Stock Based Compensation Arrangements

9 Months Ended

Jul. 31, 2017

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

Stock Based Compensation Arrangements

9. STOCK BASED COMPENSATION ARRANGEMENTS

Stock-based compensation expense during the three months ended July 31, 2017 and 2016 amounted to approximately $3.7 million and $1.6 million, respectively. Stock-based compensation expense (including stock based compensation recorded in discontinued operations) during the nine months ended July 31, 2017 and 2016 amounted to approximately $11.8 million and $2.8 million, respectively. Stock-based compensation expense is recorded in general and administrative and research and development expenses in the accompanying consolidated statements of operations.

On February 8, 2017, the Board appointed Steve Gorlin as a Class II director with a term expiring in 2019 and Dr. Jon Mogford as a Class III director with a term expiring in 2017 to fill vacancies created upon the resignations of Messrs. Brauser and Honig. In addition, Mr. Gorlin was appointed as a member of each of the Board’s Audit, Compensation and Nominating and Corporate Governance Committees. Each of Mr. Gorlin and Dr. Mogford are deemed an “independent” director as such term is defined by the rules of The NASDAQ Stock Market LLC. There are no family relationships between either of Mr. Gorlin and Dr. Mogford and any of our other officers and directors. Mr. Gorlin and Dr. Mogford were each granted (i) an option to purchase up to 50,000 shares of the Company’s common stock at an exercise price equal to $4.72 per share (the “Options”) which Options will vest in 24 equal monthly installments commencing on the one month anniversary of the grant date and (ii) a restricted stock award of 50,000 shares of common stock that will vest in 24 equal monthly installments commencing on the one month anniversary of the grant date (the “RSUs”). The Options and the RSUs were granted pursuant to the Company’s 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan, the vesting and the exercise of the Options and the vesting of the RSUs are subject to stockholder approval (which was considered perfunctory given management’s high level of ownership interest).

A summary of the Company’s employee stock option activity in the nine months ended July 31, 2017 is presented below:

	Number of shares			Weighted-Average Exercise Price
Outstanding - October 31, 2016		383,210		$	5.74
Granted		2,715,000		$	3.49
Exercised		(231,404	)	$	4.85
Outstanding - July 31, 2017		2,866,806		$	3.68
Options exercisable - July 31, 2017		997,008		$	3.88
Weighted-average fair value of options granted during the period				$	2.37

A summary of the Company’s non-employee stock option activity in the nine months ended July 31, 2017 is presented below:

	Number of shares		Weighted-Average Exercise Price
Outstanding - October 31, 2016		-	$	-
Granted		52,000	$	4.71
Outstanding - July 31, 2017		52,000	$	4.71
Options exercisable - July 31, 2017		10,833	$	4.71

The value of employee and non-employee stock option grants is amortized over the vesting period of, generally, one to three years. As of July 31, 2017, there was approximately $2.8 million of unrecognized compensation cost related to non-vested employee and non-employee stock option awards, which is expected to be recognized over a remaining weighted-average vesting period of 0.7 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for the nine months ended July 31, 2017:

Risk free annual interest rate		1.78-2.28	%
Expected volatility		71.65-86.34	%
Expected life		5.04-6.00
Assumed dividends	None

A summary of the Company’s restricted stock activity in the nine months ended July 31, 2017 is presented below:

	Number of shares			Weighted-Average Grant-Date Fair Value
Unvested - October 31, 2016		274,829		$	6.00
Granted		1,031,000		$	4.56
Vested		(1,011,466	)	$	4.22
Unvested - July 31, 2017		294,363		$	7.07

During the nine months ended July 31, 2017, the Company granted 1,031,000 restricted shares to employees and non-employees.

The weighted-average fair value of restricted shares granted during the nine months ended July 31, 2017 was $4.56. The total fair value of restricted stock granted during the nine months ended July 31, 2017 was approximately $4.7 million.

The value of restricted stock grants is measured based on its fair value on the date of grant and amortized over the vesting period of, generally, six months to three years. As of July 31, 2017, there was approximately $2.0 million of unrecognized compensation cost related to unvested restricted stock awards, which is expected to be recognized over a remaining weighted-average vesting period of 0.6 years.