Quarterly report pursuant to Section 13 or 15(d)

STOCK OPTIONS/STOCK BASED COMPENSATION AND WARRANTS

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STOCK OPTIONS/STOCK BASED COMPENSATION AND WARRANTS
6 Months Ended
Jun. 30, 2011
STOCK OPTIONS/STOCK [Abstract]  
STOCK OPTIONS/STOCK BASED COMPENSATION AND WARRANTS
NOTE 7     STOCK OPTIONS/STOCK-BASED COMPENSATION AND WARRANTS
 
On April 26, 2011, the board of directors approved an amendment and restatement of the Northern Oil and Gas, Inc. 2009 Equity Incentive Plan (the “Plan”), which was approved at the annual meeting of shareholders.  An additional 1,000,000 shares were authorized for grant under the Plan, resulting in an aggregate of 4,000,000 shares authorized for past and future grants under the Plan.  The Plan is intended to provide a means whereby the Company may be able, by granting stock options and shares of restricted stock, to attract, retain and motivate capable and loyal employees, non-employee directors, consultants and advisors of the company, for the benefit of the Company and its shareholders.
 
On November 1, 2007, the board of directors granted options to purchase 560,000 shares of the Company's common stock under the Company's 2006 Incentive Stock Option Plan.  The Company granted options to purchase 500,000 shares of the Company's common stock, to members of the board and options to purchase 60,000 shares of the Company's common stock to one employee pursuant to an employment agreement.  These options were granted at a price of $5.18 per share and the optionees were fully vested on the grant date.  As of June 30, 2011, options to purchase a total of 265,963 shares remain outstanding but unexercised.  The board of directors determined that no future grants will be made pursuant to the 2006 Incentive Stock Option Plan. All future stock compensation will be issued under the 2009 Equity Incentive Plan.
 
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 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 price volatility.  The Company used the simplified method to determine the expected term of the options due to the lack of sufficient historical data.  Changes in these assumptions can materially affect the fair value estimate.  The total fair value of the options is recognized as compensation over the vesting period.  There have been no stock options granted in the six months ended June 30, 2011 under the 2006 Stock Option Plan or the 2009 Equity Incentive Plan.
 
The following summarizes activities concerning outstanding options to purchase shares of the Company's common stock as of and for the period ending June 30, 2011:
 
·
No options were exercised or forfeited in the six months ended June 30, 2011.
·
No options expired during the six months ended June 30, 2011.
·
Options covering 265,963 shares are exercisable and outstanding at June 30, 2011.
·
There is no further compensation expense that will be recognized in future periods relative to any options that had been granted as of June 30, 2011, because the Company recognized the entire fair value of such compensation upon vesting of the options.
·
There were no unvested options at June 30, 2011.
 
 
Warrants Granted February 2009
 
On February 27,  2009, in conjunction with the closing of the revolving credit facility (see Note 8), the Company issued CIT warrants to purchase a total of 300,000 shares of common stock exercisable at $5.00 per share.   The total fair value of the warrants was calculated using the Black-Scholes valuation model based on factors present at the time the warrants were issued.  The fair value of the warrants is included in Debt Issuance Costs and is being amortized over the term of the facility.  CIT exercised the warrants in January 2011.
 
Restricted Stock Awards
 
During the six months ended June 30, 2011, the Company issued 590,735 restricted shares of common stock as compensation to officers and employees of the Company, the majority of which were issued under the long term equity incentive plan. The restricted shares vest over various terms with all restricted shares vesting no later than January 1, 2014. As of June 30, 2011, there was approximately $22.2 million of total unrecognized compensation expense related to unvested restricted stock. This compensation expense will be recognized over the remaining vesting period of the grants. The Company has assumed a zero percent forfeiture rate for restricted stock.
 
The following table reflects the outstanding restricted stock awards and activity related thereto for the six months ended June 30, 2011:
 
 
Six Months Ended
 
 
June 30, 2011
 
 
Number of
Shares
 
Weighted-Average Price
 
Restricted Stock Awards:
       
  Restricted Shares Outstanding at the Beginning of Period
    1,135,622     $ 13.28  
  Shares Granted
    590,735     $ 27.96  
  Lapse of Restrictions
    (312,459 )   $ 15.26  
    Restricted Shares Outstanding at June 30, 2011
    1,413,898     $ 18.97