Equity-Based Compensation

6 Months Ended

Jun. 30, 2017

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

Equity-Based Compensation

Note 3: 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 669,619 and 185,417 options and equity warrants granted in the six months ended June 30, 2017 and 2016, respectively.

Stock option for employees’ activity during the six months ended June 30, 2017 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, 2017		836,256		$	16.82		4.47	$	—
Granted		369,929			0.55		—		—
Forfeited		(6,715	)		24.45		—		—
Outstanding June 30, 2017		1,199,470		$	11.76		5.85	$	—
Vested and expected to vest June 30, 2017		1,199,470		$	11.76		5.85	$	—
Exercisable June 30, 2017		857,288		$	15.24		3.53	$	—

Unvested stock option activity for employees:

	Number of Options			Weighted Average Exercise Price		Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding January 1, 2017		90,625		$	1.72		9.33	$	—
Granted		369,929			0.55		—		—
Vested		(118,373	)		1.45		—		—
Forfeited		—			—		—		—
Outstanding June 30, 2017		342,181		$	0.55		9.89	$	—

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, 2017		271,500		$	10.41		4.66	$	—
Granted		149,740			0.57		—		—
Exercised		—			—		—		—
Forfeited		(5,590	)		15.08		—		—
Outstanding June 30, 2017		415,650		$	6.80		6.26	$	—
Vested and expected to vest June 30, 2017		415,650		$	6.80		6.26	$	—
Exercisable June 30, 2017		269,161		$	10.17		4.17	$	—

Unvested 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, 2017		26,389		$	1.65		8.61	$	—
Granted		149,740			0.57		—		—
Vested		(26,862)			1.46		—		—
Forfeited		(2,778	)		1.56		—		—
Outstanding June 30, 2017		146,489		$	0.58		9.81	$	—

The impact on the Company’s results of operations of recording equity-based compensation for the six months ended June 30, 2017 and 2016 was to increase costs and expenses by approximately $101,000 and $238,000, respectively, which decreased earnings per share by $0.01 for both June 30, 2017 and 2016, .

As of June 30, 2017 and 2016, respectively, there was $405,000 and $380,000 of unrecognized equity-based compensation cost related to options granted under the Equity Incentive Plan.

On January 26, 2016, the Board, based on the recommendation of its Compensation Committee, established two programs - the 2016 Senior Executive Deferred Cash Performance Award Plan for Dr. William A. Carter and Thomas K. Equels, the Company’s two primary executive officers, and the 2016 Voluntary Incentive Stock Award Plan for Company employees and Board members other than Dr. Carter and Mr. Equels. Both Plans include a Base Pay Supplement provision.

The Company maintains a record of the number of shares of stock represented by each Incentive Right issued out of the 2016 Voluntary Incentive Stock Award Plan. During the six months ended June 30, 2016, the Company granted rights of 123,100 incentive shares associated with the Plan and recorded $192,000 in equity-based compensation. There were no incentive shares issued during the six months ended June 30, 2017.