			-0-			-0-

During the year ended December 31, 2018, options to eight employees to purchase a total of 128,500 shares were exercised. 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, 2018, options to one employee to purchase a total of 2,000 shares were forfeited. 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.

A summary of the status of the Company’s stock option plans as of December 31, 2018, 2017 and 2016 and changes during the years then ended are as follows:

	2018					2017					2016
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding at beginning of year		1,778,100		$	11.60		1,760,000		$	9.97		1,560,500		$	9.92
Granted		605,000			13.26		576,000			14.96		527,000			9.77
Exercised		(128,500	)		10.78		(547,900	)		9.92		(277,500	)		8.96
Forfeited		(2,000	)		12.41		(10,000	)		9.77		-0-			-0-
Expired		-0-			-0-		-0-			-0-		(50,000	)		11.97
Outstanding at end of  year		2,252,600			12.09		1,778,100			11.60		1,760,000			9.97
Options exercisable at end of year		1,647,600					1,202,100					1,233,000
Weighted average fair value of options granted during the year				$	2.05				$	1.81				$	0.81

The following is a summary of stock options outstanding as of December 31, 2018:

Date of Grant	Number of Employees	Number of Shares			Option Price		Expiration Date
07/05/11	3		22,000			11.16	07/05/19
08/29/12	6		44,000			11.29	08/29/20
06/26/13	10		228,600			10.08	06/26/21
06/11/14	9		151,000			9.85	06/11/22
06/24/15	11		268,000			9.82	06/24/23
04/05/16	19		369,000			9.77	04/05/24
01/19/17	2		60,000			14.25	01/19/27
04/04/17	32		505,000			15.04	04/04/27
04/02/18	40		540,000	*		13.09	04/02/28
07/09/18	4		40,000	*		15.75	07/09/28
12/10/18	1		25,000	*		12.94	12/10/28
			2,252,600

* 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, 2018, 2017 and 2016 was $2,047,176, $5,935,112 and $8,939,488, respectively, of which $2,047,176, $5,896,112 and $6,156,928 relate to options exercisable. The intrinsic value of options exercised in 2018, 2017 and 2016 was $509,770, $3,030,119 and $1,018,730, respectively, determined as of the date of option exercise. The weighted average remaining contractual term of the above options was 7.9, 6.8 and 5.6 years as of December 31, 2018, 2017 and 2016, respectively. For the years ended December 31, 2018, 2017 and 2016, amounts charged to stock compensation expense relating to stock option grants, which is included in General and Administrative Expenses, totaled $1,115,395, $928,977 and $463,864, respectively.

Restricted Stock

On April 2, 2018, the Company awarded a total of 45,000 shares of restricted stock to two participants, pursuant to their employment agreements. During 2018, the Company also awarded 2,000 shares of restricted stock to our ten directors as additional directors’ fees. 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 our ten directors as additional directors’ fees. 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. The grant date fair value of restricted stock grants awarded to participants was $616,200, $845,870 and $627,085 for the years ended December 31, 2018, 2017 and 2016, respectively. These grants primarily vest in equal installments over five years. As of December 31, 2018, there remained a total of $1,296,604 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 3.4 years. For the years ended December 31, 2018, 2017 and 2016, amounts charged to stock compensation expense related to restricted stock grants, which is included in General and Administrative Expenses, totaled $497,715, $385,514 and $600,814, respectively.

A summary of the status of the Company’s non-vested restricted stock awards as of December 31, 2018, 2017 and 2016, and changes during the year ended December 31, 2018, 2017 and 2016 are presented below:

	2018					2017					2016
				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		146,953		$	11.98		133,315		$	10.04		121,242		$	9.83
Granted		47,000			13.11		56,000			15.10		60,500			10.37
Dividend Reinvested Shares		8,378			13.37		6,867			14.83		8,430			10.82
Forfeited		-0-			-0-		-0-			-0-		(2,160	)		9.83
Vested		(41,827	)		11.76		(49,229	)		10.67		(54,697	)		10.07
Non-vested at end of year		160,504		$	12.44		146,953		$	11.98		133,315		$	10.04

Other Stock-Based Awards

Effective June 20, 2018, a portion of our quarterly directors’ fee was paid with our unrestricted common stock. During 2018, 2,000 unrestricted shares of common stock were granted with a weighted average fair value on the grant date of $15.13 per share.

As of December 31, 2018, there were 1,961,500 shares available for grant as stock options, restricted stock or other stock-based awards under the 2013 Plan.