Quarterly report pursuant to Section 13 or 15(d)

STOCK OPTIONS/STOCK-BASED COMPENSATION AND WARRANTS

v3.10.0.1
STOCK OPTIONS/STOCK-BASED COMPENSATION AND WARRANTS
6 Months Ended
Jun. 30, 2018
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.  As of June 30, 2018, there were 780,552 shares available for future awards under the 2013 Plan.

Restricted Stock Awards

During the six months ended June 30, 2018, the Company issued 950,355 restricted shares of common stock subject only to time-based vesting 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 June 2021.  As of June 30, 2018, there was approximately $2.6 million of total unrecognized compensation expense related to such unvested restricted stock that will be recognized over a weighted-average period of approximately 1.2 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 subject only to time-based vesting and activity related thereto for the six months ended June 30, 2018:
 
Six Months Ended
June 30, 2018
 
Number of
Shares
 
Weighted-Average Grant Date Fair Value (per Award)
Restricted Stock Awards:
 
 
 
Restricted Shares Outstanding at Beginning of Period
1,721,533

 
$
3.65

Shares Granted
950,355

 
2.64

Lapse of Restrictions
(623,775
)
 
3.20

Shares Forfeited
(892,086
)
 
4.00

Restricted Shares Outstanding at End of Period
1,156,027

 
$
2.78



Stock Option Awards

The following table reflects the outstanding stock option awards and the activity related thereto for the six months ended June 30, 2018:
 
Stock Option Awards (1)
 
Weighted-Average Exercise Price
 
Weighted Average Contractual Term
Outstanding as of 12/31/2017
250,000

 
$
2.79

 
1.0
  Granted

 

 
 
  Exercised

 

 
 
  Expired or canceled

 

 
 
  Forfeited

 

 
 
Outstanding as of 6/30/2018
250,000

 
$
2.79

 
0.4
____________
(1) All of the stock options outstanding were vested and exercisable at the end of the period.

Performance Stock Awards

On June 1, 2018, the Company granted performance stock awards as compensation to certain officers and employees of the Company. The performance stock awards are restricted and vest contingent on the continued service of the recipients through the vesting date, March 15, 2021. Additionally, the performance stock awards include awards that vest based on two separate defined performance criteria. Shares under the Performance-Based Restricted Share Grant I (“Performance Award I”) vest contingent on the Company’s fourth quarter annualized Adjusted EBITDA as compared to specified targets. Performance Award I contains both service and performance vesting conditions. The Company assessed the probability of achieving the performance condition as of June 30, 2018 using its internal financial forecasts. Shares under the Performance-Based Restricted Share Grant II (“Performance Award II”) vest contingent on the Company’s average closing stock price for the last twenty trading days of 2018 compared to specified targets. Performance Award II contains both service and market vesting conditions. A Monte Carlo simulation prepared by an independent third party is utilized to determine the grant date fair value of Performance Award II.

Shares under Performance Award I vest contingent on the Company’s fourth quarter annualized Adjusted EBITDA as compared to specified targets, as follows:
Performance
 
Aggregate Shares Vested
Less than Target I
 
0 shares
Target I to Target II
 
327,500 shares
Target II to Target III
 
660,000 shares
Greater than or equal to Target III
 
997,500 shares


The following table summarizes the Performance Award I activity for the six months ended June 30, 2018:
 
Six Months Ended June 30, 2018
 
Number of
Shares
 
Weighted-Average Grant Date Fair Value (per Award)
Outstanding as of 12/31/2017

 
$

Shares Granted
997,500

 
2.70

Lapse of Restrictions

 

Shares Forfeited

 

Outstanding as of 6/30/2018
997,500

 
$
2.70



The fair value of the Performance Award I is estimated using the fair value on the grant date. The Company records the expense of the Performance Award I on a straight-line basis over the requisite service period. Any Performance Award I awards that do not become earned will terminate, expire and otherwise be forfeited by the participants. For the three and six months ended June 30, 2018, the Company recorded compensation expense related to Performance Award I awards of $0.2 million. At June 30, 2018, there was $2.5 million of total unrecognized compensation expense related to these awards.
 
Shares under Performance Award II vest contingent on the Company’s average closing stock price for the last twenty trading days of 2018 compared to specified targets, as follows:
Performance
 
Aggregate Shares Vested
Less than Target I
 
0 shares
Target I to Target II
 
327,500 shares
Target II to Target III
 
660,000 shares
Greater than or equal to Target III
 
997,500 shares


The following table summarizes the Performance Award II activity for the six months ended June 30, 2018:
 
Six Months Ended June 30, 2018
 
Number of
Shares
 
Weighted-Average Grant Date Fair Value (per Award)
Outstanding as of 12/31/2017

 
$

Shares Granted
997,500

 
1.67

Lapse of Restrictions

 

Shares Forfeited

 

Outstanding as of 6/30/2018
997,500

 
$
1.67



The fair value of the Performance Award II is estimated using a Monte Carlo simulation at the grant date. The Company records the expense of the Performance Award I on a straight-line basis over the requisite service period. Any Performance Award II awards that do not become earned will terminate, expire and otherwise be forfeited by the participants. For the three and six months ended June 30, 2018, the Company recorded compensation expense related to Performance Award II awards of $0.1 million. At June 30, 2018, there was $1.5 million of total unrecognized compensation expense related to these awards.

The assumptions used to estimate the fair value of the Performance Award II granted as of the date presented are as follows:
 
June 1, 2018
Risk-free interest rate
2.10
%
Dividend yield
%
Expected volatility
100.00
%
Company's closing stock price on grant date
$
2.70

Fair value per Performance Award II
$
1.67


 
On June 1, 2018, the Company granted performance stock awards consisting of an aggregate of 176,100 shares as compensation to certain directors of the Company. These performance stock awards are set up with the same specified targets as the Performance Award II for officers and employees described above. These performance stock awards are restricted and vest contingent on continued service of the recipient through the vesting date of March 15, 2019, and dependent on the performance relative to the stock price targets for the Performance Award II. At June 30, 2018, there was $0.3 million of total unrecognized compensation expense related to these awards.