Quarterly report pursuant to Section 13 or 15(d)

STOCK OPTIONS/STOCK-BASED COMPENSATION AND WARRANTS

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STOCK OPTIONS/STOCK-BASED COMPENSATION AND WARRANTS
9 Months Ended
Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK OPTIONS/STOCK-BASED COMPENSATION AND WARRANTS
STOCK OPTIONS/STOCK-BASED COMPENSATION AND WARRANTS

The Company maintains its 2013 Incentive Plan (the “2013 Plan”) to provide a means whereby the Company may be able, by granting equity and other types of awards, to attract, retain and motivate capable and loyal employees, non-employee directors, consultants and advisors of the Company, for the benefit of the Company and its shareholders.  In May 2016, the Company’s shareholders approved an amendment to the 2013 Plan to increase the number of shares available for awards under the 2013 Plan by 1.6 million shares. As of September 30, 2017, there were 2,729,880 shares available for future awards under the 2013 Plan.

Restricted Stock Awards

During the nine months ended September 30, 2017, the Company issued 848,562 restricted shares of common stock under the 2013 Plan as compensation to officers, employees and directors of the Company.  Unvested restricted shares vest over various terms with all restricted shares vesting no later than April 2020.  As of September 30, 2017, there was approximately $4.0 million of total unrecognized compensation expense related to unvested restricted stock that will be recognized over a weighted-average period of approximately 1.7 years.  The Company has historically assumed a zero percent forfeiture rate, thus recognizing forfeitures as they occur, for restricted stock due to the small number of officers, employees and directors that have received restricted stock awards.

The following table reflects the outstanding restricted stock awards and activity related thereto for the nine months ended September 30, 2017:
 
Nine Months Ended
September 30, 2017
 
Number of
Shares
 
Weighted-Average
Price
Restricted Stock Awards:
 
 
 
Restricted Shares Outstanding at Beginning of Period
1,905,104

 
$
4.59

Shares Granted
848,562

 
2.13

Lapse of Restrictions
(689,632
)
 
4.40

Shares Forfeited
(85,383
)
 
4.09

Restricted Shares Outstanding at End of Period
1,978,651

 
$
3.62



Stock Option Awards

The following table reflects the outstanding stock option awards and the activity related thereto for the nine months ended September 30, 2017:

 
Stock Option Awards (1)
 
Weighted-Average Exercise Price
 
Weighted Average Contractual Term
Outstanding as of 12/31/2016
391,872

 
$
3.66

 
2.9
  Granted

 

 
 
  Exercised

 

 
 
  Expired or canceled

 

 
 
  Forfeited

 

 
 
Outstanding as of 9/30/2017
391,872

 
$
3.66

 
2.2
____________
(1) All of the stock options outstanding were vested and exercisable at the end of the period.

Performance Equity Awards

The Company has granted performance equity awards under its 2017 Long Term Incentive Program to certain officers.  The awards are subject to market conditions that are based on the Company’s 2017 total shareholder return on both an absolute and relative basis.  Depending on the Company’s stock price performance, on both an absolute basis and on a relative basis compared to the defined peer group, the award recipients may earn between 0% and 150% of their 2017 base salaries, with any such amounts expected to be settled in restricted shares of the Company’s common stock that will vest over a three-year service-based period beginning in 2018.

The Company used a Monte Carlo simulation model to estimate the fair value of the awards based on the expected outcome of the Company’s stock price performance, on both an absolute basis and on a relative basis compared to the defined peer group, using key valuation assumptions.  The assumptions used for the Monte Carlo model to determine the fair value of the awards and associated compensation expense included a forecast period for the relevant stock price period in 2017, a risk-free interest rate of 0.97% and 80.0% for the Company’s stock price volatility.

The maximum value of the performance shares issuable if all participants earned the maximum award would total $1.3 million.  For the three months ended September 30, 2017 and 2016, the Company recorded $27,132 and $8,224, respectively, of compensation expense related to these performance equity awards. For the nine months ended September 30, 2017 and 2016, the Company recorded $63,308 and $197,832, respectively, of compensation expense related to these performance equity awards.