Stock-Based Compensation

9 Months Ended

Sep. 30, 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 and 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:

	Nine Months Ended September 30,
	2017	2016
Volatility	48 - 49%	38% - 50%
Risk-free interest rate	1.85% - 2.26%	1.12% - 1.65%
Expected term	6.25 years	6.25 years

The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2017 and 2016 was $2.05 and $1.93, 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 September 30, 2017 and 2016, the Company recognized expense of $137,673 and $102,105, respectively, associated with stock option awards. During the nine months ended September 30, 2017 and 2016, the Company recognized expense of $384,787 and $333,650, respectively, associated with stock option awards. At September 30, 2017, future stock compensation expense associated with stock options (net of estimated forfeitures) not yet recognized was $1,221,255 and will be recognized over a weighted average remaining vesting period of 2.7 years. The following summarizes stock option activity for the three months ended September 30, 2017:

				Weighted		Weighted		Aggregate
	Number of			Average		Average Remaining		Intrinsic
	Options			Exercise Price		Contractual Life		Value
Outstanding at December 31, 2016		1,128,368		$	5.12		7.0	$	514,439
Granted		353,500			4.78
Exercised		(14,407	)		1.31
Forfeited		(380,838	)		4.99
Outstanding at September 30, 2017		1,086,623		$	5.11		8.0	$	500
Exercisable at September 30, 2017		428,721		$	5.47		7.0	$	344

The total intrinsic value of stock options exercised during the nine months ended September 30, 2017 and September 30, 2016 was $32,960 and $1,854, respectively.

Stock Awards

During the three months ended September 30, 2017 and 2016, the Company issued 14,489 and 11,052 shares, respectively, to non-employee directors as compensation for their service on the board. During the nine months ended September 30, 2017 and 2016, such awards totaled 38,159 and 40,531 shares, respectively. 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 September 30, 2017 and 2016 was $62,013 and $61,830, respectively. The total fair value of stock awards granted, vested and expensed during the nine months ended September 30, 2017 and 2016 was $174,650 and $166,113, respectively. As of September 30, 2017, there was no unrecognized compensation cost related to stock awards.