Stock-Based Compensation

3 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Note 13: Stock-Based Compensation

The Company grants stock option awards to officers and employees and grants stock awards to directors as compensation for their service to the Company.

In November 2010, the Company adopted the 2010 Stock Incentive Plan (“the Plan”) which was amended in April 2011, August 2013, April 2014, February 2016 and March 2017. As amended, up to 1,950,000 shares of common stock are available for issuance under the Plan. The Plan provides for the issuance of stock options and other stock-based awards.

Stock Options

Stock option awards under the Plan have a 10-year maximum contractual term and must be issued at an exercise price of not less than 100% of the fair market value of the common stock at the date of grant. The Plan is administered by the Board of Directors, which has the authority to determine to whom options may be granted, the period of exercise and what other restrictions, if any, should apply. Vesting for awards granted to date under the Plan is principally over four years from the date of the grant, with 25% of the award vesting after one year with monthly vesting thereafter.

Option awards are valued based on the grant date fair value of the instruments, net of estimated forfeitures, using a Black-Scholes option pricing model with the following assumptions:

	Three Months Ended June 30,
	2017		2016
Volatility		49%		38% - 47%
Risk-free interest rate		2.04% - 2.26%		1.30% - 1.65%
Expected term		6.25 years		6.25 years

The weighted average grant date fair value of stock options granted during the three months ended March 31, 2017 and 2016 was $2.42 and $2.04, respectively.

For grants prior to January 1, 2015, the volatility assumption was based on historical volatility of similar sized companies due to lack of historical data of the Company’s stock price. For all grants subsequent to January 1, 2015, the volatility assumption reflects the Company’s historic stock volatility for the period of February 1, 2014 forward, which is the date the Company’s stock started actively trading. The risk free interest rate was determined based on treasury securities with maturities equal to the expected term of the underlying award. The expected term was determined based on the simplified method outlined in Staff Accounting Bulletin No. 110.

Stock option awards are expensed on a straight-line basis over the requisite service period. During the three months ended March 31, 2017 and 2016, the Company recognized expense of $127,967 and $123,322, respectively, associated with stock option awards. At March 31, 2017, future stock compensation expense associated with stock options (net of estimated forfeitures) not yet recognized was $1,803,570 and will be recognized over a weighted average remaining vesting period of 3.1 years. The following summarizes stock option activity for the three months ended March 31, 2017:

				Weighted		Weighted Average		Aggregate
	Number of			Average		Remaining		Intrinsic
	Options			Exercise Price		Contractual Life		Value
Outstanding at December 31, 2016		1,128,368		$	5.12		7.0	$	514,439
Granted		307,500			4.89
Exercised		-			-
Forfeited		(39,080	)		4.89
Outstanding at March 31, 2017		1,396,788		$	5.08		7.2	$	178,222
Exercisable at March 31, 2017		569,554		$	5.25		4.6	$	100,973

There were no stock options exercised during the three months ended March 31, 2017. The total intrinsic value of stock options exercised during the three months ended March 31, 2016 was $1,854.

Stock Awards

During the three months ended March 31, 2017 and 2016, the Company issued 10,884 and 15,913 shares, respectively, to non-employee directors as compensation for their service on the board. Such stock awards are immediately vested.

Stock awards are valued based on the closing price of our common stock on the date of grant, and compensation cost is recorded on a straight line basis over the share vesting period. The total fair value of stock awards granted, vested and expensed during the three months ended March 31, 2017 and 2016 was $56,379 and $52,664, respectively. As of March 31, 2017, there was no unrecognized compensation cost related to stock awards.