Share-Based Compensation

9 Months Ended

Sep. 30, 2014

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

The Company accounts for share-based compensation under ASC 718, Compensation-Stock Compensation. We recognized share-based compensation expenses of approximately $487,000 and $3.5 million for the three and nine months ended September 30, 2014, respectively, compared to $0 for the three and nine months ended September 30, 2013. These amounts are included in selling, general and administrative expenses in our condensed consolidated statements of operations.

On March 26, 2014, our Board of Directors approved the grant of 13,035,000 stock options and 2,500,000 restricted stock units, or RSU's, to executive officers and certain key employees, effective April 1, 2014. Stock options primarily vest ratably over four years and include a performance condition; the stock options expire 10 years from the grant date. RSU's only vest upon a qualifying event.

As of September 30, 2014, we have approximately $500,000 of unrecognized incentive expense related to nonvested stock options that is expected to be recognized over a weighted-average period of approximately three months.

A summary of stock option activity for the nine months ended September 30, 2014 is as follows:



	Options	Range of Exercise Prices		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life
						(in years)
Outstanding at December 31, 2013	—	$	—	$	—	—
Granted	13,035,000	1.00		1.00		9.50
Exercised	—	—		—		—
Expired	—	—		—		—
Forfeited	—	—		—		—
Outstanding at September 30, 2014	13,035,000	$	1.00	$	1.00	9.50
Vested or expected to vest at September 30, 2014	3,258,750	$	1.00	$	1.00	9.50
Exercisable at September 30, 2014	3,258,750	$	1.00	$	1.00	9.50

The fair value of each stock option granted under the W2007/ACEP Holdings, LLC 2013 Management Incentive Plan

is estimated on the date of the grant using the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions:



Assumptions:
Expected term (years)	5.5
Risk-free interest rate	1.93	%
Expected volatility	81	%
Dividend yield	NA

A summary of RSU activity for the nine months ended September 30, 2014 is as follows:



	RSUs	Fair Value

Outstanding at December 31, 2013	—	$	—
Granted	2,500,000	1.00
Exercised	—	—
Canceled	—	—
Vested	—	—
Outstanding at September 30, 2014	2,500,000	$	1.00

As of September 30, 2014, there was $2.5 million of total unrecognized compensation cost related to all unvested restricted stock awards. As of September 30, 2014 no shares were exercisable as the shares only vest upon the occurrence of a qualifying event. Compensation costs will be recognized when a qualifying event becomes probable.

- 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.

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