Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.7.0.1
Stock-Based Compensation
6 Months Ended
Jun. 30, 2017
Stock-based Compensation [Abstract]  
Stock-Based Compensation

7. Stock-Based Compensation


Common Stock Warrants


In connection with the March 23, 2016 public offering the Company issued warrants to purchase 6,825,000 shares of common stock with an exercise price of $1.00 per share and expire five years from the issuance date. In connection with the Company’s July 23, 2013 initial public offering, the Company issued warrants to the underwriters for 125,000 shares of common stock issuable at $12.50 per share upon exercise and expire five years from the issuance date. On March 10, 2011, the Company issued warrants to purchase shares of common stock to third parties in consideration for a private equity placement transaction of which 17,392 warrants remain outstanding.  The warrants have an exercise price of $0.48 per share and expire ten years from the issuance date. During the six months ended June 30, 2017 and 2016 no warrants were exercised. As of June 30, 2017 the Company has outstanding warrants to purchase 2,961,571 shares of common stock issuable at $1.00 per share; warrants to purchase 125,000 shares of common stock issuable at $12.50 per share; and warrants to purchase 17,392 shares of common stock issuable at $0.48 per share. These warrants do not meet the criteria required to be classified as liability awards and therefore are treated as equity awards.

 

Stock Options


The following is a summary of the stock option activity for the six months ended June 30, 2017:


 

 

Shares

 

 

Weighted

Average

Exercise

Price

 

Outstanding, December 31, 2016

 

 

1,136,753

 

 

$

3.93

 

Granted

 

 

1,526,500

 

 

$

0.84

 

Forfeited

 

 

(143,253

)

 

$

2.10

 

Outstanding, June 30, 2017

 

 

2,520,000

 

 

$

2.16

 


The weighted average grant-date fair value of stock options granted during the six months ended June 30, 2017 was $0.57. The fair value of each stock option was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for stock options granted during the six months ended June 30, 2017:


Dividend yield

 

 

0.0

%

Expected volatility

 

 

76.62

%

Risk-free interest rate

 

 

2.20

%

Expected lives (years)

 

 

6.25

 


The risk-free interest rate is based on U.S. Treasury interest rates at the time of the grant whose term is consistent with the expected life of the stock options. The Company used an average historical stock price volatility based on an analysis of reported data for a peer group of comparable companies that have issued stock options with substantially similar terms, as the Company did not have sufficient trading history for its common stock. Expected term represents the period that the Company’s stock option grants are expected to be outstanding. The Company elected to utilize the “simplified” method to estimate the expected term. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option.


Expected dividend yield was considered to be 0% in the option pricing formula since the Company had not paid any dividends and had no plans to do so in the future. The forfeiture rate was considered to be none as the options vest on a monthly basis.


The Company recognized $123,418 and $128,405 in stock-based compensation expense for the three months ended June 30, 2017 and 2016, respectively and $245,142 and $338,839 in share-based option compensation expense for the six months ended June 30, 2017 and 2016, respectively for the Company’s stock option awards.


The following table summarizes information about stock options outstanding at June 30, 2017:


Options Outstanding

 

 

Options Vested and Exercisable

 

Balance

as of

6/30/2017

 

 

Weighted

Average

Remaining

Contractual

Life

(Years)

 

 

Weighted

Average

Exercise

Price

 

 

Balance

as of

6/30/2017

 

 

Weighted

Average

Remaining

Contractual

Life

(Years)

 

 

Weighted

Average

Exercise

Price

 

2,520,000

 

 

8.6

 

 

$2.16

 

 

882,308

 

 

7.1

 

 

$4.12

 


As of June 30, 2017, the unrecognized stock-based compensation expense related to unvested stock options was $1,812,962, which is expected to be recognized over a weighted average period of approximately 17.8 months.


Restricted Stock

The Company recognized $19,686 and $0 in stock-based compensation expense for employees related to restricted stock awards during the three months ended June 30, 2017 and 2016, respectively and $136,207 and $0 in stock-based compensation expense for employees related to restricted stock awards during the six months ended June 30, 2017 and 2016, respectively. The Company recognized $10,500 and $1,634 in share-based compensation expense related to issuance of shares of restricted stock to non-employees (i.e., consultants) in exchange for services during the three months ended June 30, 2017 and 2016, respectively and $21,000 and $2,917 during the six months ended June 30, 2017 and 2016, respectively. As of June 30, 2017 there were 302,625 restricted stock awards granted to employees, all of which were unvested.


Total stock-based compensation expense, including restricted stock and stock options was $402,349 and $341,756 for the six months ended June 30, 2017 and 2016, respectively.