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STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2018

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

STOCK-BASED COMPENSATION

13.

STOCK-BASED COMPENSATION

The Company adopted an Incentive Stock Plan on January 18, 2007. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. While the plan terminates 10 years after the adoption date, issued options have their own schedule of termination. During 2013, the majority of the shareholders approved to increase the total available shares in the plan from 2.5 million to 3.5 million shares of common stock. During May 2014, the majority of the shareholders approved to increase the total available shares in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock and during April 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million to 5.1 million shares of common stock. Options to acquire shares of common stock may be granted at no less than fair market value on the date of grant. Upon exercise, shares of new common stock are issued by the Company.

The Company adopted the 2015 Stock Incentive Plan on April 30, 2015. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.

Under the 2015 Stock Option Plan the Company has issued options to purchase approximately 3.9 million shares at an average price of $3.75 per share with a fair value of $8.8 million. For the six months ended June 30, 2018 and 2017, the Company issued options to purchase 1.5 million and 1.1 million shares. For the six months ended June 30, 2018 and 2017, the Company recognized an expense of approximately $1,950,627 and $1,034,731, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of June 30, 2018, the Company had approximately $6,502,000 of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years. The Company used straight-line amortization of compensation expense over the two to three-year requisite service or vesting period of the grant. There are options to purchase approximately 3.0 million shares that are vested as of June 30, 2018.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards using the Black - Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following:

		Six months ended June 30,
		2018		2017
Expected volatility		103% – 103%		137% - 140%
Expected term		4.77 – 5.04 Years		4 Years
Risk-free interest rate		2.56% - 2.57%		1.33%
Forfeiture Rate		0.00%		0.00%
Expected dividend yield		0.00%		0.00%

The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

A summary of the status of the Company’s outstanding stock options as of June 30, 2018 and changes during the period ending on that date is as follows:

						Weighted Average				Aggregate				Average
						Exercise				Intrinsic				Remaining
		Shares (000’s)				Price				Value (000’s)				Term (Yrs)
Options
Balance at December 31, 2017			4,602			$	1.82			$	12,476				4.23
Granted			1,453				5.56
Exercised			(702	)			0.40
Forfeiture and cancelled			(17	)			3.19
Balance June 30, 2018			5,336			$	3.02			$	8,794				5.49

Exercisable at June 30, 2018			3,026			$	1.84

The following table summarizes information about employee stock options outstanding at June 30, 2018:

		Outstanding Options												Vested Options
Range of Exercise Price		Number Outstanding at June 30, 2018 (000’s)				Weighted Averaged Remaining Life (years)				Weighted Averaged Exercise Price				Number Exercisable at June 30, 2018 (000’s)				Weighted Averaged Exercise Price				Weighted Averaged Remaining Life (years)
$0.20 - $0.53			502				3.58			$	0.27				514			$	0.28				3.50
$0.65 - $1.80			1,042				1.61			$	0.85				1,028			$	0.85				1.59
$1.83 - $2.84			1,169				3.84			$	2.06				827			$	2.07				3.83
$3.20 - $6.20			2,613				8.15			$	4.82				649			$	4.25				6.79
$7.20 - $22.00			8				1.13			$	10.36				8			$	10.36				1.13
Outstanding options			5,336				5.49			$	3.02				3,026			$	1.84				3.64

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the six months ended June 30, 2018 and 2017 is presented in the following table:

			For the Six Months ended
			June 30, 2018								June 30, 2017
			Shares				Weighted Average Grant Date Fair Value				Shares				Weighted Average Grant Date Fair Value
Unvested at beginning of period				72,222			$	—				—				—
Granted								—				100,000				3.64
Vested				(16,667	)			—				(11,111	)			—
Unvested at end of period				55,556			$	3.64				88,889				3.64

Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of June 30, 2018 was $202,174 and is expected to be recognized over a weighted average period of 1.75 years.