Note 12.

Stock Based Compensation

In connection with the approval of the Business Combination, the 2015 Omnibus Incentive Plan (the Plan) was approved by shareholders to provide incentives to key employees, directors, and consultants of the Company and its subsidiaries. Awards under the Plan are generally not restricted for any specific form or structure and could include, without limitation, stock options, stock appreciation rights, dividend equivalent rights, restricted stock awards, cash-based awards, or other right or benefit under the Plan. The Plan allowed for the lesser of: (i) 1.60 million shares of common stock; or (ii) 8% of the outstanding common shares immediately following the consummation of the Business Combination as reserved and authorized for issuance under the Plan. At December 31, 2016 and 2015, there were 0.94 million and 1.57 million shares, respectively, of common stock authorized and available for issuance under the Plan.

Stock Options

Upon completion of the Business Combination, the Company approved initial grants of non-qualified stock option awards under the Plan to the current independent members of the Board of Directors. The stock option awards expire in ten years from the date of grant and vest over a period of one year – 20% of the options will vest 30 days following the grant date, 40% of the options will vest six months following the grant date subject to the Director’s continued service and the remaining 40% of the options will vest 12 months following the grant date subject to the director’s continued service. The exercise price is required to be set at not less than 100% of the fair market value of the Company’s common stock on the date of grant.

In June 2016, the Company granted non-qualified stock option awards under the Plan to certain key employees of the Company. The stock option awards expire in ten years from the date of grant and vest in 20% increments over a period that ranges from the grant date to approximately 4.5 years.

In September 2016, the Company granted non-qualified stock option awards under the Plan to a key employee of the Company. The stock option awards expire in ten years from the date of grant and vest at 25% on the grant date and in 25% increments thereafter over approximately 1.5 years.

During the year ended December 31, 2016, and the period from November 24, 2015 through December 31, 2015, the fair value of each option was estimated on the date of grant using the Black-Scholes model that uses the following weighted average assumptions:

	2016			2015
Expected dividend yield		0	%		0	%
Risk-free interest rate		1.5	%		1.7	%
Expected option term		6 years			5.5 years
Volatility		88.3	%		75.4	%
Weighted-average fair value	$	2.66		$	3.46

The Company calculated the expected term of the stock option awards using the “simplified method” in accordance with the Securities and Exchange Commission Staff Accounting Bulletins No. 107 and 110 because the Company lacks historical data and is unable to make reasonable assumptions regarding the future. The Company also estimates forfeitures of share-based awards at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from original projections. The Company’s assumptions with respect to stock price volatility are based on the average historical volatility of peers with similar attributes. The Company determines the risk-free interest rate by selecting the U.S. Treasury constant maturity rate.

The total compensation expense related to stock option awards under the Plan was $0.6 million and $0.03 million for the year ended December 31, 2016, and the period from November 24, 2015 through December 31, 2015, respectively. The income tax benefit related to share-based compensation expense was approximately $0.3 million and nominal for the year ended December 31, 2016, and the period from November 24, 2015 through December 31, 2015, respectively. As of December 31, 2016, $1.0 million of total unrecognized compensation expense related to the share-based compensation Plan is expected to be recognized over a weighted-average period of 2.50 years. The total unrecognized share-based compensation expense to be recognized in future periods as of December 31, 2016 does not consider the effect of share-based awards that may be issued in future periods.

Stock option awards as of December 31, 2016, and changes during the year ended December 31, 2016 were as follows:

					Weighted Average
			Weighted		Remaining
			Average		Contractual Term		Aggregate
	Options		Exercise Price		(Years)		Intrinsic Value

Outstanding, beginning of period		33,336	$	5.40
Granted		567,972		4.12
Exercised		-		-
Forfeited		-		-
Outstanding, end of period		601,308	$	4.19		9.51	$	-

Exercisable, end of period		210,485	$	4.47		9.43	$	-

There was no aggregate intrinsic value for the options outstanding and exercisable at December 31, 2016 because the exercise price exceeds the underlying share price.

Restricted Stock Awards

In June 2016, the Company granted restricted stock awards under the Plan to members of the Board of Directors. The awards vest at 20% on the date of the award and in two 40% increments during the remaining annual period.

The total compensation expense related to restricted stock awards granted under the Plan was $0.1 million for the year ended December 31, 2016. The income tax benefit related to the restricted stock awards was approximately $0.03 million for the year ended December 31, 2016. As of December 31, 2016, $0.05 million of total unrecognized compensation expense related to the restricted stock awards under the Plan is expected to be recognized over a weighted-average period of 0.5 years. The total unrecognized share-based compensation expense to be recognized in future periods as of December 31, 2016 does not consider the effect of share-based awards that may be issued in future periods.

Outstanding (non-vested) and vested restricted awards as of December 31, 2016 totaled 22,400 and 33,600, respectively, and 33,600 that vested during the year ended December 31, 2016. The fair value grant date fair value of vested and non-vested awards was $1.99 per share.