Stock-Based Compensation

6 Months Ended

Jun. 30, 2015

8. Stock-Based Compensation

The Company’s Stock Incentive Plan provides for the issuance of long-term incentive awards, or awards, in the form of non-qualified and incentive stock options, or Options, stock appreciation rights, stock grants and restricted stock units. The awards may be granted by the Company’s Board of Directors to its employees, directors and officers and to consultants, agents, advisors and independent contractors who provide services to the Company. The exercise price for Options must not be less than the fair market value of the underlying shares on the date of grant. Options expire no later than ten years from the date of grant and generally vest and become exercisable over a four-year period following the date of grant. Every non-employee member of the Company’s Board of Directors may also receive an annual non-qualified Option or restricted stock unit grant. Upon the exercise of Options, the Company issues the resulting shares from shares reserved for issuance under the Company’s Incentive Plan.

Stock-based compensation expense is reduced by an estimated forfeiture rate derived from historical employee termination behavior. If the actual number of forfeitures differs from the Company’s estimates, the Company may record adjustments to increase or decrease compensation expense in future periods.

The estimated grant-date fair value of the Company’s stock-based awards is amortized ratably over the awards’ service periods. Stock-based compensation expense recognized was as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Research and development	$	30,000	$	40,000	$	59,000	$	78,000
General and administrative		22,000		195,000		45,000		390,000
Total stock-based compensation	$	52,000	$	235,000	$	104,000	$	468,000

The following table summarizes stock option activity for the six months ended June 30, 2015:



			Options Outstanding
							Average
					Weighted		Remaining
	Shares				Average		Contractual
	Available				Exercise		Term		Intrinsic
	For Grant		Shares		Price		(Years)		Value
Balance, December 31, 2014		785,000		440,695	$	9.37		8.18	$	640,837
Granted		-		-		-		-		-
Exercised		-		(80,000)		8.00		-		(149,750)
Forfeited		-		-		-		-		-
Expired		-		(60)		455.00		-		-
Balance, June 30, 2015		785,000		360,635	$	9.60		7.62	$	491,087
Vested or expected to vest at June 30, 2015				358,504	$	9.60		7.62	$	202,222
Exercisable at June 30, 2015				325,222	$	9.00		7.60	$	202,222

The intrinsic value of options exercisable as of June 30, 2015 was $0.2 million, based on the Company’s closing stock price of $0.19 per share and a weighted average exercise price of $9.00 per share.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes model requires the Company to make certain estimates and assumptions, including estimating the fair value of the Company’s common stock, assumptions related to the expected price volatility of the Company’s stock, the period during which the options will be outstanding, the rate of return on risk-free investments and the expected dividend yield for the Company’s stock.

There were no grants of stock options to employees or directors during the three and six months ended June 30, 2015 and 2014.

As of June 30, 2015, there was $0.3 million of total unrecognized compensation expense related to unvested options that will be recognized over the weighted average remaining period of 1.66 years.

Shares Reserved For Further Issuance

As of June 30, 2015, the Company had reserved shares of its common stock for future issuance as follows:



	Shares Reserved
Stock options outstanding		360,635
Available for future grants under the Stock Incentive Plan		785,000
Warrants		1,209,650
Total shares reserved		2,355,285