12. STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2014

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

12. STOCK BASED COMPENSATION

Stock options

During 2013, the Company adopted the 2013 Stock Option Plan (the “Plan”) which is intended to advance the interest of the Company’s stockholders by enhancing the Company’s ability to attract, retain, and motivate persons who make (or are expected to make) important contributions to the Company. 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted in the following table.  The Company calculates expected volatility based on a comparable industry group and estimates the expected term of its stock options using the simplified method.  The expected term represents an estimate of the time options are expected to remain outstanding.  The risk-free interest rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant. 

The weighted-average grant-date fair value of options granted during the years ended December 31, 2014 and 2013 was $77.25 and $7.05, respectively.

On August 19, 2014, a consultant was granted 140,000 stock options exercisable for common shares of the Company expiring December 31, 2015 and immediately vested. The fair value of the award amounted to $2,058,000 and was based on a Black-Scholes option pricing model with the following assumptions: risk free interest rate – 1.59%, volatility – 37%, expected term – 5 years, expected dividends – N/A.

						Weighted
						Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Number of			Exercise		Life		Intrinsic
Stock Options	Shares			Price		(In Years)		Value
Balance at December 31, 2012		-		$	-			$	-
Granted		635,000			7.02
Forfeited		(133,333	)		3.75
Balance at December 31, 2013		501,667			0.53		5.50	$	59,367,000
Granted		140,000			77.25
Exercised		(33,333	)		3.75
Forfeited		(68,333	)		6.97
Balance at December 31, 2014		540,000		$	26.10		3.78	$	-
Vested and exercisable at December 31, 2014		540,000		$	26.10		3.78	$	-

Total stock based compensation expense for the year ended December 31, 2014, 2013, and 2012 was $7,129,000, $435,000 and $0, respectively.  As of December 31, 2013, there was $130,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost was recognized during 2014.

Restricted stock

On July 1, 2014, James P. McCormick, our Chief Financial Officer at that time, was granted 66,667 restricted shares of the Company. The fair value of the award amounted to $6,383,000 and was based upon the closing price of the Company’s stock on the date of grant taking into account a 25% discount for lack of marketability. These restricted shares were originally scheduled to vest one third on October 31, 2014, one third on January 1, 2015 and one third on January 1, 2016. On October 29, 2014, the Company modified the terms of this award by extending the vesting dates as follows: one third on April 1, 2015, one third on January 1, 2016 and one third on April 1, 2016. Unrecognized stock compensation related to this grant amounted to $1,445,000 as of December 31, 2014. The Company determined this modification did not change the expectation that the award will ultimately vest. Therefore, the unrecognized stock based compensation cost on the date of the modification will be amortized on a straight line basis over the remaining expected term of this award.