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11. CAPITAL STOCK AND STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2016

Policy Text Block [Abstract]

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

11.

CAPITAL STOCK AND STOCK BASED COMPENSATION

On May 7, 2014, our shareholders approved the 2014 Omnibus Incentive Plan (the “2014 Plan”). The 2014 Plan includes 500,000 of our common shares that may be granted under various types of awards as described in the 2014 Plan. As of December 31, 2016, we were authorized to issue 272,723 shares under this plan.

Service Based Restricted Stock

In the first quarter of 2016, we issued 30,000 restricted stock units to certain members of our management that will be settled in one share of common stock of the company per unit. These restricted stock units vest in increments of 25% per year over the next four years. We valued the units at an average fair value of $11.56 per unit, which was the closing price of our stock on the last trading date prior to the grant date. Also in the first quarter of 2016, we issued an additional 2,000 restricted stock units to a member of management. These units vest the same as the first issuance. We valued the units at an average fair value of $10.29 per unit, which was the closing price of our stock on the last trading date prior to the grant date. In the first quarter of 2015, we issued 28,000 restricted stock units to certain members of our management that will be settled in one share of common stock of the company per unit. These restricted stock units vest in increments of 25% per year over the next four years. We valued the units at a fair value of $13.42 per unit, which was the closing price of our stock on the last trading date prior to the grant date. In August 2015, we issued 2,000 restricted stock units to a member of our management that will be settled in one share of common stock of the company per unit. These restricted stock units vest on the same basis as the restricted stock units issued in the first quarter of 2015. We valued the units at a fair value of $18.15 per unit, which was the closing price of our stock on the last trading date prior to the grant date. For the years ended December 31, 2016 and 2015, we recorded expense of $127,349 and $183,150, respectively, related to these restricted stock units.

Performance Based Restricted Stock

In the first quarter of 2016, we made available up to 43,000 performance based restricted stock units to certain members of our management. Shares underlying the performance based restricted stock units will be issued upon achieving certain established EPS goals at the end of fiscal year 2017. For the year ended 2016, we did not record any expense related to these performance units as it is uncertain if we will reach the performance goals.

In 2015, we made available up to 34,000 performance based restricted stock units to certain members of our management. Shares underlying the performance based restricted stock units were to be issued upon achieving certain established EPS goals at the end of fiscal year 2016. For the years ended 2016 and 2015, we did not record any expense related to these restricted stock units as the performance goals were not achieved.

Stock Options

In the first quarter of 2016, we issued 30,000 stock options to certain members of our management. These stock options vest in increments of 20% per year over the next five years. The options are exercisable at $11.56 per option, which was the closing price of our stock on the last trading date prior to the grant date. We have determined the fair value of the options to be $3.41 per option using the Black Scholes calculation. The significant assumptions utilized for the Black Scholes calculations consist of an expected life of 6.5 years, historical volatility of 42.32%, a risk free interest rate of 2.06%, a dividend yield of 3.81% and an initial employee forfeiture rate of 7.7%. Our expected life estimate is based on the sum of the vesting terms divided by the number of vesting tranches. Also in the first quarter of 2016, we issued an additional 2,000 stock options to a member of our management. These units vest the same as the first issuance. The options are exercisable at $10.29 per option, which was the closing price of our stock on the last trading date prior to the grant date. We have determined the fair value of the options to be $2.84 per option using the Black Scholes calculation. The significant assumptions utilized for the Black Scholes calculations consist of an expected life of 6.5 years, historical volatility of 42.32%, a risk free interest rate of 1.88%, a dividend yield of 4.30% and an initial employee forfeiture rate of 7.7%. In the first quarter of 2015, we issued 28,000 stock options to certain members of our management. These stock options vest in increments of 20% per year from the grant date. The options are exercisable at $13.42 per option, which was the closing price of our stock on the last trading date prior to the grant date. We have determined the fair value of the options to be $4.70 per option using the Black Scholes calculation. The significant assumptions utilized for the Black Scholes calculations consist of an expected life of 6.5 years, historical volatility of 46.20%, a risk free interest rate of 1.92%, a dividend yield of 2.99% and an initial employee forfeiture rate of 3.8%. Our expected life estimate is based on the sum of the vesting terms divided by the number of vesting tranches. For the years ended 2016 and 2015, we recorded expense of $35,100 and $54,828, respectively, related to these stock options.

For the above issuances under the plan, we expect to recognize expense in the years 2017 through 2020 as follows:

2017		$	142,336
2018			106,068
2019			58,474
2020			8,918
Total		$	315,796

The following summarizes stock option transactions from January 1, 2015 through December 31, 2016:

		Shares				Weighted Average Exercise Price				Weighted Average Remaining Actual Term				Aggregate Intrinsic Value
Options outstanding at January 1, 2015			23,000			$	14.57
Issued			30,000			$	13.74
Exercised			(600	)		$	14.57
Forfeited			(800	)		$	14.57
Options outstanding at December 31, 2015			51,600			$	14.57				8.6			$	-

Options exercisable at:
January 1, 2015			-			$	-							$	-
December 31, 2015			4,000			$	14.57				8.0

Unvested options at December 31, 2015			47,600			$	14.04				8.6			$	-

Options outstanding at January 1, 2016			51,600			$	14.57
Issued			32,000			$	11.48
Exercised			-			$	-
Forfeited			(41,350	)		$	13.33
Options outstanding at December 31, 2016			42,250			$	12.85				8.8			$	-

Options exercisable at:
January 1, 2016			4,000			$	14.57							$	-
December 31, 2016			6,900			$	14.10				8.4			$	-
Unvested options at December 31, 2016			35,350			$	12.60				8.8			$	-

During the years ended December 31, 2016 and 2015, a total of 32,000 and 30,000, respectively, were issued with an intrinsic value of zero for all years. During the year ended December 31, 2016, no options were exercised. During the year ended December 31, 2016, a total of 41,350 options were forfeited with a fair value of $192,218. A total of 4,850 options vested during the year ended December 31, 2016 with a fair value of $25,337. At December 31, 2016 and 2015, a total of 35,350 and 47,600 options were unvested with a fair value of $149,411 and $248,004.

During the year ended December 31, 2016, we issued 14,568 shares of common stock to members of our Board of Directors. We recorded compensation expense of $168,000, which was the fair market value of the shares on the grant dates. The shares are fully vested.

The Company has authorized 250,000 shares of voting preferred stock without par value. No shares are issued or outstanding. Also, the Company has authorized 250,000 shares of non-voting preferred stock without par value. Of these, 125,000 shares have been designated Series A non-voting convertible preferred stock with a stated value of $.06 per share, of which no shares are issued or outstanding at December 31, 2016 and 2015, respectively.

The plans generally provided for grants with the exercise price equal to fair value on the date of grant, graduated vesting periods of up to 5 years, and lives not exceeding 10 years.

In June 2009, our Board of Directors adopted a Rights Agreement, which provides for one preferred share purchase right to be associated with each share of our outstanding common stock. Shareholders exercising these rights would become entitled to purchase shares of Series B Junior Participating Cumulative Preferred Stock. The rights are exercisable after the time when a person or group of persons without the approval of the Board of Directors acquire beneficial ownership of 20 percent or more of our common stock or announce the initiation of a tender or exchange offer which if successful would cause such person or group to beneficially own 20 percent or more of the common stock. Such exercise would ultimately entitle the holders of the rights to purchase at the exercise price, shares of common stock of the surviving corporation or purchaser, respectively, with an aggregate market value equal to two times the exercise price. The person or groups effecting such 20 percent acquisition or undertaking such tender offer would not be entitled to exercise any rights. The Rights Agreement was renewed in June 2012 and expired in August 2015.

Repurchase of Common Stock

In February 2016, our Board of Directors authorized the repurchase of up to $7,500,000 of common shares outstanding in open market or privately negotiated transactions over the next 12 months. Purchases of stock under this program were funded with borrowings from our amended and restated revolving credit facility. For the year ended December 31, 2016, there were 175,632 shares repurchased and retired, for $1,950,114. As of December 31, 2016, we have $5,549,886 of availability remaining under the February 2016 authorization.