13. Stock-Based Compensation

 

Equity Incentive Plans –  The Company adopted the 2013 Equity Compensation Plan under which the Company reserved 500,000 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 plan provides for a maximum of 500,000 shares that could be acquired upon the exercise of stock options or the vesting of restricted stock. On June 3, 2015, the Company amended the plan to increase the number of authorized shares of common stock under the plan to 1,800,000 shares.

 

Stock Options

 

 

 

On March 23, 2015, the Company granted 32,857 stock options to certain directors for future services. These options had a grant date fair value of $61,443 using the Black-Sholes option-pricing model with the following assumptions:

 

The options are exercisable at an exercise price of $3.45 per share over a ten-year term and vest over one year. The Company recorded $46,080 as compensation expense during the year ended December 31, 2015 pertaining to this grant.

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:

 

 

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  $58,807 and $67,194 as compensation expense during the years ended December 31, 2015 and 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:

 

 

The options were 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. These options were canceled in connection with Mr. Proman's Separation Agreement (see Note 11).

 

The Company recorded non-cash compensation expense of $104,886 and $67,194 for the years ended December 31, 2015 and 2014, respectively, pertaining to stock options.

 

Total unrecognized compensation expense related to unvested stock options at December 31, 2015 amounts to $94,382 and is expected to be recognized over a remaining weighted average period of 0.94 years.

 

Warrants

 

As of December 31, 2014 and 2015, there were 362,500 warrants outstanding and exercisable, with a weighted average exercise price of $8.34 per share. The weighted average remaining contractual life of the warrants outstanding and exercisable at December 31, 2015 and 2014 was 3.5 and 4.5 years, respectively, and the aggregate intrinsic value was $0 and $87,000, respectively.

 

The Company did not grant any warrants to purchase shares of common stock during the year ended December 31, 2015.

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:

 

 

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 consolidated statements of comprehensive loss for the year ended December 31, 2014.

 

No compensation cost was recognized for the years ended December 31, 2015 and 2014 pertaining to warrants.

 

Restricted Stock

 

 

As discussed in Note 4, the Company granted an aggregate of 300,000 shares of restricted common stock to the Stockholders. Of these shares, 99,999 were fully vested on the date of grant and the remaining shares are scheduled to vest in equal annual increments of 66,667 shares over a three year period, with the first vesting date being November 26, 2015, subject to continued employment on each applicable vesting date. The aggregate grant date fair value of the awards amounted to $1,494,000, based upon the closing market price on the date of grant. The Company recorded $341,221 and $497,994 as compensation expense pertaining to the grants during the years ended December 31, 2015 and 2014, respectively.

 

The Company recorded non-cash compensation expense of $341,221 and $497,994 for the years ended December 31, 2015 and 2014, respectively, pertaining to restricted stock.

 

Total unrecognized compensation expense related to unvested restricted stock at December 31, 2015 amounts to $212,113 and is expected to be recognized over a weighted average period of 1.91 years.