Quarterly report pursuant to Section 13 or 15(d)

Note 7 - Equity

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Note 7 - Equity
 9 Months Ended
Sep. 30, 2015
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
Note 7:       Equity
 
Initial Public Offering
 
The Company completed its initial public offering of 3,000,000 shares of common stock at a price to the public of $6.50 per share on November 14, 2014, whereupon it received aggregate net proceeds of approximately $17,065,000 after deducting underwriting discounts, commissions and other offering expenses. The Company’s underwriters exercised their option to purchase 450,000 additional shares of common stock to cover over-allotments on November 18, 2014, pursuant to which it received aggregate net proceeds of approximately $2,710,000, after deducting underwriting discounts, commissions and expenses.  Also, in conjunction with the IPO, the Company issued warrants to the underwriters for the purchase of 90,000 shares of common stock, which can be exercised between November 10, 2015 and November 10, 2018 at an exercise price of $8.125 per share.
 
Stock Options
 
In the nine months ended September 30, 2015, the Company granted 211,660 stock options to employees and certain non-employee members of its board of directors with exercise prices ranging from $6.31 - $9.62.
 
The fair value of the Company’s common stock prior to its IPO was estimated by the Board of Directors at or about the time of grant for each share-based award. At each grant, the board considered a number of factors in establishing a value for the Company’s common stock including its EBITDA, assessments of an amount its shareholders would accept in the private sale of the company, discussions with its investment bankers regarding pricing of the Company’s common stock in an initial public offering and the probability of successfully completing an IPO. Although the methods for determining the fair value of the Company’s common stock are not complex, the board’s estimate of the fair value of the common stock did involve subjectivity, especially assessments of value in a private sale and estimates of value in the public stock market.
 
Upon the completion of the Company’s IPO, its stock trading price became the basis of fair value of its common stock used in determining the value of share based awards. To the extent the value of the Company’s share based awards involves a measure of volatility, it will rely upon the volatilities from publicly traded companies with similar business models until its common stock has accumulated enough trading history for it to utilize its own historical volatility. The expected life of the options granted is based on the average of the vesting term and the contractual term of the option. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury 10-year yield curve in effect at the date of the grant.
 
The Company has computed the fair value of all options granted during the nine months ended September 30, 2015 and 2014, using the following assumptions:
 
    Nine Months Ended September 30,
    2015   2014
Expected volatility     45% - 50%       43% - 46%  
Expected dividends       None           None    
Expected term (years)     5.5 - 7       5.5 - 7.5  
Risk-free rate     1.66% - 1.92%       0.07% - 2.05%  
Forfeiture rate       20%           None    
 
The information below summarizes the stock options:
 
    Number of
Shares		   Weighted
Average
Exercise
Price		   Weighted
Average
Fair
Value		   Weighted
Average
Remaining
Contractual Life
Outstanding at December 31, 2014     314,775     $ 2.23     $ 0.92       9.2  
Granted at market price     211,660       8.35                  
Exercised     -       -                  
Cancelled     (1,835 )     3.49                  
Outstanding at September 30, 2015     524,600     $ 4.69     $ 2.21       9.0  
Exercisable at September 30, 2015     111,502     $ 1.81     $ 0.82       8.4  
 
The intrinsic value of the Company’s stock options outstanding was $1,336,454 at September 30, 2015.
 
For the three and nine months ended September 30, 2015, stock based compensation expense for stock options was $129,704, and $240,701, respectively.  For the three and nine months ended September 30, 2014, stock based compensation expense for stock options was $7,440 and $15,538, respectively.  Unrecognized stock-based compensation expense for stock options as of September 30, 2015 was $613,406, which is expected to be recognized ratably over the next 2.7 years. During the three months ended September 30, 2015 the Company made a cumulative adjustment to stock-based compensation expense in the amount of $23,031 to reflect accounting for certain performance based options.
 
Restricted Stock
 
The information below summaries the restricted stock activity:
 
Restricted Stock Awards   Shares
Outstanding at December 31, 2014     662,375  
Restricted stock awards granted     8,000  
Awards forfeited or exercised     -  
Outstanding  at September 30, 2015     670,375  
 
For the three and nine months ended September 30, 2015, stock based compensation expense for restricted stock was $226,875, and $405,376, respectively.  For the three and nine months ended September 30, 2014, stock based compensation expense for restricted stock was $10,115, and $32,508, respectively.   Unrecognized stock based compensation expense for restricted stock awards as of September 30, 2015 was $663,525 to be recognized ratably over the next 2.7 years. During the three months ended September 30, 2015 the Company made a cumulative adjustment to stock-based compensation expense in the amount of $122,841 to reflect accounting for certain performance based awards.