Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

v3.2.0.727
STOCK-BASED COMPENSATION
6 Months Ended
Jun. 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
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
 
Employee and director stock option grants:
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
$
40,296
 
$
47,274
 
$
83,653
 
$
110,701
 
General and administrative
 
 
29,101
 
 
176,581
 
 
174,436
 
 
360,965
 
Restructuring
 
 
 
 
47,853
 
 
 
 
47,853
 
 
 
 
69,397
 
 
271,708
 
 
258,089
 
 
519,519
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-employee consultant stock option grants:
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
 
2,358
 
 
1,982
 
 
5,456
 
 
16,697
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total stock-based compensation
 
$
71,755
 
$
273,690
 
$
263,545
 
$
536,216
 
 
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 six months ended June 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:
 
 
 
Six Months
 
 
Six Months
 
 
 
Ended
 
 
Ended
 
 
 
June 30, 2015
 
 
June 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
 
$
2.65-2.69
 
 
$
7.40
 
Weighted-average grant-date fair value
 
$
2.17-2.20
 
 
$
6.20
 
 
Exercise prices for all grants made during the six months ended June 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
 
 
 
 
 
 
 
Canceled
 
 
105,072
 
$
27.22
 
 
 
 
 
 
 
Forfeited
 
 
229,475
 
$
9.29
 
 
 
 
 
 
 
Outstanding at June 30, 2015
 
 
895,119
 
$
8.47
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested, June 30, 2015
 
 
315,203
 
$
18.14
 
 
5.33
 
$
7,969
 
Unvested, June 30, 2015
 
 
579,916
 
$
3.21
 
 
9.73
 
$
110,269
 
Exercisable at June 30, 2015
 
 
315,203
 
$
18.14
 
 
5.33
 
$
7,969
 
 
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 June 30, 2015, there was approximately $1,421,000 of total unrecognized compensation cost related to unvested stock-based compensation arrangements.  Of this total amount, the Company expects to recognize approximately $335,000, $459,000, $331,000, $206,000 and $90,000 during 2015, 2016, 2017, 2018 and 2019 respectively. The Company expects 579,916 unvested options to vest in the future.  In addition, there are outstanding options to purchase 50,000 shares of common stock that vest upon the occurrence of future events.