Share Based Compensation

12 Months Ended

Dec. 31, 2014

Share-based Compensation [Abstract]

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

13. Share-Based Compensation

Harvard Bioscience maintains the Third Amended and Restated 2000 Stock Option and Incentive Plan as amended, (the “Harvard Bioscience Plan”) for the benefit of certain of its officers, directors and employees.

The disclosure prior to the Separation represents the Company’s portion of the plan maintained by Harvard Bioscience in which the Company’s employees and directors participated. All options and awards granted under the Harvard Bioscience Plan consist of Harvard Bioscience common shares. Accordingly, the amounts presented are not necessarily indicative of future performance and do not necessarily reflect the results that the Company would have experienced as an independent, publicly-traded company for the periods presented.

HART maintains the 2013 Plan for the benefit of certain of its officers, directors and employees. All options and awards granted under the 2013 Plan consist of HART common shares. Additionally, equity awards related to shares of the Company’s common stock were issued from the 2013 Plan at the time of the Distribution to the holders of Harvard Bioscience equity awards as part of an adjustment (the “Adjustment”) to those equity awards to prevent a loss of value due to the Distribution.

Prior to the Separation, HART stock-based compensation expense represented an allocation from Harvard Bioscience’s stock-based compensation expense for employees whose time had been allocated to HART. After the Separation, HART continues to record the expense on stock-based awards of Harvard Bioscience stock options and restricted stock units, issued by Harvard Bioscience, to former Harvard Bioscience employees now employed by HART.

Harvard Bioscience award holders were also issued stock-based compensation awards in HART stock options and restricted stock units. HART recognizes compensation expense on those awards to former Harvard Bioscience employees who now are employed by HART, and does not recognize expense on the Adjustment awards given to individuals not now employed by HART. Additionally, HART records expense on grants made under the 2013 Plan to HART officers, directors and employees granted subsequent to the Adjustment.

In connection with the spin-off, certain required adjustments were made to the Harvard Bioscience outstanding equity compensation awards under their employee benefit plans. Each outstanding option to purchase Harvard Bioscience common stock was converted on the date of the Distribution into both an adjusted Harvard Bioscience option to purchase Harvard Bioscience common stock and an option to purchase HART common stock. Black-Scholes valuation modeling was used to determine the value that each Harvard Bioscience option had lost at the time of the Distribution. To ensure the holder maintained such lost value, 80% of such lost value was provided back to the holder by making appropriate adjustments to the share amount and exercise price of the existing Harvard Bioscience option and 20% of such lost value was provided back to the holder through the issuance of an option to purchase HART common stock. Similar to the adjustment of the existing Harvard Bioscience options, with respect to unvested Harvard Bioscience restricted stock units outstanding at the time of the Distribution, such Harvard Bioscience restricted stock units were converted on the date of the Distribution into both an adjusted Harvard Bioscience restricted stock unit and a HART restricted stock unit. The market prices of Harvard Bioscience and HART common stock were used to determine the value that each Harvard Bioscience restricted stock unit lost at the time of the Distribution and then to ensure the holder maintained such lost value, 80% of such lost value was provided back to the holder by making an appropriate increase of the share amount of the existing Harvard Bioscience restricted stock unit and 20% of such lost value was provided back to the holder through the issuance of a HART restricted stock unit. The share amounts and exercise prices of the adjusted Harvard Bioscience options and HART options, as well as the share amounts of the adjusted Harvard Bioscience restricted stock unit and HART restricted stock unit, were each adjusted and set in a manner to ensure the intrinsic value held by the holder pertaining to the existing Harvard Bioscience award just prior to the Distribution would be maintained immediately following the Distribution and were determined such that tax was not triggered under Section 409A of the Internal Revenue Code. As part of these required adjustments, the Company issued approximately 0.3 million HART options and approximately 0.02 million HART restricted stock units, all of which are reflected below. The Company records compensation expense only on those HART awards issued to HART employees. The Company also records compensation expense on those Harvard Bioscience awards issued to HART employees.

Harvard Bioscience Plan

Harvard Bioscience maintains the Harvard Bioscience Plan for the benefit of certain of its officers, directors and employees. Prior to the Separation stock-based compensation expense for HART represented an allocation from Harvard Bioscience’s stock-based compensation expense for employees and directors whose time was partly or wholly allocated to HART. The disclosure for periods prior to the Separation represents the Company’s portion of the plan maintained by Harvard Bioscience in which the Company’s employees and directors participated. All options and awards granted under the Harvard Bioscience Plan consist of Harvard Bioscience common shares. Accordingly, the amounts presented are not necessarily indicative of future performance and do not necessarily reflect the results that the Company would have experienced as an independent, publicly-traded company for the periods presented.

During the year ended December 31, 2013 all awards were granted to the Company’s employees and directors at exercise prices equal to or greater than fair market value of the Harvard Bioscience’s common stock on the date of grant.

Harvard Bioscience Plan Award Information

The following is a summary of stock option and restricted stock unit activity:

	Stock Options			Restricted Stock Units
	Stock Options Outstanding	Weighted Average Exercise Price		Restricted Stock Units Outstanding	Grant Date Fair Value
Balance at December 31, 2012	622,340	$	4.07	184,264	$	3.90
Granted	217,902		5.08	63,929		5.08
Exercised	(487,031)		3.33	—		—
Vested (RSUs)	—		—	(55,247)		—
Cancelled/forfeited	(29,972)		4.34	(10,892)		3.83
Adjustment (1)	2,177,100			144,131
Balance at December 31, 2013	2,500,339		3.20	326,185		5.46
Granted	—		—	—		—
Exercised	(66,056)		3.34	—		—
Vested (RSUs)	—		—	(154,628)		—
Cancelled/forfeited	(311,635)		5.58	—		—
Balance at December 31, 2014	2,122,648	$	2.84	171,557	$	5.67

(1) Prior to the Separation, this rollforward included only those Harvard Bioscience options and restricted stock units which were issued while giving service to the regenerative technology operations of Harvard Bioscience. If employees were splitting time between regenerative technology and other parts of Harvard Bioscience, only an allocated portion of that year’s activity would be reflected. As of the time of the Separation, the rollfoward was “Adjusted” to exclude all Harvard Bioscience employees not employed by HART at the time of the Separation, and to include 100% of the Harvard Bioscience awards held by HART employees (regardless of level of service in prior years).

The following table summarizes information concerning the Harvard Bioscience Plan currently outstanding and exercisable options as of December 31, 2014:

	Options Outstanding								Options Exercisable
			Weighted								Weighted
	Number		Average		Weighted				Shares		Average		Weighted
Range of	Outstanding at		Remaining		Average		Aggregate		Exercisable at		Remaining		Average		Aggregate
Exercise	December		Contractual Life		Exercise		Intrinsic		December		Contractual Life		Exercise		Intrinsic
Price	31. 2014		in Years		Price		Value		31. 2014		in Years		Price		Value
$1.43 - 2.59		1,365,645		5.07	$	2.26	$	4,651,366		1,188,461		4.71	$	2.22	$	4,100,190
3.64		246,575		8.41		3.64		500,547		56,663		8.41		3.64		115,026
3.71 - 3.99		276,653		2.33		3.98		468,475		276,653		2.33		3.98		468,475
4.04		233,775		6.42		4.04		381,053		175,332		6.42		4.04		285,791
$1.43- 4.04		2,122,648		5.25	$	2.84	$	6,001,441		1,697,109		4.62	$	2.74	$	4,969,482

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on Harvard Bioscience’s closing stock price of $5.67 as of December 31, 2014, which would have been received by the option holders had all option holders exercised their options as of that date. The aggregate intrinsic value of options exercised for the years ended December 31, 2014 and 2013 was approximately $0.1 million and $1.1 million, respectively. The total number of in-the-money options that were exercisable as of December 31, 2014 was 1,697,109.

For the year ended December 31, 2014, the total compensation costs related to unvested awards not yet recognized is $0.6 million and the weighted average period over which it is expected to be recognized is 1.49 years.

Harvard Bioscience Plan Valuation and Expense Information under Stock-Based-Payment Accounting

Stock-based compensation expense related to Harvard Bioscience employee stock options and restricted stock units for the years ended December 31, 2014 and 2013 was allocated as follows:

	Years Ended December 31,
	2014		2013
	(in thousands)
Research and development	$	66	$	136
Sales and marketing		14		16
General and administrative		683		622
Total stock-based compensation	$	763	$	774

The Company did not capitalize any stock-based compensation.

The weighted-average estimated value of Harvard Bioscience employee stock options granted during 2013 was $2.64, using the Black-Scholes model with the following weighted-average assumptions:

	Year Ended December 31,
	2013
Volatility	57.18	%
Risk-free interest rate	1.42	%
Expected holding period	5.67 years
Dividend yield	-	%

The Company used Harvard Bioscience’s historical volatility to calculate the expected volatility. Historical volatility was determined by calculating the mean reversion of the daily adjusted closing stock price. The risk-free interest rate assumption is based upon observed Treasury bill interest rates (risk-free) appropriate for the term of the Harvard Bioscience employee stock options. The expected life of employee stock options represents the period of time options are expected to be outstanding and were based on historical experience of Harvard Bioscience.

Stock-based compensation expense recognized in the Company’s consolidated statements of operations related to Harvard Bioscience options for the years ended December 31, 2014 and 2013 is based on awards ultimately expected to vest and has been reduced for annualized estimated forfeitures. Stock-based-payment accounting requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience of Harvard Bioscience.

Harvard Apparatus Regenerative Technology, Inc. 2013 Equity Incentive Plan

The 2013 Equity Incentive Plan (the “2013 Plan”) was adopted by the Board of Directors on October 11, 2013. The aggregate number of shares authorized for issuance under the Plan is 3,320,000 shares of common stock.

The Company currently has 3,320,000 shares of its common stock reserved for the issuance of awards under the 2013 Plan. As of December 31, 2014, there were options outstanding to purchase 2,006,980 shares, and 7,980 restricted stock units outstanding.

Through December 31, 2014, incentive stock options to purchase 130,122 shares and non-qualified stock options to purchase 2,224,604 shares had been granted to employees and directors under the plan.

During the year ended December 31, 2013, 2,117,226 options were granted under the 2013 Plan to HART and Harvard Bioscience employees and directors at exercise prices equal to or greater than fair market value of the Company’s common stock on the date of grant, of which 298,784 were issued as part of the Adjustment made to the Harvard Bioscience outstanding equity compensation awards.

During 2013, 23,715 restricted stock units were granted to certain HART and Harvard Bioscience employees and directors under the 2013 Plan, all of which were issued as part of the Adjustment made to the Harvard Bioscience outstanding equity compensation awards.

During 2014 no options or restricted stock units were granted to Harvard Bioscience employees or directors, and the company does not anticipate issuing any to Harvard Bioscience employees in the future.

2013 Plan Award Information

The following is a summary of stock option and restricted stock unit activity:

	Stock Options			Restricted Stock Units
	Stock Options Outstanding	Weighted Average Exercise Price		Restricted Stock Units Outstanding	Grant Date Fair Value
Balance at December 31, 2012	-	$	-	-	$	-
Granted	2,117,226		4.36	23,715		6.00
Exercised	(693)		5.38	-		-
Vested (RSUs)	-		-	(2,021)		-
Cancelled/forfeited	(40,826)		4.96	(2,202)		-
Balance at December 31, 2013	2,075,707		4.34	19,492		6.00
Granted	237,500		7.93	-		-
Exercised	(115,950)		4.90	(9,796)		-
Vested (RSUs)	-		-	-		-
Cancelled/forfeited	(190,277)		4.42	(1,716)		-
Balance at December 31, 2014	2,006,980	$	4.73	7,980	$	6.00

The Company’s policy is to issue stock available from its registered but unissued stock pool through its transfer agent to satisfy stock option exercises and vesting of the restricted stock units.

The following table summarizes information concerning 2013 Plan currently outstanding and exercisable options as of December 31, 2014:

	Options Outstanding								Options Exercisable
			Weighted								Weighted
	Number		Average		Weighted				Shares		Average		Weighted
Range of	Outstanding at		Remaining		Average		Aggregate		Exercisable at		Remaining		Average		Aggregate
Exercise	December		Contractual Life		Exercise		Intrinsic		December		Contractual Life		Exercise		Intrinsic
Price	31. 2014		in Years		Price		Value		31. 2014		in Years		Price		Value
$2.05 - 3.60		54,108		4.05	$	3.13	$	2,705		54,108		4.05	$	3.13	$	2,705
3.61 - 5.16		1,668,023		8.80		4.28		-		508,375		8.59		4.28		-
5.17-6.72		77,349		6.27		5.52		-		50,114		5.35		5.61		-
6.73 - 8.28		57,500		9.76		7.32		-		-		-		-		-
8.29 - 9.84		150,000		9.34		8.87		-		-		-		-		-
$2.05- 9.84		2,006,980		8.64	$	4.73	$	2,705		612,597		7.92	$	4.28	$	2,705

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $3.18 as of December 31, 2014, which would have been received by the option holders had all option holders exercised their options as of that date. The aggregate intrinsic value of options exercised for the year ended December 31, 2014 and 2013 was approximately $507,466 and $810, respectively. The total number of in-the-money options that were exercisable as of December 31, 2014 was 12,905.

For the year ended December 31, 2014, the total compensation costs related to unvested awards not yet recognized is $4.4 million and the weighted average period over which it is expected to be recognized is 2.17 years.

2013 Plan Valuation and Expense Information under Stock-Based-Payment Accounting

Stock-based compensation expense related to the 2013 Plan including employee stock options, restricted stock units, and the employee stock purchase plan for the years ended December 31, 2014 and 2013 was allocated as follows:

	Years Ended December 31,
	2014		2013
	(in thousands)
Research and development	$	554	$	39
Sales and marketing		94		32
General and administrative		1,154		525
Total stock-based compensation	$	1,802	$	596

The Company did not capitalize any stock-based compensation.

The weighted-average estimated value of employee stock options granted during 2014 and 2013 was $5.25 and $3.33, respectively, using the Black Scholes model with the following weighted-average assumptions:

	Year Ended December 31,
	2014		2013
Volatility	74.00	%	73.59	%
Risk-free interest rate	1.61	%	2.01	%
Expected holding period	6.25 years		5.81 years
Dividend yield	-	%	-	%

Post spin-off, the Company used the published volatility of comparable companies, as management did not believe that our trading history was of a sufficient duration to provide an accurate estimate of expected volatility. The risk-free interest rate assumption is based upon observed Treasury bill interest rates (risk-free) appropriate for the term of the Company’s employee stock options. After the Separation, the simplified method of estimating expected life was used. The vesting period is approximately four years and the contractual life is ten years.

Stock-based compensation expense recognized in the Company’s consolidated statements of operations for the years ended December 31, 2014 and 2013 is based on awards ultimately expected to vest and has been reduced for annualized estimated forfeitures. Stock-based-payment accounting requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience and weighting of various employee classes.