Equity-Based Compensation

9 Months Ended

Sep. 30, 2014

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

Equity-Based Compensation

Equity-Based Compensation

The fair value of each option and equity warrant award is estimated on the date of grant using a Black-Scholes-Merton option pricing valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option and equity warrant. The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates. There were 955,000 options or equity warrants granted in the nine months ended September 30, 2014. The fair values of the options and equity warrants granted in the nine months ended September 30, 2014 and 2013, were estimated based on the following weighted average assumptions:

	Nine Months Ended September 30,
	2014	2013
Risk-free interest rate	1.66% - 1.72%	0.14% - 1.40%
Expected dividend yield	—	—
Expected lives	5 years	1 year to 5 years
Expected volatility	88.33% - 92.63%	89.73% - 118.22%
Weighted average grant date fair value for options and equity warrants issued	$0.22 per option/warrant for 955,000 options/warrants	$0.14 per option/warrant for 3,870,000 options/warrants

Stock option for employees' activity during the nine months ended September 30, 2014 is as follows:

Stock option activity for employees:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding January 1, 2014	10,611,480		$	1.73	4.92	$	—
Granted	905,000		0.36		9.67	—
Forfeited	(367,000	)	1.42		4.22	—
Outstanding September 30, 2014	11,149,480		$	1.63	4.61	$	—
Vested and expected to vest September 30, 2014	11,149,480		$	1.63	4.61	$	—
Exercisable September 30, 2014	10,541,980		$	1.69	4.20	$	—

905,000 options to purchase shares were granted to employees during the nine months ended September 30, 2014.

Unvested stock option activity for employees:

	Number of Options		Weighted Average Exercise  Price		Average  Remaining Contractual  Term  (Years)	Aggregate  Intrinsic Value
Outstanding January 1, 2014	525,000		$	0.29	8.38	$	—
Granted	905,000		0.36		9.67	—
Vested	(822,500	)	0.30		9.14	—
Forfeited	—		—		—	—
Outstanding September 30, 2014	607,500		$	0.37	8.63	$	—

Stock option activity for non-employees:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding January 1, 2014	4,128,432		$	1.48	5.01	$	—
Granted	50,000		2.60		9.17	—
Exercised	—		—		—	—
Forfeited	(368,428	)	2.80		1.93	—
Outstanding September 30, 2014	3,810,004		$	1.37	4.64	$	—
Vested and expected to vest September 30, 2014	3,810,004		$	1.37	4.64	$	—
Exercisable September 30, 2014	3,743,337		$	1.58	4.44	$	—

50,000 options to purchase shares were granted to non-employees during the nine months ended September 30, 2014.

Unvested stock option activity for non-employees during the year:

	Number of Options		Weighted Average Exercise  Price		Weighted  Average Remaining  Contractual Term  (Years)	Aggregate  Intrinsic Value
Outstanding January 1, 2014	470,833		$	0.25	9.61	$	—
Options granted	50,000		2.60		9.17	—
Options vested	(454,166	)	0.28		8.86	—
Options forfeited	—		—		—	—
Outstanding September 30, 2014	66,667		$	1.84	9.09	$	—

The impact on the Company’s results of operations of recording equity-based compensation for the nine months ended September 30, 2014 and 2013 was to increase general and administrative expenses by approximately $260,000 and $292,000, respectively. There was no impact on basic and fully diluted earnings per share for the nine months ended September 30, 2014 and 2013.

As of September 30, 2014 and 2013, respectively, there was $301,000 and $492,000 of unrecognized equity-based compensation cost related to options granted under the Equity Incentive Plan.