Annual report pursuant to Section 13 and 15(d)

Note 17 - Warrants

v3.5.0.2
Note 17 - Warrants
12 Months Ended
Dec. 31, 2015
Disclosure Text Block Supplement [Abstract]  
Shareholders' Equity and Share-based Payments [Text Block]
Note 17
– Warrants

On September 29, 2014, in connection with the Exchange Agreement, the Company completed a private placement equity offering to accredited investors, raising $4,556,100 in gross proceeds.  For its assistance in this private placement of equity, the Company paid a placement agent commissions representing 10% of the gross proceeds and issued it warrants to purchase 258,155 shares of the Company’s Common Stock.  The fair value of the warrants was calculated using the Black-Scholes model and the following assumptions: estimated life of five years, volatility of 46.5%, risk-free interest rate of 1.77% and dividend yield of 0%.  The fair value of the warrants at grant date was $1,660,526.

On November 21, 2014, the Company completed a private placement equity offering to accredited investors, raising $1,052,498 in gross proceeds.  For its assistance in this private placement of equity, the Company paid a placement agent commissions representing 10% of the gross proceeds and issued it warrants to purchase 32,239 shares of the Company’s Common Stock.  The fair value of the warrants was calculated using the Black-Scholes model and the following assumptions: estimated life of five years, volatility of 46.5%, risk-free interest rate of 1.63% and dividend yield of 0%.  The fair value of the warrants at grant date was $91,436.

During the year ended December 31, 2015, 100,588 warrants were exercised through a cashless exercise provision for the issuance of 72,247 shares of the Company’s Common Stock with an exercise price of $2.21.

The fair values of warrants during the year ended December 31, 2015 were calculated on the date of the grant using the Black-Scholes option pricing model.  The Black Scholes valuation model requires the Company to estimate key assumptions such as expected volatility, expected terms, risk-free interest rates and dividend yields. The Company determined the assumptions in the Black Scholes valuation model as follows: expected volatility is a combination of the Company’s competitors’ historical volatility; expected term is calculated using the “simplified” method prescribed in ASC 718; and the risk free rate is based on the U.S. Treasury yield on 5 and 7-year instruments in effect at the time of grant.  A dividend yield is not used, as the Company has never paid cash dividends and does not currently intend to pay cash dividends other than as required to settle out the dividend derivative liability.  The Company periodically reviews the assumptions and modifies the assumptions accordingly.

The following table summarizes the warrant activity for the periods indicated:

 
 
Warrants
   
Weighted- Average Exercise Price
 
Balance at December 31, 2014 (Audited)
   
290,394
   
$
2.21
 
Granted
   
-
     
-
 
Exercised
   
(100,588
)
 
$
2.21
 
Balance at December 31, 2015 (Audited)
   
189,806
   
$
2.21
 

The warrants outstanding at December 31, 2015 are immediately exercisable at $2.21, and have a weighted average remaining term of approximately 3.69 years.

The Company uses the basis for the accounting of warrants issued in connection with the private placement to the placement agent in accordance with ASC 480 Distinguishing Liabilities from Equity and ASC 815 Derivatives and Hedging.  The warrants were considered an issuance cost for the private placement and therefore were deducted from the gross proceeds reducing equity.