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8. Stockholders' Equity

3 Months Ended

Mar. 31, 2019

Stockholders' Equity

8. Stockholders' Equity

Dividends Declared and Paid

Dividends declared and paid on common stock were $1,075,962 and $1,068,375 for the three months ended March 31, 2019 and 2018, respectively. The Company’s Board of Directors approved a quarterly dividend on May 8, 2019 of $0.10 per share payable in cash on June 14, 2019 to stockholders of record as of May 31, 2019 (see Note 13).

Stock Options

Pursuant to the Company’s 2005 Equity Participation Plan (the “2005 Plan”), which provides for the issuance of incentive stock options, non-statutory stock options and restricted stock, a maximum of 700,000 shares of the Company’s Common Stock are permitted to be issued pursuant to options granted and restricted stock issued. Effective August 12, 2014, the Company adopted the 2014 Equity Participation Plan (the “2014 Plan”) pursuant to which, a maximum of 700,000 shares of Common Stock of the Company are authorized to be issued pursuant to the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and stock bonuses. Incentive stock options granted under the 2014 Plan and 2005 Plan expire no later than ten years from the date of grant (except no later than five years for a grant to a 10% stockholder). The Board of Directors or the Compensation Committee determines the expiration date with respect to non-statutory stock options and the vesting provisions for restricted stock granted under the 2014 Plan and 2005 Plan.

The results of operations for the three months ended March 31, 2019 and 2018 include stock-based compensation expense totaling approximately $1,000 and $2,000, respectively. Stock-based compensation expense related to stock options is net of estimated forfeitures of approximately 17% for the three months ended March 31, 2019 and 2018. Such amounts have been included in the consolidated statements of operations and comprehensive income (loss) within other operating expenses.

Stock-based compensation expense for the three months ended March 31, 2019 and 2018 is the estimated fair value of options granted, amortized on a straight-line basis over the requisite service period, for the entire portion of the award less an estimate for anticipated forfeitures. The Company uses the “simplified” method to estimate the expected term of the options because the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term. No options were granted during the three months ended March 31, 2019 and 2018.

The Black-Scholes Option Valuation Model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our stock options.

A summary of stock option activity under the Company’s 2014 Plan and 2005 Plan for the three months ended March 31, 2019 is as follows:

Stock Options		Number of Shares				Weighted Average Exercise Price per Share				Weighted Average Remaining Contractual Term				Aggregate Intrinsic Value

Outstanding at January 1, 2019			37,500			$	8.36				2.24			$	349,950

Granted			-			$	-				-			$	-
Exercised			-			$	-				-			$	-
Forfeited			(1,250	)		$	7.85				2.04			$	11,413

Outstanding at March 31, 2019			36,250			$	8.36				2.00			$	230,713

Vested and Exercisable at March 31, 2019			33,750			$	8.27				1.95			$	218,250

The aggregate intrinsic value of options outstanding and options exercisable at March 31, 2019 is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s Common Stock for the options that had exercise prices that were lower than the $14.74 closing price of the Company’s Common Stock on March 31, 2019. The total intrinsic value of options forfeited during the three months ended March 31, 2019 was $11,413, determined as of the date of forfeiture.

Participants in the 2005 and 2014 Plans may exercise their outstanding vested options, in whole or in part, by having the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise price of the option being exercised (“Net Exercise”), or by exchanging a number of shares owned for a period of greater than one year having a fair market value equal to the exercise price of the option being exercised (“Share Exchange”).

As of March 31, 2019, there were no unamortized compensation costs related to unvested stock option awards.

As of March 31, 2019, there were 426,822 shares reserved for grants under the 2014 Plan.

Restricted Stock Awards

A summary of the restricted common stock activity under the Company’s 2014 Plan for the three months ended March 31, 2019 is as follows:

Restricted Stock Awards		Shares				Weighted Average Grant Date Fair Value per Share				Aggregate Fair Value

Balance at January 1, 2019			120,499			$	17.66			$	2,129,175

Granted			51,242			$	17.76			$	910,058
Vested			(27,501	)		$	18.67			$	(513,446	)
Forfeited			(3,804	)		$	15.51			$	(59,011	)

Balance at March 31, 2019			140,436			$	17.58			$	2,466,776

Fair value was calculated using the closing price of the Company’s Common Stock on the grant date. For the three months ended March 31, 2019 and 2018, stock-based compensation for these grants was approximately $309,000 and $106,000, respectively, which is included in other operating expenses on the accompanying consolidated statements of operations and comprehensive income (loss). These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be recognized by the directors, executives and employees.