Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Equity

v3.7.0.1
Note 8 - Equity
 6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
Note
8:
Equity
 
Stock Options
 
In the
six
months ended
June 30, 2017,
the Company granted
190,286
stock options to employees with exercise prices ranging from
$2.65
-
$3.88.
 
 
Upon the completion of the Company’s IPO in
November 2014,
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
six
months ended
June 30, 2017
and
2016,
using the following assumptions:
 
    Six Months Ended June 30,
    2017   2016
Expected volatility  
 
42%
 
  
44%
-
45%
Expected dividends  
 
None
 
  
 
None
 
Expected term (years)  
5.5
-
7
  
 
7
 
Risk-free rate  
1.98%
to
2.14%
  
1.47%
to
1.68%
Forfeiture rate  
 
20%
 
  
2
0%
 
 
The information below summarizes the stock options activity:
 
    Number of
Shares		   Weighted
Average
Exercise
Price		   Weighted
Average
Fair
Value		   Weighted
Average
Remaining
Contractual Life
Outstanding at December 31, 2016    
953,075
     $
3.66
     $
1.86
      
6.9
  
Granted at market price    
190,286
      
3.69
      
 
      
 
  
Exercised    
(69,581
 )    
1.20
      
 
      
 
  
Cancelled    
(29,494
 )    
5.25
      
 
      
 
  
Outstanding at June 30, 2017    
1,044,286
     $
3.78
     $
1.77
      
7.4
  
Exercisable at June 30, 2017    
347,119
     $
4.54
     $
2.26
      
4.8
  
 
The intrinsic value of the Company’s stock options outstanding was
$761,049
at
June 30, 2017.
 
For the
three
and
six
months ended
June 30, 2017,
stock-based compensation expense for stock options was
$84,845
and
$135,883,
respectively.  For the
three
and
six
months ended
June 30, 2016,
stock-based compensation expense for stock options was
$171,152
and
$338,911,
respectively. Unrecognized stock-based compensation expense for stock options as of
June 30, 2017
was
$835,077,
which is expected to be recognized ratably over the next
2.4
years.
 
Restricted Stock
 
The information below summaries the restricted stock activity:
 
Restricted Stock Awards   Shares
Outstanding at December 31, 2016    
92,415
  
Awards granted    
59,700
  
Awards vested    
(74,070
 )
Awards forfeited    
(12,345
 )
Outstanding at June 30, 2017    
65,700
  
 
For the
three
and
six
months ended
June 30, 2017,
stock-based compensation expense for restricted stock was
$47,211
and
$91,238,
respectively. For the
three
and
six
months ended
June 30, 2016,
stock-based compensation expense for restricted stock was
$391,373
and
$418,483,
respectively. Unrecognized stock based compensation expense for restricted stock awards as of
June 30, 2017
was
$266,652
to be recognized ratably over the next
1.1
years. 
 
Treasury Stock
 
In
December 2013,
the Company exercised its right of
first
refusal under the terms of a Stockholders Agreement dated
March 10, 2010
to repurchase
534,000
shares of the Company’s common stock. The shares were purchased for
$0.45
per share or
$240,000
in cash along with the issuance of an option to repurchase the
534,000
shares. The repurchased shares were recorded as treasury stock, at cost in the amount of
$791,638,
and were available for general corporate purposes. The option is classified in equity as it is considered indexed to the Company’s stock and meets the criteria for classification in equity.  The option was granted to the seller for a term of
8
years.  The option contained the following exercise prices:
 
Year 1
  
$
0.56
  
Year 2
  
$
0.68
  
Year 3
  
$
0.84
  
Year 4
  
$
1.03
  
Year 5
  
$
1.28
  
Year 6
  
$
1.59
  
Year 7
  
$
1.97
  
Year 8
  
$
2.45
  
 
Consideration given in the form of the option was valued using a Binomial Lattice-Based model resulting in a fair value of
$1.03
per share option for a total fair value of
$551,638.
The option was valued using the Binomial Lattice-Based valuation methodology because that model embodies all of the relevant assumptions that address the features underlying the instrument.
 
During
December 2016,
the option holder partially exercised the call option and purchased
250,872
shares at a total repurchase price of
$210,000.
The Company reduced the cost of treasury shares by approximately
$113,000
related to the transaction, reduced the value of the option by approximately
$259,000,
and reduced additional paid-in-capital by approximately
$162,000.