Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

9 Months Ended

Sep. 30, 2014

11. Stock-Based Compensation

Equity Incentive Plans – Prior to the consummation of our IPO, we adopted the 2013 Equity Compensation Plan under which we reserved 500,000 shares of our common stock for the purpose of providing equity incentives to our employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. The plan provides for a maximum of 500,000 shares that could be acquired upon the exercise of a stock option or the vesting of restricted stock. The plan was approved by our stockholders prior to the consummation of our IPO.

Stock Options

The following table summarizes the Company's stock option activity for the nine months ended September 30, 2014:

	Number of Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - December 31, 2013		-		$	-			-	$	-
Granted in compensatory arrangements		187,000			3.45
Issued as Merger consideration		183,000			3.45
Exercised		-			-
Forfeited or Canceled		(4,000	)		(3.45	)
Outstanding – September 30, 2014		366,000		$	3.45			9.6	$	585,600

Exercisable – September 30, 2014		183,000			3.45			9.8	$	292,800

A summary of the changes in the Company's unvested stock options is as follows:

	Number of Options			Weighted Average Grant Date Fair Value
Unvested - December 31, 2013		-		$	-
Granted in compensatory arrangements		187,000			1.65
Issued as Merger consideration		183,000			3.04
Vested		(183,000	)		(3.04	)
Forfeited or Canceled		(4,000	)		1.65
Unvested – September 30, 2014		183,000		$	1.65

On March 31, 2014, the Company granted 187,000 stock options to certain directors, senior management and employees for future services. These options had a fair value of $308,350 using the Black-Sholes option-pricing model with the following assumptions:

Risk-free interest rate		2.02	%
Expected dividend yield		0.00	%
Expected volatility		48.14	%
Expected term	6 years

The options are exercisable at an exercise price of $3.45 per share over a ten-year term and vest over three years. The Company recorded $24,597 and $50,292 as compensation expense during the three and nine months ended September 30, 2014, respectively, pertaining to this grant.

As discussed in Note 4, the Company issued 183,000 stock options to Mr. Proman as part of the Merger Consideration in connection with the acquisition of NAPW. These options had a fair value of $556,496 using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate		1.82	%
Expected dividend yield		0.00	%
Expected volatility		41.5	%
Expected term	5 years

The options are fully vested and exercisable at an exercise price of $3.45 per share over a ten year term. The Company included the fair value of the options of $556,496 as part of the consideration paid in connection with the acquisition of NAPW.

Total unrecognized compensation expense related to unvested stock awards at September 30, 2014 amounts to $251,462 and is expected to be recognized over a weighted average period of 2.50 years.

Warrants

A summary of warrant activity for the nine months ended September 30, 2014 is as follows:

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - December 31, 2013		131,250	$	10.00		5.2	$	-
Granted		231,250		7.41
Exercised		-		-
Forfeited or Canceled		-		-
Outstanding – September 30, 2014		362,500	$	8.34		4.8	$	105,000

Exercisable – September 30, 2014		131,250		10.00		4.4	$	-

A summary of the changes in the Company's unvested warrants is as follows:

	Number of Warrants			Weighted Average Grant Date Fair Value
Unvested - December 31, 2013		-		$	-
Granted		231,250			7.41
Vested		(231,250	)		(1.87	)
Forfeited or Canceled		-			-
Unvested – September 30, 2014		-		$	-

As discussed in Note 4, the Company granted 181,250 warrants to Mr. Proman as part of the Merger Consideration in connection with the acquisition of NAPW. These warrants had a fair value of $294,342. In addition, the Company granted 50,000 warrants to Aegis for financial advisory services rendered in connection with the NAPW acquisition. These warrants had a fair value of $138,768.

The fair value of the warrants was determined using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate		1.82	%
Expected dividend yield		0.00	%
Expected volatility		41.5	%
Expected term	5 years

The warrants are fully vested, are exercisable one year from the date of grant and have a five year term. Of the warrants granted, 100,000 are exercisable at an exercise price of $4.00 per share and 131,250 warrants are exercisable at an exercise price of $10.00 per share. The Company included the fair value of the warrants granted to Mr. Proman of $294,342 as part of the consideration paid in connection with the acquisition of NAPW. The fair value of the warrants granted to Aegis Capital of $138,768 has been recorded as acquisition related costs in the accompanying condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2014.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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