Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

3 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

10. Stock-Based Compensation

Equity Incentive Plans – The Company adopted the 2013 Equity Compensation Plan (the “2013 Plan”) under which the Company reserved 62,500 shares of common stock for the purpose of providing equity incentives to 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 Company subsequently amended the 2013 Plan to increase the number of authorized shares of common stock under the 2013 Plan to 225,000 shares, which the Company’s stockholders approved on June 3, 2015.

Stock Options

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2017:

	Number of Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding - December 31, 2016		69,950		$	12.07			9.0	$	156,975
Granted		240,000			10.72
Exercised		-			-
Forfeited/Canceled/Expired		(5,886	)		(32.63	)
Outstanding – March 31, 2017		304,064		$	10.61			9.8	$	80,500

Exercisable – March 31, 2017		44,897		$	11.03			9.1	$	53,666

As discussed in Note 8, the Company granted 210,000 and 30,000 stock options to Messrs. Wang and Xiao, respectively, in connection with their employment agreements. These options had an aggregate fair value of $1,260,000, using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate		2.13	%
Expected dividend yield		0.00	%
Expected volatility		52.09	%
Expected term	5.5 years

The options are exercisable at an exercise price of $10.72 per share over a ten-year term and vest over three years, with one-third vested upon grant. The options are subject to the approval by the Company’s stockholders of the amendment to the 2013 Plan to increase the number of authorized shares of common stock under the 2013 Plan. As of March 31, 2017, none of the stock options are exercisable and 80,000 options have vested. The Company recorded $455,000 as compensation expense during the three months ended March 31, 2017 pertaining to these grants.

The Company recorded non-cash compensation expense of approximately $488,000 and $30,000 as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2017 and 2016, respectively, pertaining to stock options.

Total unrecognized compensation expense related to unvested stock options at March 31, 2017 amounts to approximately $907,000 and is expected to be recognized over a remaining weighted average period of 1.8 years.

Warrants

As of March 31, 2017, there were 170,314 warrants outstanding and exercisable, with a weighted average exercise price of $32.44 per share. The weighted average remaining contractual life of the warrants at March 31, 2017 and December 31, 2016 was 4.1 and 4.3 years, respectively, and the aggregate intrinsic value was $0.

The Company did not grant any warrants to purchase shares of common stock during the three months ended March 31, 2017.

No compensation cost was recognized for the three months ended March 31, 2017 and 2016 pertaining to warrants.

Restricted Stock

As of March 31, 2017 and December 31, 2016, there were 2,778 shares of unvested restricted stock outstanding.

The Company recorded non-cash compensation expense of approximately $28,000 for the three months ended March 31, 2017 and 2016, pertaining to restricted stock.

Total unrecognized compensation expense related to unvested restricted stock at March 31, 2017 amounts to approximately $74,000 and is expected to be recognized over a weighted average period of 0.7 years.