Stockholders' Equity

9 Months Ended

Sep. 30, 2014

Stockholders' Equity [Abstract]

Stockholders' Equity

Note 8 – Stockholders’ Equity

Authorized and Issued Capital Stock

As of September 30, 2014, the Company had 200,000,000 shares of common stock authorized with a par value of $0.01 per share, of which 106,875,447 were issued and outstanding and 1,000,000 shares of preferred stock authorized with a par value of $0.01 per share, none of which were issued and outstanding. During the first nine months of 2014, increases in the Company’s issued and outstanding common stock reflect restricted stock, net of shares exchanged for payroll tax obligations paid by the Company, that vested during the period. In addition, pursuant to a Stock Purchase Agreement dated June 9, 2014, the Company purchased approximately 8.2 million shares of the Company’s common stock from a shareholder for a purchase price of $0.40 per share. This purchase represented 100% of the shareholder’s holdings of the Company’s common stock. These shares were canceled and returned to the Company's authorized stock and reduced the number of shares issued and outstanding.

Equity Plans Prior to Merger

Pursuant to the merger of Nytis USA with and into the Company (formerly known as St. Lawrence Seaway Corporation (“SLSC”)) in 2011, all options, warrants and restricted stock were adjusted to reflect the conversion ratio used in the merger. As of September 30, 2014, the Company has 163,076 options outstanding and exercisable, 2,696,133 warrants (including 250,000 warrants granted by SLSC prior to the merger) outstanding and exercisable and 1,468,181 shares of common stock outstanding that are subject to restricted stock agreements.

Nytis USA Restricted Stock Plan

As of September 30, 2014, there were 1,468,181 shares of unvested restricted stock granted under the Nytis USA Restricted Stock Plan (“Nytis USA Plan”). The Company accounted for these grants at their intrinsic value. From the dates of grant through March 31, 2013, the Company estimated that none of these shares would vest and accordingly, no compensation cost had been recorded through March 31, 2013.

In June 2013, the vesting terms of these restricted stock grants were modified so that 25% of the shares would vest on the first of January from 2014 through 2017. As such, the Company is recognizing compensation expense for these restricted stock grants based on the fair value of the shares on the date the vesting terms were modified. Compensation costs recognized for these restricted stock grants were approximately $84,000 for the three months ended September 30, 2014 and 2013 and $251,000 and $84,000 respectively, for the nine months ended September 30, 2014 and 2013. As of September 30, 2014, there was approximately $755,000 of unrecognized compensation costs related to these restricted stock grants which the Company expects will be recognized ratably over the next 2.3 years.

Carbon Stock Incentive Plan

In 2011, the stockholders of Carbon approved the adoption of Carbon’s 2011 Stock Incentive Plan (“Carbon Plan”), under which 12,600,000 shares of common stock were authorized for issuance to Carbon officers, directors, employees or consultants eligible to receive awards under the Carbon Plan.

The Carbon Plan provides for granting Director Stock Awards to Non-Employee Directors and for granting Incentive Stock Options, Non-qualified Stock Options, Restricted Stock Awards, Performance Awards and Phantom Stock Awards, or a combination of the foregoing as is best suited to the circumstances of the particular employee, officer, or consultant.

Restricted Stock

During the nine months ended September 30, 2014, 1,600,000 shares of restricted stock were granted under the terms of the Carbon Plan in addition to 3,210,000 shares granted during previous years. For employees, these restricted stock awards vest ratably over a three-year service period and for non-employee directors the awards vest upon the earlier of a change in control of the Company or the date their membership on the Board of Directors is terminated other than for cause. The Company recognizes compensation expense for these restricted stock grants based on the grant date fair value of the shares, amortized ratably over three years for employee awards (based on the required service period for vesting) and seven years for non-employee director awards (based on a market survey of the average tenure of directors among U.S. public companies). As of September 30, 2014, approximately 1.3 million of these restricted stock grants have vested.

Compensation costs recognized for these restricted stock grants were approximately $220,000 and $150,000 for the three months ended September 30, 2014 and 2013, respectively and approximately $591,000 and $376,000 for the nine months ended September 30, 2014 and 2013, respectively. As of September 30, 2014, there was approximately $1.5 million of unrecognized compensation costs related to these restricted stock grants. This cost is expected to be recognized over the next 6.5 years.

Restricted Performance Units

As of September 30, 2014, 4,810,000 shares of restricted performance units have been granted under the terms of the Carbon Plan. The performance units represent a contractual right to receive one share of the Company’s common stock subject to the terms and conditions of the agreements including the achievement of the price of the Company’s stock, net asset value per share, net production per share and Adjusted EBITDA (defined as net income (loss) before interest expense, taxes, depreciation, depletion, amortization, accretion of asset retirement obligations, ceiling test write downs of oil and gas properties and the gain or loss on sold investments or properties) per share relative to a defined peer group and the lapse of forfeiture restrictions pursuant to the terms and conditions of the agreements, including for certain of the grants, the requirement of continuous employment by the grantee prior to a change in control of the Company. Based on the relative achievement of performance, 4,686,160 of the restricted performance units are outstanding as of September 30, 2014.

The Company accounts for the performance units granted during 2012 and 2014 at their fair value determined at the date of grant. The final measurement of compensation cost will be based on the number of performance units that ultimately vest. At September 30, 2014, the Company estimated that none of the performance units granted in 2012 and 2014 would vest due to change in control and other performance provisions and accordingly, no compensation cost has been recorded. As of September 30, 2014, if change in control and other performance provisions pursuant to the terms and conditions of these agreements are met in full, the estimated unrecognized compensation cost related to the performance units granted in 2012 and 2014 would be approximately $2.2 million.

The performance units granted in 2013 contain specific vesting provisions, no change in control provisions nor any performance conditions other than stock price performance. Due to different earning requirements compared to the performance units granted in 2012 and 2014, the Company recognizes compensation expense for the performance units granted in 2013 based on the grant date fair value of the performance units, amortized ratably over three years (the performance period). The fair value of the performance units granted in 2013 was estimated using the following key assumptions: no expected dividends, volatility of our stock and those of defined peer companies used to determine our performance relative to the defined peer group, a risk free interest rate and an expected life of three years. Compensation costs recognized for these performance unit grants were approximately $86,000 and $91,000 for the three months ended September 30, 2014 and 2013, respectively, and approximately $259,000 and $182,000 for the nine months ended September 30, 2014 and 2013, respectively. As of September 30, 2014, there was approximately $559,000 of unrecognized compensation costs related to performance units granted in 2013. These costs are expected to be recognized over the next 1.5 years.