Annual report pursuant to Section 13 and 15(d)

STOCK-BASED COMPENSATION

v3.6.0.2
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]
9.  STOCK-BASED COMPENSATION
 
2015 Stock Incentive Plan. The 2015 Stock Incentive Plan (the “2015 Plan”) was approved for a total of 420,000 shares of common stock and are authorized for issuance under the plan for grants of incentive or nonqualified stock options, rights to purchase restricted and unrestricted shares of common stock, stock appreciation rights and performance share grants. A committee of the board of directors determines exercise prices, vesting periods and any performance requirements on the date of grant, subject to the provisions of the Plan.  Options are granted at or above the fair market value of the common stock at the grant date and expire on the tenth anniversary of the grant date.  Vesting periods are generally between one and four years.  Options granted pursuant to the Plan generally will become fully vested upon a termination event occurring within one year following a change in control, as defined.  A termination event is defined as either termination of employment or services other than for cause or constructive termination of employees or consultants resulting from a significant reduction in either the nature or scope of duties and responsibilities, a reduction in compensation or a required relocation. The 2015 Plan replaces our 2006 Stock Incentive Plan (the “2006 Plan”). Awards will no longer be granted under the 2006 Plan; however, all outstanding awards under the 2006 Plan will remain in effect according to the terms of the 2006 Plan and the respective agreements relating to such awards. In addition, any shares that are currently available under the 2006 Plan and any shares underlying awards under the 2006 Plan which are forfeited, cancelled, reacquired by the Company or otherwise terminated will instead be added to the number of shares available for grant under the 2015 Plan. The 2015 Plan was approved by stockholders at our 2015 Annual Meeting of Stockholders. As of December 31, 2016, there are an aggregate of 130,895 shares available for future grants under the Plan.
 
2006 Stock Option Plan.  Prior to the approval of the 2015 Stock Incentive Plan, option grants to directors and employees were made under the 2006 Plan.  A total of 70,000 shares of common stock were authorized for issuance under the Plan for grants of incentive or nonqualified stock options, rights to purchase restricted and unrestricted shares of common stock, stock appreciation rights and performance share grants.  A committee of the board of directors determined exercise prices, vesting periods and any performance requirements on the date of grant, subject to the provisions of the Plan.  Options were granted at or above the fair market value of the common stock at the grant date and expire on the tenth anniversary of the grant date.  Vesting periods were generally between one and four years.  Options granted pursuant to the Plan generally will become fully vested upon a termination event occurring within one year following a change in control, as defined.  A termination event is defined as either termination of employment or services other than for cause or constructive termination of employees or consultants resulting from a significant reduction in either the nature or scope of duties and responsibilities, a reduction in compensation or a required relocation.
 
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:
 
 
 
Year Ended December 31,
 
 
 
2016
 
2015
 
Employee and director stock option grants:
 
 
 
 
 
 
 
Research and development
 
$
58,044
 
$
130,901
 
General and administrative
 
 
471,453
 
 
317,257
 
 
 
 
529,497
 
 
448,158
 
Non-employee consultant stock option grants:
 
 
 
 
 
 
 
Research and development
 
 
(338)
 
 
(858)
 
General and administrative
 
 
 
 
 
 
 
 
(338)
 
 
(858)
 
Total stock-based compensation
 
$
529,159
 
$
447,300
 
 
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 required service period which is generally 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% was applied to all unvested options for employees and directors, respectively, during the periods ended December 31, 2016 and 2015.  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:
 
 
 
Year Ended December 31,
 
 
 
2016
 
 
2015
 
Volatility
 
 
104-105
%
 
 
106-107
%
Risk-free interest rate
 
 
1.29-1.39
%
 
 
1.70-1.95
%
Expected life (years)
 
 
6
 
 
 
6
 
Dividend
 
 
0
%
 
 
0
%
Weighted-average exercise price
 
$
1.97
 
 
$
26.50
 
Weighted-average grant-date fair value
 
$
1.59
 
 
$
21.60
 
 
Stock Option Activity
 
A summary of stock option activity is as follows:
 
 
 
Number of
 
 
 
Weighted
 
 
 
 
 
Shares
 
 
 
Average
 
 
 
 
 
Issuable Upon
 
Weighted
 
Remaining
 
 
 
 
 
Exercise of
 
Average
 
Contracted
 
Aggregate
 
 
 
Outstanding
 
Exercise
 
Term in
 
Intrinsic
 
 
 
Options
 
Price
 
Years
 
Value
 
Outstanding at December 31, 2014
 
 
71,946
 
$
155.90
 
 
 
 
 
 
 
 
Granted
 
 
46,520
 
$
26.50
 
 
 
 
 
 
 
 
Exercised
 
 
(833)
 
$
27.40
 
 
 
 
 
 
 
 
Expired
 
 
(18,340)
 
$
241.80
 
 
 
 
 
 
 
 
Forfeited
 
 
(28,360)
 
$
82.20
 
 
 
 
 
 
 
 
Outstanding at December 31, 2015
 
 
70,933
 
$
78.63
 
 
 
 
 
 
 
 
Granted
 
 
475,300
 
$
1.97
 
 
 
 
 
 
 
 
Exercised
 
 
(166)
 
$
1.48
 
 
 
 
 
 
 
 
Expired
 
 
(16,153)
 
$
156.53
 
 
 
 
 
 
 
 
Forfeited
 
 
(58,481)
 
$
7.00
 
 
 
 
 
 
 
 
Outstanding at December 31, 2016
 
 
471,433
 
 
7.59
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested, December 31, 2016
 
 
74,006
 
$
26.68
 
 
 
8.78
 
$
 
Unvested, December 31, 2016
 
 
397,427
 
$
4.03
 
 
 
9.35
 
$
 
Exercisable at December 31, 2016
 
 
74,006
 
$
26.68
 
 
 
8.78
 
$
 
 
Exercise prices for all grants made during the twelve months ended December 31, 2016 and 2015 were equal to or greater than the market value of the Company’s common stock on the date of grant. 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. Shares of common stock issued upon the exercise of options are from authorized but unissued shares.
 
The weighted-average grant-date fair value of options granted during the years ended December 31, 2016 and 2015 was $1.59 and $21.60, respectively.  The total fair value of shares vested during the years ended December 31, 2016 and 2015 was $440,443 and $449,649, respectively.  The weighted-average grant-date fair value of vested and unvested options outstanding at December 31, 2016 was $20.03 and $3.27, respectively. The weighted-average grant-date fair value of vested and unvested options outstanding at December 31, 2015 was $125.70 and $23.90, respectively.
 
The weighted average grant date fair value of options expired during the years ended December 31, 2016 and December 31, 2015 was $116.32 and $126.10, respectively. The weighted average grant date fair value of options forfeited during the years ended December 31, 2016 and December 31, 2015 was $2.54 and $47.09, respectively. The number of options vested during the years ended December 31, 2016 and December 31, 2015 was 68,180 and 9,466, respectively. The number of options unvested at January 1, 2016 and January 1, 2015 was 47,253 and 38,555, respectively. The weighted average grant date fair value of options unvested at January 1, 2016 and January 1, 2015 was $23.93 and $49.52, respectively.
  
As of December 31, 2016, there was $1,050,110 of total unrecognized compensation cost related to unvested stock-based compensation arrangements.  Of this total amount, the Company expects to recognize $519,276, $369,948, and $160,886 during 2017, 2018, and 2019 respectively. The Company expects options to purchase 390,863 shares to vest in the future.