Equity-Based Compensation

9 Months Ended

Sep. 30, 2016

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 247,917 and 66,666 options granted to employees and non-employees in the nine months ended September 30, 2016 and 2015, respectively.

Stock option for employees' activity during the nine months ended September 30, 2016 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, 2016		893,771		$	18.96		4.02	$	—
Granted		185,417			1.58		—		—
Forfeited		(227,259	)		5.75		—		—
Outstanding September 30, 2016		851,929		$	18.70		4.05	$	—
Vested and expected to vest September 30, 2016		851,929		$	18.70		4.05	$	—
Exercisable September 30, 2016		714,950		$	18.60		2.87	$	—

Unvested stock option activity for employees:

	Number of Options			Weighted Average Exercise Price		Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding January 1, 2016		27,777		$	3.48		7.82	$	—
Granted		185,417			1.58		—		—
Vested		(76,215	)		2.10				—
Forfeited		—			—		—		—
Outstanding September 30, 2016		136,979		$	1.67		9.35	$	—

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, 2016		275,250		$	15.48		4.31	$	—
Granted		62,500			1.63		—		—
Exercised		—			—		—		—
Forfeited		(31,667	)		44.79		—		—
Outstanding September 30, 2016		306,083		$	9.59		5.21	$	—
Vested and expected to vest September 30, 2016		306,083		$	9.59		5.21	$	—
Exercisable September 30, 2016		257,819		$	11.11		4.34	$	—

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

	Number of Options		Weighted Average Exercise Price		Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding January 1, 2016		—	$	—		—	$	—
Granted		62,500		1.63		—		—
Vested		(14,236)		1.63		—		—
Forfeited		—		—		—		—
Outstanding September 30, 2016		48,264	$	1.63		9.82	$	—

The impact on the Company’s results of operations of recording equity-based compensation for the nine months ended September 30, 2016 and 2015 was to increase costs and expenses by approximately $125,000 and $148,000, respectively, which increased loss per share by $0.01.

As of September 30, 2016 and 2015, respectively, there was $332,000 and $231,000 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 nine months ended September 30, 2016, the Company granted rights to 140,936 split adjusted incentive shares and recorded $219,000 in equity-based compensation under this Plan.