Separation Agreement

9 Months Ended

Sep. 30, 2016

Separation Agreement

Separation Agreement

8.Separation Agreement

On April 22, 2015, the Company’s prior chief executive officer (the “Prior CEO”), ceased to be an employee of the Company. In connection with the termination of his employment, the Company agreed to pay the Prior CEO the amount of $535,000, consisting of a $500,000 severance benefit (the “Severance”) and $35,000 of accrued and unused vacation (the “Vacation Pay”).

The Severance was to be paid over a 12-month period in equal monthly installments. However, under the terms of the separation agreement, in the event the Prior CEO were to resign, or be removed from, his service on the Company’s Board, then (i) 50% of the then unpaid portion of Severance due to the Prior CEO would be paid to him in a lump sum within 30 days from the termination of his service on the Board and (ii) the remaining 50% of the unpaid Severance due to the Prior CEO would be paid in equal installments over the lesser of (a) six months or (b) the remainder of the original 12-month period. The Vacation Pay was paid in a lump sum in May 2015. In June 2015, the Prior CEO’s service on the Board terminated.

In connection with the transactions described above, the Company recorded a charge of $535,000 in its consolidated statements of operations for the year ended December 31, 2015. Such amount is included within general and administrative expense in the consolidated statement of operations.

Additionally, the Company agreed to fully accelerate the vesting of 53,820 unvested stock options held by the Prior CEO at the time of the termination of his employment. The Company determined that the acceleration of vesting was a Type III modification pursuant to ASC 718. Therefore, the Company recognized the incremental fair value of the awards as of the modification date and recognized the amount immediately since the awards did not require further service. In connection with this modification, the Company recorded a charge of $503,502 in its consolidated statement of operations for the year ended December 31, 2015. Such amount is included within general and administrative expense. At December 31, 2015, the Company had $153,846 related to the Severance recorded as an accrued liability, which was paid in the first quarter of 2016. Therefore there is no remaining obligation as of September 30, 2016.