STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

STOCKHOLDERS' EQUITY

Note 9 — Stockholders’ Equity

The Company has authorized 50,000,000 shares of common stock, of which 16,546,196 were issued and 16,512,742 outstanding at March 31, 2019; 16,145,915 shares were issued and 16,112,461 were outstanding as of December 31, 2018.

Warrants

In April 2013, the closing date of the Company’s second common offering, the Company’s placement agent received investor rights to 5 year warrants to purchase 86,376 common shares of the Company at an exercise price of $4.55 per unit, which was equal to 110% of the offering price. During the first quarter of 2018, 73,309 of the warrants were exercised, and 13,067 warrants expired.

In June 2016, from the Company’s IPO, the investors received three-year warrants to purchase 2,300,000 shares of common stock at an exercise price of $6.75 per share; the warrants are exercisable through June 2, 2019. Following the first anniversary of the date of issuance, if certain conditions are met, the Company may redeem any and all of the outstanding warrants at a price equal to $0.01 per warrant. During the first quarter of 2019, warrants for 400,281 shares were exercised.

In addition, the underwriter’s representatives for the IPO received four-year warrants to purchase up to 138,000 units, consisting of one share of common stock and one warrant to purchase one share of common stock. The warrants for the units are exercisable between June 2, 2017 and June 2, 2021 at an exercise price of $6.75 per unit.

The following table summarizes the Company’s warrant activity:

	Common Unit Warrants
	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)
Outstanding – December 31, 2018		2,438,000		$	6.75		0.55
Granted		—			—		—
Exercised		(400,281	)		6.75		—
Expired		—			—		—
Outstanding – March 31, 2019		2,037,719		$	6.75		0.32
Exercisable – March 31, 2019		2,037,719		$	6.75		0.32

The intrinsic value of the common stock warrants was approximately $550,000 and $1,609,000 as of March 31, 2019, and December 31, 2018, respectively.

2016 and 2017 Equity Incentive Plans

The Company has limited the aggregate number of shares of common stock to be awarded under the 2016 Equity Incentive Plan to 397,473 shares and no more than 397,473 shares of common stock in the aggregate may be granted in connection with incentive stock options. The Company has limited the aggregate number of shares of common stock to be awarded under the 2017 Equity Incentive Plan to 500,000 shares and no more than 500,000 shares of common stock in the aggregate may be granted in connection with incentive stock options. In addition, unless the Compensation Committee specifically determines otherwise, the maximum number of shares available under the 2016 and 2017 Plans and the awards granted under those plans will be subject to appropriate adjustment in the case of any stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, exchanges or other changes in capitalization affecting our common stock.

On June 2, 2016, 307,666 shares of restricted stock were issued to employees and were recorded at the fair value of $5.25 as per the initial offering price. In addition, on January 20, 2017, 10,000 shares of restricted stock were issued to one employee and were recorded at the fair value of $4.99 per share and on October 1, 2018, 30,000 shares of restricted stock were issued to employees and were recorded at the fair value of $8.58 per share. The restricted shares vest 25% per year over a four-year vesting period and are being recognized as expense on a straight-line basis over the vesting period of the awards.

On January 25, 2018, 80,000 fully vested shares were granted to the nonemployee directors, and 229,334 stock options with a four-year vesting period were granted to certain employees. The shares were recorded at the fair value of $5.55 per share for a total of $444,000 and the stock options were valued using a Black Scholes model at $3.52 per option using the assumptions noted in the following table:

Expected volatility	67.8	%
Risk-free interest rate	2.5	%
Expected life	6.25 years
Dividend yield	0.0	%

Expected Volatility. Expected volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate. Expected volatility is based on the historical daily volatility of the price of our common shares. The Company estimated the expected volatility of the stock options at grant date.

Risk-Free Interest Rate. The risk-free interest rate is based on the implied yield on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term of our stock-based awards.

Expected Term or Life. The expected term or life of stock options granted issued represents the expected weighted average period of time from the date of grant to the estimated date that the stock option would be fully exercised. The weighted average expected option term was determined using the “simplified method” for plain vanilla options as allowed by the accounting guidance. The “simplified method” calculates the expected term as the average of the vesting term and original contractual term of the options.

The stock options had an intrinsic value of approximately $337,000 and $427,000 as of March 31, 2019 and December 31, 2018, respectively.

The Company recognizes forfeitures as they occur rather than estimating a forfeiture rate. The reduction of stock compensation expense related to the forfeitures was approximately $0 and $39,000 for the three months ended March 31, 2019 and 2018, respectively.

Unrecognized stock compensation expense was approximately $1,233,000 as of March 31, 2019, which will be recognized over the remaining vesting period.

A summary of the restricted stock activity is presented as follows:

	Shares			Weighted  Average Grant Date Fair Value
Unvested balance at December 31, 2018		165,834		$	5.84
Granted		—			—
Vested		(2,500	)		4.99
Forfeited		—			—
Unvested balance at March 31, 2019		163,334		$	5.85

The following table summarizes the Company’s stock option activity:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term  (In Years)
Outstanding – December 31, 2018		229,334	$	5.55		9.08
Granted		—		—		—
Exercised		—		—		—
Expired		—		—		—
Outstanding – March 31, 2019		229,334	$	5.55		8.83
Exercisable – March 31, 2019		57,334	$	5.55		8.83

Treasury Stock

The Company accounts for purchases of treasury stock under the cost method with the cost of such share purchases reflected in treasury stock in the accompanying condensed balance sheet. As of March 31, 2019 and December 31, 2018, the Company had 33,454 treasury shares.