7.Stock-Based Compensation and Warrants

The Company accounts for stock-based compensation under the provisions of FASB ASC 718-10-55. This standard requires the Company to record an expense associated with the fair value of the stock-based compensation. The Company uses the Black-Scholes option valuation model to calculate stock-based compensation at the date of grant. Option pricing models require the input of highly subjective assumptions, including the expected volatility. For warrants granted to employees and directors, the Company uses the simplified method to determine the expected term of the warrants due to the lack of sufficient historical data. Changes in these assumptions can materially affect the fair value estimate. The fair value of the warrants are recognized as compensation or interest expense over the vesting term.

Warrants

The table below reflects the status of warrants outstanding at September 30, 2014:


Issue Date	Common Shares		Exercise Price		Expiration Date
February 1, 2011		1,000,000	$	0.285		January 31, 2021
February 22, 2011		600,000	$	2.50		February 22, 2016
April 5, 2011		100,000	$	2.50		April 5, 2016
November 1, 2012		50,000	$	3.28		November 1, 2016
November 2, 2012		921,000	$	4.00		October 31, 2017
January 1, 2013		100,000	$	3.25		February 15, 2018
Total		2,771,000

Outstanding Warrants

No warrants were forfeited or expired during the nine months ended September 30, 2014.

The Company recorded general and administrative expense of $15,697 and $217,868 for the three and nine months ended September 30, 2013, respectively, related to these warrants. The Company recorded no general and administrative expense for the three and nine months ended September 30, 2014, related to these warrants. There is no further general and administrative expense that will be recognized in future periods related to any warrants that have been granted as of September 30, 2014, as the Company recognized the entire fair value upon vesting.

There are 2,771,000 warrants that are exercisable at September 30, 2014.

No warrants were exercised during the nine months ended September 30, 2014.

Stock Options

Effective January 16, 2014, certain executives and outside directors of the Company agreed to surrender the 415,625 stock options granted to them in prior periods. There are no options outstanding at September 30, 2014.

Restricted Stock Awards

During the nine months ended September 30, 2014, the Company issued 574,483 restricted shares of common stock as compensation to officers and employees of the Company. The restricted shares vest over various terms with all restricted shares vesting no later than March 2017. As of September 30, 2014, there was $2.2 million of total unrecognized compensation expense related to unvested restricted stock. This compensation expense will be recognized over the weighted average period of 1.8 years. The Company has assumed a zero percent forfeiture rate for restricted stock. The Company recorded general and administrative expense of $325,363 and $1,037,414 for the three and nine months ended September 30, 2014, respectively, and $465,076 and $1,094,919 for the three and nine months ended September 30, 2013, respectively, related to issuances of restricted shares.

The following table reflects the outstanding restricted stock awards and activity related thereto for the nine months ended September 30, 2014:


	Nine Months Ended September 30, 2014
	Number of Shares			Weighted-Average Grant Price
Restricted Stock Awards:
Restricted Shares Outstanding at the Beginning of Period		769,063		$	3.82
Shares Granted		574,483		$	2.24
Lapse of Restrictions		(327,396	)	$	3.88
Restricted Shares Outstanding at September 30, 2014		1,016,150		$	2.91