Annual report pursuant to Section 13 and 15(d)

Stock Based Compensation

v3.7.0.1
Stock Based Compensation
 12 Months Ended
Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
NOTE H - Stock Based Compensation
 
In August 2013, the Company adopted the 2013 Equity Compensation Plan (the “Plan”), which provides for the granting of incentive stock options, nonqualified stock options, restricted stock units, performance units, and stock purchase rights. Options under the Plan may be granted at prices not less than 100% of the fair value of the shares on the date of grant as determined by the Board Committee. The Board Committee determines the period over which the options become exercisable subject to certain restrictions as defined in the Plan, with the current outstanding options generally vesting over three years. The term of the options is no longer than ten years. The Company currently has 11,828,912 shares of common stock for issuance under the plan.
 
With the approval of the Board of Directors and majority Shareholders, effective May 8, 2014, the Plan was amended and restated. The amendment provides for an automatic increase in the number of shares of common stock available for issuance under the Plan each January (with Board approval), commencing January 1, 2015 in an amount up to four percent (4%) of the total number of shares of common stock outstanding on the preceding December 31st.
 
The Company recognized stock-based compensation expense (options, and restricted share grants) in its consolidated statements of operations as follows:
 
 
 
Year  Ended
 
 
 
December 31,
 
 
 
2016
 
2015
 
 
 
 
 
 
 
Research and Development
 
$
554
 
$
528
 
General and Administrative
 
 
965
 
 
1,064
 
Total
 
$
1,519
 
$
1,592
 
 
The following table contains information about the Company’s stock plan at December 31, 2016:
 
 
 
Awards
 
 
 
 
 
 
 
 
Reserved
 
 
 
 
Awards
 
 
 
for
 
Awards
 
 
Available
 
 
 
Issuance
 
Issued
 
 
for Grant
 
2013 Equity Compensation Plan
 
 
11,829
 
 
9,325
*
 
 
2,504
 
 
* includes both stock grants and option grants
 
The following table summarizes the Company’ stock option activity and related information for the period from January 1, 2015 to December 31, 2016:
 
 
 
 
 
Weighted
 
Weighted Average
 
 
 
Number of
 
Average
 
Contractual Term
 
 
 
Options
 
Exercise Price
 
In Years
 
Outstanding at January 1, 2015
 
 
5,353
 
$
1.06
 
 
9.1
 
Granted
 
 
1,960
 
 
0.56
 
 
 
 
Exercised
 
 
-
 
 
 
 
 
 
 
Forfeited
 
 
(217)
 
 
0.95
 
 
 
 
Expired
 
 
(193)
 
 
0.89
 
 
 
 
Outstanding at December 31, 2015
 
 
6,903
 
$
0.93
 
 
8.4
 
Granted
 
 
1,631
 
 
0.41
 
 
 
 
Exercised
 
 
-
 
 
-
 
 
 
 
Forfeited
 
 
(180)
 
 
0.66
 
 
 
 
Cancelled
 
 
(64)
 
 
0.94
 
 
 
 
Expired
 
 
-
 
 
-
 
 
 
 
Outstanding at December 31, 2016
 
 
8,290
 
$
0.85
 
 
7.3
 
 
As of December 31, 2016, the number of vested shares underlying outstanding options was 6,445,860 at a weighted average exercise price of $0.94. The aggregate intrinsic value of in the-money options outstanding as of December 31, 2016 was $4.6 million. The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price of $1.40 on December 31, 2016, and the exercise price of options, multiplied by the number of options. As of December 31, 2016, there was approximately $700 thousand of total unrecognized share-based compensation. Such costs are expected to be recognized over a weighted average period of approximately 0.6 years.
 
All options expire ten years from date of grant. Except for options granted to consultants, all remaining options vest entirely and evenly over three years. A portion of options granted to consultants vests over four years, with the remaining vesting being based upon the achievement of certain performance milestones, which are tied to either financing or drug development initiatives.
 
The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period, with the exception of options granted subject to a consulting agreement, whereby the option vesting period and the service period defined pursuant to the terms of the consulting agreement may be different. Stock options issued to consultants are revalued quarterly until fully vested, with any change in fair value expensed. The following weighted-average assumptions were used to calculate share based compensation:
 
 
 
For the Year Ended
 
 
 
December 31,
 
 
 
2016
 
 
2015
 
Volatility
 
 
44.72 % - 89.15%
 
 
 
71.1% - 102.3 %
 
Risk-free interest rate
 
 
1.14 % - 2.09%
 
 
 
1.34% - 1.74 %
 
Dividend yield
 
 
0.0
%
 
 
0.0
%
Expected life
 
 
6.0 years
 
 
 
6.0 years
 
 
The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Hence, the Company uses the “simplified method” described in Staff Accounting Bulletin (SAB) 107 to estimated expected term of share option grants.
 
The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company has limited history for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available.