8. Stockholders' Equity

6 Months Ended

Jun. 30, 2013

Notes to Financial Statements

8. Stockholders' Equity

Preferred Stock

On May 14, 2013 the Board of Directors approved, subject to stockholder approval (which was received on August 13, 2013), an amendment to the Certificate of Incorporation of the Company to increase the number of authorized shares of Preferred Stock from 1,000,000 to 2,500,000.

Common Stock

On May 14, 2013 the Board of Directors approved, subject to stockholder approval (which was received on August 13, 2013), an amendment to the Certificate of Incorporation of the Company to increase the number of authorized shares of Common Stock from 10,000,000 to 20,000,000.

Dividend Declared

Dividends declared and paid on Common Stock were $307,274 and $226,829 for the six months ended June 30, 2013 and 2012, respectively. Dividends declared and paid on Common Stock were $153,637 and $113,432 for the three months ended June 30, 2013 and 2012, respectively. The Company’s Board of Directors approved a quarterly dividend on August 13, 2013 of $.04 per share payable in cash on September 13, 2013 to stockholders of record as of August 30, 2013.

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 550,000 shares of Common Stock are permitted to be issued pursuant to options granted and restricted stock issued.  On May 14, 2013 the Board of Directors approved, subject to stockholder approval (which was received on August 13, 2013), an increase in the number of shares authorized to be issued pursuant to the 2005 Plan from 550,000 to 700,000. Incentive stock options granted under the 2005 Plan expire no later than ten years from date of grant (except no later than five years for a grant to a 10% stockholder). The Board of Directors or the Stock Option Committee determines the expiration date with respect to non-statutory options, and the vesting provisions for restricted stock, granted under the 2005 Plan.

The results of operations for the six months ended June 30, 2013 and 2012 include share-based stock option compensation expense totaling approximately $13,000 and $30,000, respectively. The results of operations for the three months ended June 30, 2013 and 2012 include share-based stock option compensation expense totaling approximately $4,000 and $10,000, respectively. Stock-based compensation expense related to stock options is net of estimated forfeitures of 21% for the six months and three months ended June 30, 2013 and 2012. Such amounts have been included in the Condensed Consolidated Statements of Income and Comprehensive Income within other operating expenses.

Stock option compensation expense in 2013 and 2012 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. No stock options were granted during the six months ended June 30, 2013 and 2012.

A summary of option activity under the Company’s 2005 Plan for the six months ended June 30, 2013 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, 2013		235,115	$	2.58		2.24	$	539,485
Granted		-	$	-		-	$	-
Exercised		-	$	-		-	$	-
Forfeited		-	$	-		-	$	-
Outstanding at June 30, 2013		235,115	$	2.58		1.75	$	631,775
Vested and Exercisable at June 30, 2013		212,615	$	2.48		1.66	$	581,875

The aggregate intrinsic value of options outstanding and options exercisable at June 30, 2013 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 $5.22 closing price of the Company’s Common Stock on June 30, 2013.

Participants in the 2005 Plan 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”). No options were exercised during the six months ended June 30, 2013.

As of June 30, 2013, the fair value of unamortized compensation cost related to unvested stock option awards was approximately $13,000. Unamortized compensation cost as of June 30, 2013 is expected to be recognized over a remaining weighted-average vesting period of 1.98 years.