XML 50 R10.htm IDEA: XBRL DOCUMENT

Stockholders' Equity

3 Months Ended

Mar. 31, 2014

Preferred Stock

The Company had certificates of designation of ten separate series as summarized below as of March 31, 2014 and December 31, 2013:

	Number of Shares Issued
	and Outstanding as of
	March 31, 2014		December 31, 2013		Par Value		Conversion Ratio
Series "A"		-		-	$	0.0001		N/A
Series "B"		1		1		0.0001	4:1
Series "C"		1		1		0.0001	1:1
Series “D"		18,000		1,227,582		0.0001	10:1
Series “D-1"		945,139		59,265		0.0001	10:1
Series “E”		-		-		0.0001	1:1
Series “F"		-		-		0.0001	1:1
Series “F-1"		156,250		156,250		0.0001	1:1
Series “H"		459,043		459,043		0.0001	10:1
Series “I”		119,760		119,760		0.0001	20:1

Series A Preferred Stock

The Company’s board of directors has designated 500,000 shares of its preferred stock as Series A Participating Preferred Stock (“Series A Preferred Stock”).

On January 1, 2013, the Company adopted a stockholder rights plan in which rights to purchase shares of Series A Preferred Stock were distributed as a dividend at the rate of one right for each share of common stock. The rights are designed to guard against partial tender offers and other abusive and coercive tactics that might be used in an attempt to gain control of Spherix or to deprive its stockholders of their interest in the long-term value of Spherix. These rights seek to achieve these goals by forcing a potential acquirer to negotiate with the board of directors (or go to court to try to force the Board of Directors to redeem the rights), because only the Board of Directors can redeem the rights and allow the potential acquirer to acquire the Company’s shares without suffering very significant dilution. However, these rights also could deter or prevent transactions that stockholders deem to be in their interests, and could reduce the price that investors or an acquirer might be willing to pay in the future for shares of the Company’s common stock.

Each right entitles the registered holder to purchase one one-hundredth of a share (a “Unit”) of the Company’s Series A Preferred Stock. Each Unit of Series A Preferred Stock will be entitled to an aggregate dividend of 100 times the dividend declared per share of common stock. In the event of liquidation, the holders of the Units of Series A Preferred Stock will be entitled to an aggregate payment of 100 times the payment made per share of common stock. Each Unit of Series A Preferred Stock will have 100 votes, voting together with the common stock. Finally, in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each Unit of Series A Preferred Stock will be entitled to receive 100 times the amount received per share of common stock. These rights are protected by customary anti-dilution provisions.

The rights will be exercisable only if a person or group acquires ten percent (10%) or more of the Company’s common stock (subject to certain exceptions stated in the plan) or announces a tender offer the consummation of which would result in ownership by a person or group of ten percent (10%) or more of the Company’s common stock. The board of directors may redeem the rights at a price of $0.001 per right. The rights will expire at the close of business on December 31, 2017 unless the expiration date is extended or unless the rights are earlier redeemed or exchanged by the Company.

Series B Convertible Preferred Stock

In connection with an offering of securities, which the Company closed in October 2010, the Company created a Series B Convertible Preferred Stock. All shares of Series B Convertible Preferred Stock issued in the offering have been converted to common stock except for one (1) outstanding share of Series B Convertible Preferred Stock as of March 31, 2014 and December 31, 2013.

The Series B Convertible Preferred Stock is convertible at the option of the holder at any time into shares of the Company’s common stock at a conversion ratio determined by dividing the stated value of the convertible preferred stock, or $1,000, by a conversion price of $250 per share. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The conversion price may also be subject to adjustment if the Company issues rights, options or warrants to all holders of its common stock entitling them to subscribe for or purchase shares of its common stock at a price per share less than the daily volume weighted average price of its common stock, if the Company distributes evidence of its indebtedness or assets or rights or warrants to subscribe for or purchase any security to all holders of its common stock, or if the Company consummates a fundamental corporate transaction such as a merger or consolidation, sale or other disposition of all or substantially all of its assets, or an exchange or tender offer accepted by the holders of 50% or more of the Company’s outstanding common stock. Subject to limited exceptions, a holder of shares of Series B Convertible Preferred Stock will not have the right to convert any portion of its Series B Convertible Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion. The Series B Convertible Preferred Stock is entitled to receive dividends (on an “as converted to common stock” basis) to and in the same form as dividends actually paid on shares of the Company’s common stock. Except as required by law, holders of the Series B Convertible Preferred Stock are generally not entitled to voting rights.

Series C Convertible Preferred Stock

On March 6, 2013, the Company and certain investors that participated in the November 2012 private placement transaction, entered into separate Warrant Exchange Agreements pursuant to which the investors exchanged common stock purchase warrants acquired in the private placement transaction for 229,337 shares of the Company’s Series C Convertible Preferred Stock. Each share of Series C Convertible Preferred Stock is convertible into one (1) share of common stock at the option of the holder. The Series C Convertible Preferred Stock was established on March 5, 2013 by the filing in the State of Delaware of a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock. During the year ended December 31, 2013, 229,336 shares of Series C Convertible Preferred Stock were converted into 229,336 shares of common stock. As of March 31, 2014 and December 31, 2013, one (1) share of Series C Convertible Preferred Stock was outstanding.

Series D Convertible Preferred Stock

In connection with the acquisition of North South in September of 2013, the Company issued 1,379,685 shares of its Series D Convertible Preferred Stock to the stockholders of North South. Each share of Series D Preferred Stock has a stated value of $0.0001 per share and is convertible into ten (10) shares of common stock. Upon the liquidation, dissolution or winding up of the Company’s business, each holder of Series D Preferred Stock shall be entitled to receive, for each share of Series D Preferred Stock held, a preferential amount in cash equal to the greater of (i) the Stated Value or (ii) the amount the holder would receive as a holder of the Company’s common stock on an “as converted” basis. Each holder of Series D Preferred Stock shall be entitled to vote on all matters submitted to its stockholders and shall be entitled to such number of votes equal to the number of shares of common stock such shares of Series D Preferred are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation and the Conversion Limit limitations described below. At no time may shares of Series D Preferred Stock be converted if such conversion would cause the holder to hold in excess of 4.99% of the Company’s issued and outstanding common stock, subject to an increase in such limitation up to 9.99% of the issued and outstanding common stock on 61 days’ written notice to the Company. The conversion ratio of the Series D Preferred Stock is subject to adjustment in the event of stock dividends, splits and fundamental transactions.

During the three months ended March 31, 2014, 1,209,582 shares of Series D Convertible Preferred Stock were exchanged for Series D-1 Convertible Preferred Stock (see below). As of March 31, 2014, 18,000 shares of Series D Convertible Preferred Stock were issued and outstanding.

Series D-1 Convertible Preferred Stock

The Company’s Series D-1 Convertible Preferred Stock (“Series D-1 Preferred Stock”) was established on November 22, 2013. Each share of Series D-1 Preferred Stock has a stated value of $0.0001 per share and is convertible into ten (10) shares of common stock. Upon the liquidation, dissolution or winding up of the Company’s business, each holder of Series D-1 Preferred Stock shall be entitled to receive, for each share of Series D-1 Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of the Company’s common stock on an “as converted” basis. Each holder of Series D-1 Preferred Stock shall be entitled to vote on all matters submitted to the Company’s stockholders and shall be entitled to such number of votes equal to the number of shares of common stock such shares of Series D-1 Preferred are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation. At no time may shares of Series D-1 Preferred Stock be converted if such conversion would cause the holder to hold in excess of 9.99% of the Company’s issued and outstanding common stock. The conversion ratio of the Series D Preferred Stock is subject to adjustment in the event of stock dividends, splits and fundamental transactions. The Company commenced an exchange with holders of Series D Convertible Preferred Stock pursuant to which the holders of the Company’s outstanding shares of Series D Preferred Stock acquired in the Merger could exchange such shares for shares of the Company’s Series D-1 Preferred Stock on a one-for-one basis.

On January 27, 2014, Spherix Incorporated (the “Company”) entered into a lockup agreement with certain holders of an aggregate of 1,508,148 shares of the Company’s common stock, $0.0001 par value per share (the “Common Stock”) and shares of Common Stock issuable upon conversion of shares of Series D-1 Convertible Preferred Stock, which are included in the Company’s Registration Statement on Form S-1 (File No.333-192737) (the “Lockup Agreement” and such 1,508,148 shares, the “Locked Up Shares”). The holders of the Locked Up Shares have agreed, for so long as such holders own such shares, not to sell any Locked Up Shares unless either (i) if such sale price is at least $6.00 per share, the cumulative amount sold by such holder (including the anticipated sale) does not exceed such holder's pro rata portion of 60% of the composite aggregate trading volume of the Common Stock during the period beginning on the date that the Registration Statement is declared effective and ending on the date of sale (the “Lockup Measuring Period) or (ii), if the sale price is less than $6.00 per share, the cumulative amount sold by such holder does not exceed such holder's pro rata portion of 20% of the composite aggregate trading volume during the Lockup Measuring Period.

During the three months ended March 31, 2014, (a) 1,209,582 shares of Series D Convertible Preferred Stock were exchanged for Series D-1 Convertible Preferred Stock (see above) and (b) 323,708 shares of D-1 were converted into 3,237,080 shares of common stock. As of March 31, 2014, 945,139 shares of Series D-1 Convertible Preferred Stock were issued and outstanding.

Series F-1 Convertible Preferred Stock

The Company’s Series F-1 Convertible Preferred Stock (“Series F-1 Preferred Stock”) was established on November 22, 2013. Each share of Series F-1 Preferred Stock is convertible, at the option of the holder at any time, into one (1) share of common stock and has a stated value of $0.0001. Such conversion ratio is subject to adjustment in the case of stock splits, stock dividends, combination of shares and similar recapitalization transactions. Each share of Series F-1 Preferred Stock is entitled to 91% of one vote per share (subject to beneficial ownership limitation) and shall vote together with holders of the Company’s common Stock. The Company is prohibited from effecting the conversion of the Series F-1 Preferred Stock to the extent that, as a result of such conversion, the holder will beneficially own more than 9.99% in the aggregate of the issued and outstanding shares of the Company’s common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series F-1 Preferred Stock. As of March 31, 2014 and December 31, 2013, 156,250 shares of Series F-1 Preferred Stock were outstanding.

Series H Convertible Preferred Stock

On December 31, 2013, the Company designated 459,043 shares of preferred stock as Series H Convertible Preferred Stock (“Series H Preferred Stock”). On December 31, 2013, the Company issued approximately $38.3 million of Series H Preferred Stock (or 459,043 shares) to Rockstar. Each share of Series H Preferred Stock is convertible into ten (10) shares of common stock and has a stated value of $83.50. The conversion ratio is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company is prohibited from effecting the conversion of the Series H Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns more than 4.99% (which may be increased to 9.99% and subsequently to 19.99%, each upon 61 days’ written notice), in the aggregate, of the Company’s issued and outstanding shares of common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series H Preferred Stock. Holders of the Series H Preferred Stock shall be entitled to vote on all matters submitted to the Company’s stockholders and shall be entitled to the number of votes equal to the number of shares of common stock into which the shares of Series H Preferred Stock are convertible, subject to applicable beneficial ownership limitations. The Series H Preferred Stock provides a liquidation preference of $83.50 per share. The shares of Series H Preferred Stock were not immediately convertible and did not possess any voting rights until such a time as the Company had obtained stockholder approval of the issuance, pursuant to NASDAQ Listing Rule 5635. On April 16, 2014, the Company obtained the required shareholder approval pursuant to NASDAQ Listing Rule 5635 and, as a result, all outstanding shares of Series H Preferred Stock are convertible and possess voting rights in accordance with its terms. As of March 31, 2014 and December 31, 2013, 459,043 shares of Series H Preferred Stock were outstanding.

Series I Preferred Convertible Stock

On December 31, 2013, the Company designated 119,760 shares of preferred stock as Series I Convertible Preferred Stock (“Series I Preferred Stock”). On December 31, 2013, the Company issued approximately $20 million (or 119,760 shares) of Series I Preferred Stock to Rockstar. Each share of Series I Preferred Stock is convertible into twenty (20) shares of the Company’s common stock and has a stated value of $167. The conversion ratio is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The holder is prohibited from converting the Series I Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns more than 4.99% (which may be increased to 9.99% and subsequently to 19.99%, each upon 61 days’ written notice), in the aggregate, of the Company’s issued and outstanding shares of common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series I Preferred Stock. Holders of the Series I Preferred Stock shall be entitled to vote on all matters submitted to its stockholders and shall be entitled to the number of votes equal to the number of shares of common stock into which the shares of Series I Preferred Stock are convertible, subject to applicable beneficial ownership limitations. The Series I Preferred stock provides for a liquidation preference of $167 per share.

The Series I Preferred Stock contains a mandatory redemption date of December 31, 2015 as to 100% of the Series I Preferred Stock then outstanding, requiring a minimum of 25% of the total number of shares of Series I Preferred Stock issued to be redeemed (less the amount of any conversions occurring prior thereto) on or prior to each of June 30, 2014, December 31, 2014, June 30, 2015 and December 31, 2015 (each, a “Partial Redemption Date” and each payment, a “Redemption Payment”). On each Partial Redemption Date, the Company is required to pay Rockstar a Redemption Payment equal to the lesser of (i) such number of shares of Series I Preferred Stock as have a stated value of $5.0 million; or (ii) such number of shares of Series I Preferred Stock as shall, together with all voluntary and mandatory redemptions and conversions to common stock occurring prior to the applicable Partial Redemption Date, have a stated value of $5.0 million; or (iii) the remaining shares of Series I Preferred Stock issued and outstanding if such shares have a stated value of less than $5.0 million, in an amount of cash equal to its stated value plus all accrued but unpaid dividends, distributions and interest thereon, unless Rockstar, in its sole discretion, elects to waive such Redemption Payment or convert such shares (or a portion thereof) into common stock. No interest or dividends are payable on the Series I Preferred Stock unless the Company fails to make the first $5.0 million Partial Redemption Payment due June 30, 2014, then interest shall accrue on the outstanding stated value of all outstanding shares of Series I Preferred Stock at a rate of fifteen (15%) per annum from January 1, 2014. The Company’s obligations to pay the Redemption Payments and any interest payments in connection therewith are secured pursuant to the terms of a Security Agreement under which the Rockstar Patents serve as collateral security. No action can be taken under the Security Agreement unless the Company has failed to make a second redemption payment of $5.0 million due December 31, 2014. The Security Agreement contains additional usual and customary “Events of Default” (as such term is defined in the Intellectual Property Security Agreement) under which Rockstar can take action, including a sale to a third party or reduction of secured amounts via transfer of the Rockstar Patents to Rockstar.

Additionally, in the event the Company consummates a Fundamental Transaction (as defined in the Certificate of Designation of Preferences, Rights and Limitations of Series I Convertible Preferred Stock), the Company shall be required to redeem such portion of the outstanding shares of Series I Preferred Stock as shall equal (i) 50% of the net proceeds of the Fundamental Transaction after deduction of the amount of net proceeds required to leave the Company with cash and cash equivalents on hand of $5.0 million and up until the net proceeds leave the Company with cash and cash equivalents on hand of $7.5 million and (ii) 100% of the net proceeds of the Fundamental Transaction thereafter.

The shares of Series I Preferred Stock were not immediately convertible and did not possess any voting rights until such a time as the Company had obtained stockholder approval of the issuance, pursuant to NASDAQ Listing Rule 5635. On April 16, 2014, the Company obtained the required shareholder approval pursuant to NASDAQ Listing Rule 5635 and, as a result, all outstanding shares of Series I Convertible Preferred Stock are convertible and possess voting rights in accordance with its terms.

As of March 31, 2014 and December 31, 2013, 119,760 shares of Series I Preferred Stock were outstanding.

Common Stock

Private Placement

On March 26, 2014, the Company sold an aggregate of $4,446,081 of its securities in a private offering made solely to accredited investors (the “Investors”) (the “Offering”) pursuant to Subscription Agreements, dated as of March 26, 2014 (the “Subscription Agreement”). Pursuant to the Offering, Investors purchased (i) 1,185,614 shares (the “Shares”) of common stock, par value $0.0001 per share, of the Company (“Common Stock”) and (ii) five year warrants to purchase an aggregate of 592,794 shares of Common Stock of the Company, at an exercise price of $6.15 per share (the “Warrants”). The Warrants are exercisable on and following the six month anniversary of the date of issuance by payment to the Company of the exercise price of $6.15 per share, or if a registration statement covering the Common Stock underlying the Warrants is not then in effect, on a cashless basis. Each Warrant may be callable at $0.01 per Warrant upon the consummation of a Company financing with a per-share offering price of at least $8.00 and net proceeds to the Company from such offering of at least $15 million. The expected use of proceeds from the Offering is for general corporate purposes and working capital.

The Company is required to register with the United States Securities and Exchange Commission (“SEC”) all Shares and the shares of Common Stock underlying the Warrants issued in the Offering (including the placement agent warrant described below) by filing within 30 days of closing a registration statement with the SEC and is required to cause such registration statement to be declared effective by the SEC within 180 days of the filing date (a registration statement was filed on April 17, 2014) unless the SEC notifies the Company that it will not be reviewing the registration statement, then in which case the Company must cause the registration statement to be declared effective within 30 days of such notification but in any event, within 60 days of the filing date. The Investors have also been granted certain “piggy back” registration rights. In the event the Company fails to file the registration statement or cause such registration statement to be declared effective by the SEC, the Company is required to pay to each Investor a cash payment equal to one (1.0%) percent of the aggregate purchase price paid by such Investor pursuant to the Subscription Agreement, on each 30 day anniversary of such event until the applicable event is cured (but not in excess of fifteen (15%) percent of such Investor’s purchase price).

The Company incurred aggregate costs associated with the Offering of approximately $572,000, and issued a five-year warrant to purchase 118,561 shares of Common Stock to the placement agent (Laidlaw and Company Ltd.) at an exercise price of $4.67 per share of Common Stock (the “Placement Agent Warrant”). The Placement Agent Warrant is exercisable beginning on the six month anniversary of the date of issuance.

Stock Grants

On January 23, 2014, the Company issued 2,000 shares of fully vested common stock to two consultants in return for services rendered. On March 3, 2014 the Company issued 1,700 shares of fully vested common stock for consulting services. The fair value of these stock grants was $24,990 based upon the closing price on the date of the grant.

Warrants

A summary of warrant activity for the three months ended March 31, 2014 is presented below:

	Warrants			Weighted Average Exercise Price		Total Intrinsic Value
Outstanding as of December 31, 2013		65,263		$	5.83		-
Issued		711,355			5.90
Cancelled		(1,597	)		28.00
Outstanding as of March 31, 2014		775,021		$	5.85	$	-

Stock Options

2014 Plan and Option Grants

On January 28, 2014, the Company approved the adoption of a director compensation program (the “Program”) for non-employee directors pursuant to and subject to the available number of shares reserved under the Spherix Incorporated 2014 Equity Incentive Plan (the “2014 Plan”). Pursuant to the Program, and pursuant to and subject to the available number of shares reserved under Plan, each non-employee director shall annually be awarded 75,000 non-qualified stock options (the “Director Options”) to acquire shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) commencing with the annual meeting of stockholders of the Company for the 2015 fiscal year of the Company.

Each Director Option shall have a term of five (5) years and shall vest in two equal annual installments with 50% vesting immediately on the date of issue and the remaining 50% on the one year anniversary of the date of issue so long as the director has not been removed for cause. Each Director Option shall be granted on the date of the annual meeting of stockholders at which directors are elected and shall have an exercise price equal to the closing price of Common Stock on the trading day immediately preceding the date of issuance.

On January 28, 2014, pursuant to and subject to the available number of shares reserved under the 2014 Plan, the Company issued 75,000 Director Options with an exercise price of $5.83 to each of the following non-employee directors: Robert Vander Zanden, Douglas Brown, Edward Karr, Harvey Kesner, Alexander Poltorak.

Also on January 28, 2014, pursuant to and subject to the available number of shares reserved under the 2014 Plan, the Company issued non-qualified options with a term of five (5) years and an exercise price of $5.83 to the individuals below for the number of shares of Common Stock set forth opposite their respective names:

·

Edward Karr – 200,000 shares, vesting in two equal annual installments with 50% vesting immediately on the date of issue and the remaining 50% on the one year anniversary of the date of issue so long as the recipient has not been removed as a director for cause;

·

Harvey Kesner – 600,000 shares, vesting in two equal annual installments with 50% vesting immediately on the date of issue and the remaining 50% on the one year anniversary of the date of issue so long as the recipient has not been removed as a director for cause; and

·

Robert Knie – 25,000, vesting immediately.

Mr. Karr and Mr. Kesner were issued their respective Performance Options in addition to the Director Options described above.

On January 28, 2014, the Compensation Committee of the Board of Directors adopted resolutions intended to grant 300,000 non-qualified stock options with a term of five (5) years and an exercise price of $5.83 to Anthony Hayes that would be subject to certain vesting conditions upon agreement of the Compensation Committee and Mr. Hayes. The parties failed to reach agreement prior to the date of this Quarterly Report on Form 10-Q and accordingly the stock options subject to specific performance targets were determined to be not issued, but may be issued at a future date at the discretion of the Compensation Committee. In accordance with ASC Topic 718 the failure to finalize performance targets result in the stock options not being considered to have been granted and therefore are not outstanding.

On March 14, 2014, pursuant to and subject to the available number of shares reserved under the 2014 Plan, the Company issued 100,000 non-qualified options with a term of ten (10) years and an exercise price of $4.67 to Frank Reiner, an employee of the Company. The options vest in 25% increments in quarterly installments beginning July 1, 2014.

On March 21, 2014, pursuant to and subject to the available number of shares reserved under the 2014 Plan, the Company issued 10,000 non-qualified options with a term of five (5) years and an exercise price of $4.29 to Hayley Behrmann, an employee of the Company. These options vest in 50% increments in six-month installments beginning September 20, 2014.

The grant date fair value of stock options granted during the quarter ended March 31, 2014 was $3,840,528. The fair value of the Company’s common stock was based upon the publicly quoted price on the date that the final approval of the awards was obtained. The Company does not expect to pay dividends in the foreseeable future so therefore the dividend yield is 0%. The expected term for stock options granted with service conditions represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by the Securities and Exchange Commission's Staff Accounting Bulletin No. 110 for “plain vanilla” options. The expected term for stock options granted with performance and/or market conditions represents the estimated period estimated by management by which the performance conditions will be met. The Company obtained the risk free interest rate from publicly available data published by the Federal Reserve. The volatility rate was computed based on a comparison of average volatility rates of similar companies. No options were granted during the three months ended March 31, 2013. The fair value of options granted in 2014 was estimated using the following assumptions:

	For the Three Months ended March 31, 2014
Exercise price	$	4.29 - $5.83
Expected stock price volatility		80.5% - 90.6	%
Risk-free rate of interest		0.76% - 1.53	%
Term (years)		5.0 - 10.0

A summary of option activity under the Company’s employee stock option plan for the three months ended March 31, 2014 is presented below:

	Number of Shares		Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2013		1,983,876	$	7.14	$	1,935,990		9.2
Employee options granted		1,310,000		5.73				5.2
Non-employee options exercised		-
Non-employee options cancelled		-
Outstanding as of March 31, 2014		3,293,876	$	6.58		-		7.5

Options vested and expected to vest		3,293,876		6.58		-		7.5
Options vested and exercisable		1,646,126	$	6.59	$	-		7.1

A summary of option activity under the Company’s non-employee stock option plan for the three months ended March 31, 2014 is presented below:

	Number of Shares		Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2013		30,000		7.08		29,400		9.3
Non-employee options granted		-		-				-
Non-employee options exercised		-
Non-employee options cancelled		-
Outstanding as of March 31, 2014		30,000		7.08		-		9.0

Options vested and expected to vest		30,000		7.08		-		9.0
Options vested and exercisable		30,000	$	7.08	$	-		9.0

Stock-based compensation associated with the amortization of stock option expense was approximately $3.4 million and $4,000 for the three months ended March 31, 2014 and March 31, 2013, respectively. Unamortized compensation cost for these awards amounted to $7.26 million at March 31, 2014 and will be amortized over a weighted average vesting period of approximately 1.0 year.

Restricted Stock Awards

On March 14, 2014, pursuant to and subject to the available number of shares reserved under the 2014 Plan, the Company issued 10,000 restricted shares to Frank Reiner, an employee of the Company. The restricted stock awards vest in 25% increments in quarterly installments beginning March 14, 2014.

A summary of the restricted stock award activity for the three months ended March 31, 2014 is as follows:

	Number of Units			Weighted Average Grant Day Fair Value
Nonvested at December 31, 2013		250		$	6.83
Granted		10,000			4.67
Vested		(250	)		4.67
Forfeited		-			-
Nonvested at March 31, 2014		10,000		$	4.74

Stock-based Compensation

Stock-based compensation for the three months ended March 31, 2014 and 2013 was comprised of the following (in thousands):

	For the three months ended March 31,
	2014		2013
Employee restricted stock awards	$	2	$	3
Employee stock option awards		3,394		1
Total compensation expense	$	3,396	$	4

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References+ Details