Cellectar Biosciences, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2015

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

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

5. STOCK-BASED COMPENSATION

Accounting for Stock-Based Compensation

The following table summarizes amounts charged to expense for stock-based compensation related to employee and director stock option grants and recorded in connection with stock options granted to non-employee consultants:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Employee and director stock option grants:
Research and development	$	25,749	$	31,441	$	109,402	$	142,142
General and administrative		142,319		130,700		316,755		491,665
Restructuring		—		—		—		47,853
		168,068		162,141		426,157		681,660

Non-employee consultant stock option grants:
Research and development		(3,052)		(15,582)		2,404		1,115

Total stock-based compensation	$	165,016	$	146,559	$	428,561	$	682,775

Assumptions Used In Determining Fair Value

Valuation and amortization method. The fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the vesting period. The estimated fair value of the non-employee options is amortized to expense over the period during which a non-employee is required to provide services for the award (usually the vesting period).

Volatility. The Company estimates volatility based on an average of (1) the Company’s historical volatility since its common stock has been publicly traded and (2) review of volatility estimates of publicly held drug development companies with similar market capitalizations.

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption.

Expected term. The expected term of stock options granted is based on an estimate of when options will be exercised in the future. The Company applied the simplified method of estimating the expected term of the options, as described in the SEC’s Staff Accounting Bulletins 107 and 110, as the historical experience is not indicative of the expected behavior in the future. The expected term, calculated under the simplified method, is applied to groups of stock options that have similar contractual terms. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted. The Company applied the simplified method to non-employees who have a truncation of term based on termination of service and utilizes the contractual life of the stock options granted for those non-employee grants which do not have a truncation of service.

Forfeitures. The Company records stock-based compensation expense only for those awards that are expected to vest. A forfeiture rate is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. An annual forfeiture rate of 2% and 0% was applied to all unvested options for employees and directors, respectively, for the nine months ended September 30, 2015 and for the year ended December 31, 2014. Ultimately, the actual expense recognized over the vesting period will be for only those shares that vest.

The following table summarizes weighted-average values and assumptions used for options granted to employees, directors and consultants in the periods indicated:

	Nine Months Ended			Nine Months Ended
	September 30, 2015			September 30, 2014
Volatility		105-107	%		108	%
Risk-free interest rate		1.70-1.95	%		1.76	%
Expected life (years)		6.0			6.0
Dividend		0	%		0	%
Weighted-average exercise price	$	2.65		$	7.40
Weighted-average grant-date fair value	$	2.17		$	6.20

Exercise prices for all grants made during the nine months ended September 30, 2015 were equal to the market value of the Company’s common stock on the date of grant.

Stock Option Activity

A summary of stock option activity is as follows:

					Weighted
	Number of				Average
	Shares Issuable				Remaining
	Upon Exercise		Weighted		Contracted		Aggregate
	of Outstanding		Average		Term in		Intrinsic
	Options		Exercise Price		Years		Value
Outstanding at December 31, 2014		719,466	$	15.59
Granted		510,200	$	2.65
Exercised		8,333	$	2.74
Canceled		149,177	$	22.68
Forfeited		283,773	$	8.22
Outstanding at September 30, 2015		788,383	$	8.67

Vested, September 30, 2015		253,556	$	18.04		5.61	$	—
Unvested, September 30, 2015		534,827	$	3.04		9.56	$	—
Exercisable at September 30, 2015		253,556	$	18.04		5.61	$	—

The aggregate intrinsic value of options outstanding is calculated based on the positive difference between the estimated per-share fair value of common stock at the end of the respective period and the exercise price of the underlying options. There have been no option exercises to date. Shares of common stock issued upon the exercise of options are from authorized but unissued shares.

As of September 30, 2015, there was approximately $971,000 of total unrecognized compensation cost related to unvested stock-based compensation arrangements. Of this total amount, the Company expects to recognize approximately $99,000, $318,000, $258,000, $206,000 and $90,000 during 2015, 2016, 2017, 2018 and 2019 respectively. The Company expects 534,827 unvested options to vest in the future. In addition, there are outstanding options to purchase 45,000 shares of common stock that vest upon the occurrence of future events.