15. Employee Equity Compensation and Benefits

9 Months Ended

Sep. 30, 2013

Employee Benefits and Share-based Compensation [Abstract]

Employee Equity Compensation and Benefits

The Company participates in a 401(k) plan, which covers substantially all full-time employees. The Plan is funded by employee contributions and discretionary matching contributions determined by management. At the Company’s discretion, it may match up to 100 percent of each employee’s contribution, not to exceed the first six percent of the employee’s individual salary. There is a six-month waiting period from date of hire to participate in the plan. Employees are 100 percent vested in employee and employer contributions. Contribution expense was approximately $95,000 and $349,000 for the three and nine month periods ended September 30, 2013, respectively.  Contribution expense was approximately $86,000 and $269,000 for the three and nine month periods ended September 30, 2012, respectively.

Stock Options

The Company’s 2009 Stock Incentive Plan was approved concurrent with its merger with Golf Trust of America (“GTA”), Inc. on March 9, 2010. The maximum number of shares that can be offered under this plan is 5,000,000. Incentives may be granted under the 2009 Plan to eligible participants in the form of (a) incentive stock options, (b) non-qualified stock options, (c) restricted stock, (d) restricted stock units, (e) stock appreciation rights and (f) other stock-based awards.

As of September 30, 2013, approximately 30,000 options remain outstanding that were issued to current officers under former incentive plans of GTA. The remaining average contractual life of these options is approximately 1.4 months.

The Company currently uses the Black-Scholes option pricing model to determine the fair value of its stock options. The determination of the fair value of stock-based payment awards on the date of grant using an option pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include the Company’s expected stock price volatility over the term of the awards, actual employee exercise behaviors, risk-free interest rate and expected dividends.

The following table shows the assumptions used to value stock options on the date of grant, as follows:  

	Nine Months
	Ended
	September 30, 2013
Weighted average expected stock price volatility		66.8	%
Estimated dividend yield		0.0	%
Risk-free interest rate		1.0	%
Expected life of option (in years)		6.0
Weighted average fair value per share	$	4.64

 The Company has not paid and does not anticipate paying cash dividends; therefore, the expected dividend rate is assumed to be 0%. The expected stock price volatility for the stock options is based on historical volatility of a representative peer group of comparable companies selected using publicly available industry and market capitalization data. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected life assumption. The expected life of the stock options granted was estimated based on the historical exercise patterns over the option lives.The following table shows the option activity, described above, during the nine months ended September 30, 2013:

Option Shares	Shares			Average Exercise Price
Outstanding at December 31, 2012(1)		1,711,167		$	4.87
Granted		295,000			4.07
Exercised		(40,000	)		2.79
Cancelled		(318,834	)		6.09
Expired	─			─
Outstanding at September 30, 2013		1,647,333		$	4.54
Vested and exercisable, end of period		837,994		$	4.61

The intrinsic value of options exercised during the nine months ended September 30, 2013 and 2012 was approximately $132,000 and $210,000, respectively.

The weighted-average grant date fair value for options granted during the nine months ended September 30, 2013 and 2012 was approximately $4.64 and $5.33, respectively.

The following table shows the details by range of exercise price for the total options outstanding at September 30, 2013:  

		Options Outstanding		Options Exercisable
Range of Exercise Price ($)		Shares	Remaining Contractual Life (years)	Shares	Price ($)
1.94 - 2.20		5,000	1.4	5,000	$	2.20
3.31 – 4.20	(1)	1,278,000	7.5	638,000		3.71
6.10		137,666	7.9	89,994		6.10
7.75 – 8.62		136,667	8.5	58,334		8.13
9.02 – 10.35		90,000	8.3	46,666		9.82
		1,647,333	7.5	837,994	$	3.75

(1) Includes 460,000 options granted to ParaPRO, LLC on August 3, 2011, that vest over seven years, pursuant to the commercial terms of the co-promotion arrangement between the Company and ParaPRO for the marketing and sale of Natroba.  For additional information, see Note 17, Commitments and Contingencies.

As of September 30, 2013, the aggregate intrinsic value of 837,994 options outstanding and exercisable was approximately $2,600.

As of September 30, 2013, there was approximately $568,000 of total unrecognized compensation cost related to unvested stock options issued to employees and directors of the Company, which is expected to be recognized ratably over a weighted-average period of 1.5 years.

Restricted Stock

The following table shows the Company's nonvested restricted stock outstanding at September 30, 2013:

				Weighted Average
				Grant Date
Restricted Stock Shares	Shares			Fair Value
Nonvested at December 31, 2012		728,333		$	7.47
Granted		357,654			3.42
Vested		(138,332	)		7.85
Forfeited		(284,867	)		6.46
Nonvested at September 30, 2013		662,788		$	5.64

Approximately $2,791,000 of total unrecognized compensation cost related to unvested restricted stock is expected to be recognized over a weighted-average period of 1.9 years.  

Employee Stock Purchase Plan

Effective July 22, 2010, the Company adopted the 2010 Employee Stock Purchase Plan to provide substantially all employees an opportunity to purchase shares of its common stock through payroll deduction, up to 10% of eligible compensation with a $25,000 maximum deferral. Semi-annually (on May 1 and November 1), participant account balances will be used to purchase shares of stock at the lesser of 85 percent of the fair market value of shares at the beginning or end of such six-month period. The Employee Stock Purchase Plan expires on July 22, 2020. A total of 1,000,000 shares are available for purchase under this plan of which 60,159 have been issued. Compensation expense related to the Employee Stock Purchase Plan and included in the table below for the nine months ended September 30, 2013 and 2012 was approximately $59,000 and $56,000 respectively.

Stock-Based Compensation Expense

The following table shows the approximate amount of total stock-based compensation expense recognized (included in selling, general and administrative expenses) for employees and non-employees:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Employees	$	401,000	$	546,000	$	1,216,000	$	1,412,000
Non-employees/Directors		91,000		132,000		300,000		489,000
Total	$	492,000	$	678,000	$	1,516,000	$	1,901,000