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Stock-Based Compensation
12 Months Ended
Dec. 31, 2016
Stock-Based Compensation

7. Stock-Based Compensation

Summary of Stock-Based Compensation Plans

At December 31, 2016, the Company has a stock-based compensation plan where the Company’s common stock has been made available for equity-based incentive grants as part of the Company’s compensation programs. In February 2009, the Company adopted the 2009 Incentive Compensation Plan (the “2009 Plan”) which originally provided for the issuance of up to 3,333,334, which was subsequently increased to 4,733,334 in May 2014, shares of the Company’s common stock in the form of options, stock appreciation rights, restricted stock and other stock-based awards to employees, officers, directors, consultants and other eligible persons. At December 31, 2016, 166 shares were available for future grant under the 2009 Plan.

In addition, the Company has awarded 1,477,379 non-plan stock option grants to employees and non-employees. These non-plan grants have vesting periods and expiration dates similar to those options granted under the Incentive Plans. At December 31, 2016, 1,416,669 non-plan grants were outstanding.

 

Stock-Based Compensation

Following is the stock-based compensation expense related to common stock options, restricted common stock and common stock warrants:

 

     Year Ended December 31,  
           2016                  2015        

Research and development

   $ 831      $ 1,018  

General and administrative

     1,648        2,382  
  

 

 

    

 

 

 

Total stock-based compensation expense

   $ 2,479      $ 3,400  
  

 

 

    

 

 

 

The fair value of the options granted is determined using the Black-Scholes option-pricing model. The following weighted average assumptions were used:

 

     2016     2015  

Risk-free interest rate

     1.49     1.65

Expected life of the options

     6 years       6 years  

Expected volatility of the underlying stock

     96     101

Expected dividend rate

     0     0

As noted above, the fair value of stock options is determined by using the Black-Scholes option pricing model. For all options granted since January 1, 2006 the Company has generally used option terms of between 5 to 10 years, generally with 5 to 6 years representing the estimated life of options granted to employees. The volatility of the common stock is estimated using historical volatility over a period equal to the expected life at the date of grant. The risk-free interest rate used in the Black-Scholes option pricing model is determined by reference to historical U.S. Treasury constant maturity rates with terms equal to the expected terms of the awards. An expected dividend yield of zero is used in the option valuation model, because the Company does not expect to pay any cash dividends in the foreseeable future. At December 31, 2016, the Company does not anticipate any option awards will be forfeited in the calculation of compensation expense due to the limited number of employees that receive stock option grants and the Company’s historical employee turnover.

The following table summarizes the stock option activity in the stock based compensation plans:

 

     Number of
Shares
     Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual
Life
(in years)
     Aggregate
Intrinsic Value
(in thousands)
 

Outstanding, December 31, 2014

     3,332,617      $ 5.79        

Granted

     454,000        3.23        

Forfeited/Cancelled

     (348,718      4.42        

Exercised

     (95,574      1.80        
  

 

 

    

 

 

       

Outstanding, December 31, 2015

     3,342,325      $ 5.70        

Granted

     1,434,750        0.97        

Forfeited/Cancelled

     (120,187      3.41        

Exercised

     —          —          
  

 

 

    

 

 

    

 

 

    

 

 

 

Outstanding, December 31, 2016

     4,656,888      $ 4.30        6.83      $ 120  
  

 

 

    

 

 

    

 

 

    

 

 

 

Exercisable, December 31, 2016

     3,384,238      $ 5.44        5.78      $ 22  

The aggregate intrinsic value in the table above represents the total pre-tax amount, net of exercise price, which would have been received by option holders if all option holders had exercised all options with an exercise price lower than the market price on December 31, 2016, based on the closing price of the Company’s common stock of $0.98 on that date.

 

The weighted-average grant-date fair values of options granted during 2016 and 2015 were $0.97 and $2.57, respectively. As of December 31, 2016 and 2015, there were unvested options to purchase 1,272,650 and 801,026 shares of common stock, respectively. Total expected unrecognized compensation cost related to such unvested options is $1,194,000 at December 31, 2016, which is expected to be recognized over a weighted-average period of 1.14 years.

During the year ended December 31, 2015, the Company issued shares totaling 95,574 upon the exercise of options valued at $146,000. During the year ended December 31, 2015, the Company received $0 for the exercise of stock options. During 2015, 212,501 options were exercised on a cashless basis resulting in the issuance of 95,574 shares. The intrinsic value of options exercised during the year ended December 31, 2015, was $313,000. There were no options exercised during the year ended December 31, 2016.

During the years ended December 31, 2016 and 2015, 963,126 and 535,692 options became vested, respectively. The total grant date fair value of options vested during the years ended December 31, 2016 and 2015 was $3,682,000 and $2,753,000, respectively.

The following table summarizes additional information regarding outstanding and exercisable options under our stock based compensation plans at December 31, 2016:

 

     Options Outstanding      Options Exercisable  

Exercise

Price (Range)

   Number of
Shares
     Weighted
Average
Remaining
Contractual
Life
     Weighted
Average
Exercise
Price
     Number of
Shares
     Weighted
Average
Exercise
Price
 
            (in years)                       

$0.87 – 1.00

     1,157,250        9.9      $ 0.88        206,250      $ 0.88  

$1.37 – 1.83

     341,668        8.2        1.45        197,147        1.51  

$2.08 – 2.79

     810,000        6.0        2.28        703,999        2.21  

$3.45 – 4.41

     564,517        7.3        3.82        498,712        3.87  

$6.24 – 7.56

     1,466,953        4.2        6.99        1,466,953        7.00  

$13.38

     316,500        7.0        13.38        311,177        13.38  
  

 

 

          

 

 

    
     4,656,888        6.8      $ 4.30        3,384,238      $ 5.44  
  

 

 

          

 

 

    

The following table summarizes the restricted stock grant activity in the Company’s equity incentive plans from December 31, 2014 through December 31, 2016:

 

     Shares  

Outstanding, December 31, 2014

     416,670  

Granted

     337,935  

Exercised

     —    

Options forfeited/cancelled

     —    
  

 

 

 

Outstanding, December 31, 2015

     754,605  

Granted

     —    

Exercised

     —    

Options forfeited/cancelled

     —    
  

 

 

 

Outstanding, December 31, 2016

     754,605  
  

 

 

 

On March 12, 2015, the Company granted 81,352 shares of restricted stock to non-employee directors as a component of their compensation. A total of 77,784 shares were issued to seven directors representing non-cash compensation cost of $280,000 which will be recognized on a straight-line basis from the grant date through December 15, 2016, when the restricted shares vested in full. A total of 3,568 shares were issued to two directors, who were not nominated for reelection, representing non-cash compensation cost of $12,845 that will be recognized on a straight-line basis from the grant date through December 15, 2016, when the restricted shares vested in full.

On April 8, 2015, the Company granted 177,618 shares of restricted stock to non-employee directors in exchange for cancelation of 222,615 stock options. As the exchange was made at fair value, there was no additional non-cash compensation expense recorded in accordance with FASB ASC 718-20. Additionally, on April 8, 2015, the Company granted 71,378 shares of restricted stock to one non-employee director representing $236,975 of non-cash compensation expense which was recorded on a straight-line basis from grant date to December 15, 2016, when the restricted shares vested in full. Also, in April and May 2015, the Company granted a total of 7,587 shares of restricted stock to four non-employee directors for service as committee chairs or lead independent director representing $23,500 of non-cash compensation expense which was be recorded on a straight-line basis from grant date to December 15, 2016, when the restricted shares vested in full.

Other Stock Based Compensation Transactions

In October 2015, the Company entered into an agreement with a consultant that provided for the grant of 30,000 shares of common stock. The Company recognized an expense of $71,000, representing the fair value of the common stock at issuance, during the fourth quarter of 2015.