Quarterly report pursuant to Section 13 or 15(d)

Note 10 - Stock-Based Compensation

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Note 10 - Stock-Based Compensation
3 Months Ended
Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

 

Restricted Stock

 

The Company’s stock-based compensation for the three months ended March 31, 2017 and 2016 consist primarily of restricted stock awards. The activity of restricted stock awards granted to employees, executives and Board members was as follows:

 

          Unvested Restricted Stock Awards          
         

Number of

Shares

     

Weighted Average

Grant Date Fair

Value

 
  Unvested balance – December 31, 2016       378,425     $ 3.45  
  Granted       350,000       1.96  
  Vested       (58,255 )     2.99  
  Cancelled       —         —    
  Unvested balance – March 31, 2017       670,170       2.71  

 

 

The total fair value of restricted stock awards granted to employees and the Board was $0.7 million and $0.3 million for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, the total unrecognized expense for unvested restricted stock awards, net of expected forfeitures, was $1.3 million, which is expected to be amortized over a weighted average period of 1.2 years.

 

Restricted Stock Awards Issued to Ryan Drexler, Chairman of the Board, Chief Executive Officer and President

 

In January 2017, the Company issued Mr. Ryan Drexler 350,000 shares of restricted stock pursuant to an Amended and Restated Executive Employment Agreement dated November 18, 2016 (“Employment Agreement”) with a grant date value of $0.7 million based upon the closing price of the Company’s common stock on the date of issuance. These shares of restricted stock vest in full upon the first anniversary of the grant date.

 

Accelerated Vesting of Restricted Stock Awards Related to Termination of Employment Agreement with Brad Pyatt, Former Chief Executive Officer

 

In March 2016, Brad Pyatt, the Company’s former Chief Executive Officer, terminated his employment with the Company. Pursuant to the terms of the separation agreement with the Company, in exchange for a release of claims, the Company agreed to pay severance in the amount of $1.1 million, payable over a 12-month period, a lump sum of $250,000 paid during March 2017 and reimbursement of COBRA premiums. In addition, the remaining unvested restricted stock awards held by Brad Pyatt of 500,000 shares vested in full upon his termination in accordance with the original grant terms. In connection with the accelerated vesting of these restricted stock awards, the Company recognized stock compensation expense of $3.9 million, which is included in “Salaries and benefits” in the accompanying Condensed Consolidated Statements of Operations for the three months ended March 31, 2016. All amounts due Mr. Pyatt were paid as of March 31, 2017.

 

Stock Options

 

The Company may grant options to purchase shares of the Company’s common stock to certain employees and directors pursuant to the 2015 Plan. Under the 2015 Plan, all stock options are granted with an exercise price equal to or greater than the fair market value of a share of the Company’s common stock on the date of grant. Vesting is generally determined by the Compensation Committee of the Board within limits set forth in the 2015 Plan. No stock option will be exercisable more than ten years after the date it is granted.

 

 

 

In February 2016, the Company issued options to purchase 137,362 shares of its common stock to Mr. Drexler, the Company’s Chief Executive Officer, President and Chairman of the Board, and 54,945 to Michael Doron, the Lead Director of the Board. These stock options have an exercise price of $1.89 per share, a contractual term of 10 years and a grant date fair value of $1.72 per share, or $0.3 million, which is amortized on a straight-line basis over the vesting period of two years. The Company determined the fair value of the stock options using the Black-Scholes model.  The table below sets forth the assumptions used in valuing such options.

 

 

For the Year Ended 

December 31, 2016

 
Expected term of options 6.5 years  
Expected volatility 131.0%  
Risk-free interest rate 1.71%  
Expected dividend yield 0.0%  

 

 

For the three months ended March 31, 2017 and 2016, the Company recorded stock compensation expense related to options of $0.1 million and $14,000, respectively.