Note 5 – Share-Based Compensation

Effective January 1, 2017, the Company adopted the 2017 Long Term Incentive Plan (the “Plan”) to attract and retain certain employees. The Plan provides for the issuance of up to one million common stock equivalents subject to the terms and conditions of the Plan. The Plan generally provides for quarterly and bi-annual vesting over terms ranging from two to three years. The Company accounts for the Plan as an equity plan.

The Company recognized these stock options at fair value determined by applying the Black Scholes options pricing model to the grant date market value of the underlying common shares of the Company. The compensation expense associated with these stock options is amortized on a straight-line basis over their respective vesting periods.

For the three months ended March 31, 2017, the Company recognized $116,600 of non-cash share-based compensation expense in selling, general and administrative expense in the condensed consolidated statements of operations. There were 44,167 stock options vested at March 31, 2017.

Stock options activity as of March 31, 2017 is as follows:

	Number of Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Term (Yrs.)		Aggregate Intrinsic Value

Total outstanding at December 31, 2016		-	$	-		-	$	-
Options granted		455,000		6.83		4.80		-
Options exercised		-		-		-		-
Actual options forfeited		-		-		-		-
Options expired		-		-		-		-
Total outstanding at March 31, 2017		455,000	$	6.83		4.80	$	-
Total exercisable at March 31, 2017		44,167	$	6.64		4.76	$	-
Total unvested at March 31, 2017		410,833	$	6.85		4.80	$	-
Total vested or expected to vest - March 31, 2017		455,000	$	6.83		4.80	$	-

As of March 31, 2017 the Company had unrecognized pre-tax compensation expense of $1,083,450 related to non-vested stock options under the Plan of which $403,355, $535,517, $129,017 and $15,561 will be recognized in 2017, 2018, 2019 and 2020, respectively.

The following table summarizes unvested stock options as of March 31, 2017:

	Number of Stock Options			Weighted Average Exercise Price

Total unvested - December 31, 2016		-		$	-
Granted		455,000			6.83
Vested		(44,167	)		6.64
Cancellations		-			-
Total unvested - March 31, 2017		410,833		$	6.85

Assumptions used in calculating the fair value of the stock options granted during 2017 are summarized below:

	Weighted Average as of March 31, 2017
Weighted Average Assumptions:

Expected dividend yield		0	%
Expected equity volatility		57	%
Expected term (years)		2.34
Risk-free interest rate		1.94	%
Exercise price per stock option	$	6.83
Market price per share	$	5.78
Weighted average fair value per stock option	$	2.64

The risk-free rate is based on the implied yield available on US Treasury constant maturities with remaining terms equivalent to the respective expected terms of the options. The Company estimates expected terms for stock options awarded to employees using the simplified method in accordance with ASC 718, Stock Compensation, because the Company does not have sufficient relevant information to develop reasonable expectations about future exercise patterns. The Company estimates the expected term for stock options using the contractual term. Expected volatility is calculated based on the Company’s peer group because the Company does not have sufficient historical data and will continue to use peer group volatility information until historical volatility of the Company is available to measure expected volatility for future grants.

The Company also awards common stock grants to directors. For the three months ended March 31, 2017 and 2016, the Company recognized in selling, general and administrative expense, non-cash share-based compensation expense of $16,185 and $0, respectively.

In January 2018, the Company’s board of directors approved an increase, subject to stockholder approval, to the number of shares available for grant pursuant to the Plan to 1,250,000 shares from 1,000,000 shares.