Quarterly report pursuant to Section 13 or 15(d)

Note 7 - Equity

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Note 7 - Equity
 9 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
Note 7:     Equity
 
Stock Options
 
In the nine months ended September 30, 2016, the Company granted 590,000 stock options to employees with exercise prices ranging from $2.23 - $4.11. 
 
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 nine months ended September 30, 2016 and 2015, using the following assumptions:
 
    Nine Months Ended September 30,
    2016   2015
Expected volatility   43% - 45%   45% - 50%
Expected dividends     None       None  
Expected term (years)     7     5.5 - 7
Risk-free rate   1.19% to 1.68%   1.66% - 1.92%
Forfeiture rate     20%       20%  
 
The information below summarizes the stock options activity:
 
    Number of
Shares		   Weighted
Average
Exercise
Price		   Weighted
Fair
Value		   Weighted
Average
Remaining
Contractual Life
Outstanding at December 31, 2015     477,459     $ 4.30     $ 2.01       8.7  
Granted at market price     590,000       3.31                  
Exercised     (34,154 )     1.95                  
Cancelled     (133,935 )     4.08                  
Outstanding at September 30, 2016     899,370     $ 3.77     $ 1.94       8.4  
Exercisable at September 30, 2016     353,692     $ 4.08     $ 2.38       7.9  
 
The intrinsic value of the Company’s stock options outstanding was $209,994 at September 30, 2016.
 
For the three and nine months ended September 30, 2016, stock based compensation expense for stock options was $183,608, and $522,519, respectively. For the three and nine months ended September 30, 2015, stock based compensation expense for stock options was $129,704, and $204,701, respectively. Unrecognized stock-based compensation expense for stock options as of September 30, 2016 was $727,979, which is expected to be recognized ratably over the next 3.42 years.
 
Restricted Stock
 
The information below summaries the restricted stock activity:
 
Restricted Stock Awards   Shares
Granted at December 31, 2015     670,375  
Awards vested     (331,087 )
Unvested at December 31, 2015     339,288  
Awards granted     86,415  
Awards vested     (162,440 )
Awards forfeited     (170,848 )
Unvested at September 30, 2016     92,415  
 
For the three and nine months ended September 30, 2016, stock based compensation expense for restricted stock was $71,698, and $490,181, respectively. For the three and nine months ended September 30, 2015, stock based compensation expense for restricted stock was $226,875, and $405,376, respectively. Unrecognized stock based compensation expense for restricted stock awards as of September 30, 2016 was $227,710 to be recognized ratably over the next 1.12 years.
 
Modifications
 
During the nine months ended September 30, 2016, the Company accelerated the vesting of all unvested stock options and restricted stock awards granted to the Company’s former chief development officer in relation to his separation from the Company. In addition, the Company modified the post-employment exercise period of the stock options previously granted, extending the exercise period to December 31, 2017.
 
During the nine months ended September 30, 2016, the Company modified the post-employment exercise period of stock options previously granted to the Company’s former chief executive officer in relation to his separation from the Company. The modification extended the exercise period to May 13, 2020. In addition, the Company accelerated the vesting of 9,733 shares of the previously granted restricted stock awards that were scheduled to vest in July 2016. The remaining unvested restricted stock awards were forfeited upon separation.
 
These modifications resulted in an approximately $412,000 increase in stock-based compensation for the nine months ended September 30, 2016.
 
Treasury Stock
 
During the nine months ended September 30, 2016, the Company acquired approximately 13,376 shares of treasury stock to satisfy minimum tax withholding related to vesting of restricted stock awards. These shares were acquired at a total cost of $83,391.