Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

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

5.   Stock-Based Compensation

During 2001, Pipex Therapeutics’ Board of Directors and stockholders adopted the 2001 Stock Incentive Plan (the “2001 Stock Plan”). This plan was assumed by Pipex in the October 2006 merger with Sheffield. As of the date of the merger, there were 1,489,353 options issued and outstanding under the 2001 plan. The total number of shares of stock with respect to which stock options and stock appreciation rights may be granted to any one employee of the Company or a subsidiary during any one-year period under the 2001 plan shall not exceed 250,000. All awards pursuant to the 2001 Stock Plan shall terminate upon the termination of the grantee’s employment for any reason. Awards include options, restricted shares, stock appreciation rights, performance shares and cash-based awards (the “Awards”). The 2001 Stock Plan contains certain anti-dilution provisions in the event of a stock split, stock dividend or other capital adjustment, as defined in the plan. The 2001 Stock Plan provides for a Committee of the Board to grant awards and to determine the exercise price, vesting term, expiration date and all other terms and conditions of the awards, including acceleration of the vesting of an award at any time. As of June 30, 2012, there were 1,066,007 options issued and outstanding under the 2001 Stock Plan.

On March 20, 2007, the Company’s Board of Directors approved the Company’s 2007 Stock Incentive Plan (the “2007 Stock Plan”) for the issuance of up to 2,500,000 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. This plan was approved by stockholders on November 2, 2007. The exercise price of stock options under the 2007 Stock Plan is determined by the compensation committee of the Board of Directors, and may be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. The total number of shares of stock with respect to which stock options and stock appreciation rights may be granted to any one employee of the Company or a subsidiary during any one-year period under the 2001 plan shall not exceed 250,000. Options become exercisable over various periods from the date of grant, and generally expire ten years after the grant date. As of June 30, 2012, there are 912,739 options issued and outstanding under the 2007 Stock Plan.

On November 2, 2010, the Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (“2010 Stock Plan”) for the issuance of up to 3,000,000 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. The exercise price of stock options under the 2010 Stock Plan is determined by the compensation committee of the Board of Directors, and may be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. Options become exercisable over various periods from the date of grant, and generally expire seven to ten years after the grant date. As of June 30, 2012, there are 1,990,000 options issued and outstanding under the 2010 Stock Plan.

In the event of an employee’s termination, the Company will cease to recognize compensation expense for that employee. There is no deferred compensation recorded upon initial grant date, instead, the fair value of the stock-based payment is recognized ratably over the stated vesting period.

The Company has applied fair value accounting for all stock-based payment awards since inception. The fair value of each option or warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes assumptions used in the months ended June 30, 2012 and 2011 are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Exercise price		$1.70 - $1.75		$1.73		$1.70 – $2.47		$1.21 – $2.22
Expected dividends		0%		0%		0%		0%
Expected volatility		171%		184%		108% – 174%		184% – 188%
Risk free interest rates		1.89% – 1.92%		2.88%		0.37% – 1.98%		2.81% – 3.58%
Expected life options		7 years – 10 years		7 years		7 years – 10 years		5 years – 7 years
Expected forfeitures		0%		0%		0%		0%

The Company records stock-based compensation based upon the stated vested provisions in the related agreements, with recognition of expense recorded on the straight line basis over the term of the related agreement. The vesting provisions for these agreements have various terms as follows:

● immediate vesting,

● one-half vesting immediately and the remainder over three years

● monthly over three years,

● quarterly over three years,

● annually over three years,

● one-third immediate vesting and remaining annually over two years,

● one-eighth immediate vesting with remaining vesting over two years,

● one-half immediate vesting with remaining vesting over nine months; and

● one quarter immediate vesting with the remaining over three years.

During the six months ended June 30, 2012, the Company granted 1,550,000 options to employees and consultants having a fair value of approximately $3.5 million based upon the Black-Scholes option pricing model.  During the same period of 2011, the Company granted 332,002 options to employees having a fair value of approximately $446,000 based upon the Black-Scholes option pricing model.

A summary of stock option activities as of June 30, 2012, and for the year ended December 31, 2011, is as follows:

	Options			Weighted Average  Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Balance – December 31, 2010		2,539,091		$	1.32
Granted		557,002			1.26
Exercised		(23,333	)		0.57
Forfeited or expired		(93,750	)		0.59
Balance – December 31, 2011		2,979,010			1.34
Granted		1,550,000			2.25
Exercised		(334,851	)		0.28
Forfeited or expired		(225,413	)		2.37
Balance – June 30, 2012 – outstanding		3,968,746		$	1.73		7.17 years	$	1,547,000
Balance – June 30, 2012 – exercisable		2,412,748		$	1.54		5.93 years	$	1,252,000

The weighted-average grant-date fair value of options granted during the six month period ended June 30, 2012 and 2011 was $2.24 and $1.34, respectively.

During the six month period ended June 30, 2012 and 2011, 334,851 and 10,000 stock options were exercised, respectively.

The Company recognized $400,000 and $57,000 in stock-based compensation expense relating to stock options during the three month periods ended June 30, 2012 and 2011, respectively, and $908,000 and $427,000 during the six month periods ended June 30, 2012 and 2011, respectively.

As of June 30, 2012, total unrecognized stock-based compensation expense related to stock options was $3.1 million, which is expected to be expensed through May 2015.