Quarterly report pursuant to Section 13 or 15(d)

Stock-based Compensation

Stock-based Compensation
6 Months Ended
Jun. 30, 2019
Share-based Payment Arrangement [Abstract]  
Stock-based Compensation

Note 10 – Stock-based Compensation


The Company’s Amended and Restated 2013 Equity Compensation Plan (the “Plan”) 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 Compensation Committee of the Board of Directors. The Compensation 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 or four years. The term of the options is no longer than ten years. As of June 30, 2019, the Company had 22,421,644 shares of common stock authorized for issuance under the Plan.


With the approval of the Board of Directors and a majority of 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 condensed consolidated statements of operations as follows ($ in thousands):



Three Months Ended

June 30,


Six Months Ended

June 30,

    2019     2018     2019     2018  
Research and Development   $ 350     $ 113     $ 649     $ 686  
General and Administrative     472       437       977       1,612  
Total   $ 822     $ 550     $ 1,626     $ 2,298  


The following table contains information about the Company’s stock plan at June 30, 2019:


    Awards Reserved for Issuance     Awards Issued     Awards
Available for Grant
2013 Equity Compensation Plan (in thousands)     22,422 *     18,806 **     3,616  


* Increased by 4,532 thousand on January 1, 2019, representing 4% of the total number of shares of common stock outstanding on December 31, 2018.
** Includes both stock grants and option grants


The following table summarizes the Company’ stock option activity and related information for the period from December 31, 2018 to June 30, 2019 (options in thousands):


    Number of Options     Weighted Average Exercise Price     Weighted Average Contractual Term in Years  
Outstanding at December 31, 2018     13,457     $ 1.13       6.2  
Granted     3,295     $ 1.05          
Forfeited     (71 )   $ 1.31          
Expired     (56 )   $ 2.32          
Outstanding at June 30, 2019     16,625     $ 1.11       6.5  


As of June 30, 2019, the number of vested shares underlying outstanding options was 10,869,582 at a weighted average exercise price of $1.16. The aggregate intrinsic value of in-the-money options outstanding as of June 30, 2019 was $1.5 million. As of June 30, 2019, there was approximately $4.3 million of total unrecognized share-based compensation. Such costs are expected to be recognized over a weighted average period of approximately 2.8 years.


All outstanding options expire ten years from date of grant. Options granted to employees prior to 2018 vest in equal monthly installments over three years. Beginning in 2018, options granted to employees vest over four years, with 25% of the shares vesting on the first annual anniversary of grant and the remaining shares vesting in 36 equal monthly installments over the following 3 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.


During the six months ended June 30, 2019 and 2018, the Company granted restricted stock awards for 122,194 and 437,789 shares of common stock, respectively. These awards are typically granted to members of the Board of Directors as payment in lieu of cash fees or as payment to a vendor pursuant to a consulting agreement. The Company values restricted stock awards at the fair market value on the date of grant. The Company recorded the value of these restricted awards as general and administrative expense of approximately $175 thousand and $342 thousand in the condensed consolidated statement of operations for the six months ended June 30, 2019 and 2018, respectively.


The Company recognizes compensation expense for stock option awards and restricted stock 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 awards granted subject to a vendor’s consulting agreement, whereby the award vesting period and the service period defined pursuant to the terms of the consulting agreement may be different. Beginning January 1, 2019, stock options issued to consultants are recorded at fair value on the date of grant and the award is recognized as an expense on a straight-line basis over the requisite service period. The following weighted-average assumptions were used to calculate share-based compensation for the comparative periods presented:


    For the Three Months Ended     For the Six Months Ended  
    June 30,     June 30,  
    2019     2018     2019     2018  
Volatility     108.78 %     105.85-108.46 %     108.78-111.34 %     105.85-108.46 %
Risk-free interest rate     1.90 %     2.77-2.89 %     1.90-2.65 %     2.29-2.89 %
Dividend yield     0.0 %     0.0 %     0.0 %     0.0 %
Expected life     6.0 years       6.0 years       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. Accordingly, the Company has elected to use the “simplified method” described in Staff Accounting Bulletin (SAB) 107 to estimate the expected term of its stock-based awards.


The expected stock price volatility assumption is based the Company’s historical stock price volatility.