Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.6.0.2
Stock-Based Compensation
12 Months Ended
Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
5. Stock-Based Compensation
 
Stock Incentive Plan
 
During 2001, the Company’s Board of Directors and stockholders adopted the 2001 Stock Incentive Plan (the “2001 Stock 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 Stock 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 December 31, 2016, there were 228,773 options issued and outstanding under the 2001 Stock Plan.
 
On March 20, 2007, the Company’s Board of Directors approved the 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 2007 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 December 31, 2016, there were 659,988 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. On October 22, 2013, the stockholders approved and adopted an amendment to the Company’s 2010 Incentive Stock Plan to increase the number of shares of Company’s common stock reserved for issuance under the Plan from 3,000,000 to 6,000,000. On May 15, 2015, the stockholders approved and adopted an amendment to the Company’s 2010 Incentive Stock Plan to increase the number of shares of the Company’s common stock reserved for issuance under the Plan from 6,000,000 to 8,000,000. On August 25, 2016, the stockholders approved and adopted an amendment to the 2010 Stock Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2010 Stock Plan from 8,000,000 to 14,000,000. 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 period from the date of grant, and expire between five and ten years after the grant date. As of December 31, 2016, there were 10,747,466 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 share 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 years ended December 31, 2016, 2015 and 2014 are as follows:
  
 
 
Year ended December 31,
 
 
 
2016
 
2015
 
2014
 
Exercise price
 
$
0.80 – $2.66
 
$
1.54 – $2.76
 
$
1.46 – $2.91
 
Expected dividends
 
 
0%
 
 
0%
 
 
0%
 
Expected volatility
 
 
96% – 123%
 
 
88% – 131%
 
 
101% – 150%
 
Risk free interest rate
 
 
1.40% – 2.13%
 
 
1.32% – 2.19%
 
 
1.57% – 2.73%
 
Expected life of option
 
 
7 years
 
 
5 years – 10 years
 
 
5 years – 10 years
 
 
The Company records stock-based compensation based upon the stated vested provisions in the related agreements. The vesting provisions for these agreements have various terms as follows:
 
·
immediate vesting,
 
 
·
half vesting immediately and remaining over three years,
 
 
·
quarterly over three years,
 
 
·
annually over three years,
 
 
·
one-third immediate vesting and remaining annually over two years,
 
 
·
one-half immediate vesting and remaining over nine months,
 
 
·
one-quarter immediate vesting and remaining over three years,
 
 
·
one-quarter immediate vesting and remaining over 33 months; and
 
 
·
monthly over three years.
 
During the years ended December 31, 2016, 2015 and 2014 the Company granted 3,861,425, 3,781,666 and 2,382,500 options to employees and directors having an approximate fair value of $3.1 million, $8.0 million and $5.0 million based upon the Black-Scholes options pricing model, respectively.
 
Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to employees for the years ended December 31, 2016, 2015 and 2014 was $3.4 million, $2.3 million and $2.1 million, respectively. Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to consultants for the years ended December 31, 2016, 2015 and 2014 were $603,000, $888,000 and $380,000, respectively.
 
A summary of stock option activities for the years ended December 31, 2016, 2015 and 2014, is as follows:
 
 
 
 
 
Weighted
 
 
Weighted Average
 
Aggregate
 
 
 
 
 
Average Exercise
 
 
Remaining
 
Intrinsic
 
 
 
Options
 
Price
 
 
Contractual Life
 
Value
 
 
 
 
 
 
 
 
 
 
 
 
Balance - December 31, 2013
 
 
3,909,580
 
$
1.78
 
 
5.59 years
 
$
785,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
 
2,382,500
 
$
2.36
 
 
 
 
 
 
 
Exercised
 
 
(6,583)
 
$
0.58
 
 
 
 
$
8,000
 
Forfeited
 
 
(304,391)
 
$
1.93
 
 
 
 
 
 
 
Balance - December 31, 2014
 
 
5,981,106
 
$
2.01
 
 
5.80 years
 
$
685,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
 
3,781,666
 
$
2.37
 
 
 
 
 
 
 
Exercised
 
 
(35,008)
 
$
1.16
 
 
 
 
$
44,000
 
Expired
 
 
(483,332)
 
$
2.48
 
 
 
 
 
 
 
Forfeited
 
 
(302,502)
 
$
1.91
 
 
 
 
 
 
 
Balance - December 31, 2015
 
 
8,941,930
 
$
2.14
 
 
5.67 years
 
$
2,900,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
 
3,861,425
 
$
0.98
 
 
 
 
 
 
 
Exercised
 
 
(445,334)
 
$
1.83
 
 
 
 
$
137,488
 
Expired
 
 
(338,529)
 
$
1.96
 
 
 
 
 
 
 
Forfeited
 
 
(383,265)
 
$
2.26
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance - December 31, 2016 - outstanding
 
 
11,636,227
 
$
1.77
 
 
5.49 years
 
$
194,355
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance - December 31, 2016 - exercisable
 
 
6,193,649
 
$
2.02
 
 
4.49 years
 
$
194,355
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grant date fair value of options granted -  December 31, 2016
 
 
 
 
$
3,091,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average grant date fair value - December 31, 2016
 
 
 
 
$
0.80
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grant date fair value of options granted - December 31, 2015
 
 
 
 
$
7,974,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average grant date fair value - December 31, 2015
 
 
 
 
$
2.12
 
 
 
 
 
 
 
 
The options outstanding and exercisable at December 31, 2016 are as follows:
 
Options Outstanding
 
Options Exercisable
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
Weighted
 
 
 
 
 
Weighted
 
Average
 
 
 
Weighted
 
Average
 
 
 
 
 
Average
 
Remaining
 
 
 
Average
 
Remaining
 
Range of
 
 
 
Exercise
 
Contractual
 
 
 
Exercise
 
Contractual
 
Exercise Price
 
Options
 
Price
 
Life
 
Options
 
Price
 
Life
 
$
0.09 – $2.00
 
 
5,769,987
 
$
1.00
 
 
5.37 years
 
 
2,324,504
 
$
1.19
 
 
3.17 years
 
$
2.01 – $3.00
 
 
5,820,416
 
 
2.50
 
 
5.64 years
 
 
3,823,321
 
 
2.49
 
 
5.33 years
 
$
3.01 – $6.00
 
 
45,824
 
 
5.24
 
 
.62 years
 
 
45,824
 
 
5.24
 
 
.62 years
 
$
0.09 – $6.00
 
 
11,636,227
 
$
1.77
 
 
5.49 years
 
 
6,193,649
 
$
2.02
 
 
4.49 years
 
 
The options outstanding and exercisable at December 31, 2015 are as follows:
 
Options Outstanding
 
Options Exercisable
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
Weighted
 
 
 
 
 
Weighted
 
Average
 
 
 
Weighted
 
Average
 
 
 
 
 
Average
 
Remaining
 
 
 
Average
 
Remaining
 
Range of
 
 
 
Exercise
 
Contractual
 
 
 
Exercise
 
Contractual
 
Exercise Price
 
Options
 
Price
 
Life
 
Options
 
Price
 
Life
 
$
0.09 – $2.00
 
 
3,029,938
 
$
1.40
 
 
4.12 years
 
 
2,363,683
 
$
1.34
 
 
3.38 years
 
$
2.01 – $3.00
 
 
5,866,168
 
 
2.50
 
 
6.50 years
 
 
2,348,247
 
 
2.44
 
 
5.76 years
 
$
3.01 – $6.00
 
 
45,824
 
 
5.24
 
 
1.62 years
 
 
45,824
 
 
5.24
 
 
1.62 years
 
$
0.09 – $6.00
 
 
8,941,930
 
$
2.14
 
 
5.67 years
 
 
4,757,754
 
$
1.92
 
 
4.54 years
 
 
The options outstanding and exercisable at December 31, 2014 are as follows:
 
Options Outstanding
 
Options Exercisable
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
Weighted
 
 
 
 
 
Weighted
 
Average
 
 
 
Weighted
 
Average
 
 
 
 
 
Average
 
Remaining
 
 
 
Average
 
Remaining
 
Range of
 
 
 
Exercise
 
Contractual
 
 
 
Exercise
 
Contractual
 
Exercise Price
 
Options
 
Price
 
Life
 
Options
 
Price
 
Life
 
$
0.09 – $2.00
 
 
2,703,280
 
$
1.37
 
 
4.33 years
 
 
2,018,074
 
$
1.28
 
 
3.73 years
 
$
2.01 – $3.00
 
 
3,232,002
 
 
2.49
 
 
7.08 years
 
 
1,829,298
 
 
2.40
 
 
6.73 years
 
$
3.01 – $6.00
 
 
45,824
 
 
5.24
 
 
2.62 years
 
 
45,824
 
 
5.24
 
 
2.62 years
 
$
0.09 – $6.00
 
 
5,981,106
 
$
2.01
 
 
5.80 years
 
 
3,893,196
 
$
1.85
 
 
5.12 years
 
 
The following is a summary of the Company’s non-vested stock options at December 31, 2016:
 
 
 
 
 
Weighted
 
 
 
Unvested Stock
 
Average Grant
 
 
 
Options
 
Date Fair Value
 
 
 
 
 
 
 
Balance - December 31, 2013
 
 
756,043
 
$
2.17
 
 
 
 
 
 
 
 
 
Granted
 
 
2,382,500
 
$
2.09
 
Vested/Exercised
 
 
(1,050,633)
 
$
2.35
 
Forfeited/Cancelled
 
 
-
 
$
-
 
 
 
 
 
 
 
 
 
Balance - December 31, 2014
 
 
2,087,910
 
$
2.30
 
 
 
 
 
 
 
 
 
Granted
 
 
3,781,666
 
$
2.12
 
Vested/Exercised
 
 
(1,382,898)
 
$
2.02
 
Forfeited/Cancelled
 
 
(302,502)
 
$
1.92
 
 
 
 
 
 
 
 
 
Balance - December 31, 2015
 
 
4,184,176
 
$
1.97
 
 
 
 
 
 
 
 
 
Granted
 
 
3,861,425
 
$
0.80
 
Vested/Exercised
 
 
(2,219,758)
 
$
1.87
 
Forfeited/Cancelled
 
 
(383,265)
 
$
2.26
 
 
 
 
 
 
 
 
 
Non-vested - December 31, 2016
 
 
5,442,578
 
$
1.18
 
 
 
 
 
 
 
 
 
Weighted average remaining period for vesting
 
 
1.99
 
 
 
 
 
As of December 31, 2016, total unrecognized stock-based compensation expense related to stock options was $6.4 million, which is expected to be expensed through January 2019.
 
FASB’s guidance for stock-based payments requires cash flows from excess tax benefits to be classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. The Company did not record any excess tax benefits in 2016, 2015 or 2014. Cash received from option exercises under the Company’s stock-based compensation plans for the years ended December 31, 2016, 2015 and 2014 was $814,000, $41,000 and $4,000, respectively.
 
Stock Warrants
 
On November 18, 2016, the Company completed a public offering of 25 million shares of common stock in combination with accompanying warrants to purchase an aggregate of 50,000,000 shares of the common stock. The stock and warrants were sold in combination, with two warrants for each share of common stock sold, a Series A warrant and a Series B warrant, each representing the right to purchase one share of common stock. The purchase price for each share of common stock and accompanying warrants was $1.00. The shares of common stock were immediately separable from the warrants and will be issued separately. The initial per share exercise price of the Series A warrants is $1.43 and the per share exercise price of the Series B warrants is $1.72, each subject to adjustment as specified in the Warrants. The Series A and Series B warrants may be exercised at any time on or after the date of issuance. The Series A warrants are exercisable until the four year anniversary of the issuance date. The Series B warrants are exercisable until December 31, 2017. The warrants include a provision, that if the Company were to enter into a certain transaction, as defined in the agreement, the warrants would be purchased from the holder for cash. Accordingly, the Company recorded the warrants as a liability at their estimated fair value on the issuance date, which was $15.7 million, and changes in estimated fair value will be recorded as non-cash income or expense in the Company’s Statement of Operations at each subsequent period. At December 31, 2016, the fair value of the warrant liability was $12.7 million, which resulted in non-cash income of $3.0 million in 2016. In accordance with authoritative accounting guidance, the warrants were valued on the date of grant using the Monte Carlo Simulation valuation model. The assumptions used by the Company are summarized in the following table:
  
 
 
Series A
 
 
Series B
 
 
 
Issuance
 
 
December 31,
 
 
Issuance
 
 
December 31,
 
 
 
Date
 
 
2016
 
 
Date
 
 
2016
 
Closing stock price
 
$
0.89
 
 
$
0.76
 
 
$
0.89
 
 
$
0.76
 
Expected dividends
 
 
0
%
 
 
0
%
 
 
0
%
 
 
0
%
Expected volatility
 
 
85.0
%
 
 
85.0
%
 
 
85.0
%
 
 
90.0
%
Risk free interest rate
 
 
1.58
%
 
 
1.67
%
 
 
0.81
%
 
 
0.85
%
Expected life of warrant
 
 
4 years
 
 
 
3.9 years
 
 
 
1.1 years
 
 
 
1 years
 
 
On October 10, 2014, the Company raised net proceeds of $19.1 million through the sale of 14,059,616 units at a price of $1.47 per unit to certain institutional investors in a registered direct offering. Each unit consisted of one share of the Company’s common stock and a warrant to purchase 0.5 shares of common stock. The warrants, exercisable for an aggregate of 7,029,808 shares of common stock, have an exercise price of $1.75 per share and a life of five years. The warrants vested immediately and expire October 10, 2019.
 
The warrants issued in conjunction with the registered direct offering in October 2014 include a provision, that if the Company were to enter into a certain transaction, as defined in the agreement, the warrants would be purchased from the holder at a premium. Accordingly, the Company recorded the warrants as a liability at their estimated fair value on the issuance date, which was $7.4 million, and changes in estimated fair value will be recorded as non-cash income or expense in the Company’s statement of operations at each subsequent period. At December 31, 2016, the fair value of the warrant liability was $2.1 million, which resulted in non-cash income of $8.5 million in 2016. At December 31, 2015, the fair value of the warrant liability was $10.6 million, which resulted in non-cash income of $3.8 million in 2015. In accordance with authoritative accounting guidance, the warrants were valued on the date of grant using the Black-Scholes valuation model which approximates the value derived using the Monte Carlo Simulation valuation model. The assumptions used by the Company are summarized in the following table:
 
 
 
Issuance
 
 
December 31,
 
 
 
Date
 
 
2016
 
Closing stock price
 
$
1.75
 
 
$
0.76
 
Expected dividends
 
 
0
%
 
 
0
%
Expected volatility
 
 
95
%
 
 
95
%
Risk free interest rate
 
 
1.39
%
 
 
1.41
%
Expected life of warrant
 
 
5 years
 
 
 
2.79 years
 
 
The following table summarizes the estimated fair value of the warrant liability (in thousands) :
 
Balance at December 31, 2014
 
$
6,756
 
Change in fair value of warrant liability
 
 
3,811
 
Balance at December 31, 2015
 
 
10,567
 
Warrants Liability
 
 
15,667
 
Change in fair value of warrant liability
 
 
(11,412)
 
Balance at December 31, 2016
 
$
14,821
 
 
As of December 31, 2016, all of the warrants remained outstanding.
 
On October 25, 2012, the Company entered into a Common Stock Purchase Agreement with certain accredited investors. As part of this agreement, the Company issued warrants to purchase 635,855 shares of common stock to the placement agent, or its permitted assigns. The warrants have an exercise price of $1.60 and a life of five years. The warrants vested immediately and expire October 25, 2017. Since these warrants were granted as part of an equity raise, the Company has treated them as a direct offering cost. The result of the transaction has no affect to equity. As of December 31, 2016, 311,834 of these warrants remained outstanding.
 
A summary of warrant activity for the Company for the years ended December 31, 2016 and 2015 is as follows:
 
 
 
Number of
 
Weighted Average
 
 
 
Warrants
 
Exercise Price
 
 
 
 
 
 
 
Balance at December 31, 2014
 
 
7,974,794
 
$
1.80
 
Granted
 
 
-
 
$
-
 
Exercised
 
 
(2,446)
 
$
1.60
 
Forfeited
 
 
(63,449)
 
$
1.79
 
Balance at December 31, 2015
 
 
7,908,899
 
$
1.79
 
Granted
 
 
50,000,000
 
$
1.58
 
Exercised
 
 
-
 
$
-
 
Forfeited
 
 
(567,257)
 
$
2.35
 
Balance at December 31, 2016
 
 
57,341,642
 
$
1.60
 
 
There was no stock-based compensation expense included in general and administrative expenses relating to warrants issued to consultants for the years ended December 31, 2016, 2015 and 2014.
 
A summary of all outstanding and exercisable warrants as of December 31, 2016 is as follows:
 
 
 
 
 
 
 
 
Weighted Average
 
 
 
Warrants
 
Warrants
 
 
Remaining
 
Exercise Price
 
Outstanding
 
Exercisable
 
 
Contractual Life
 
$
1.60
 
 
311,834
 
 
311,834
 
 
0.82 years
 
$
1.43
 
 
25,000,000
 
 
25,000,000
 
 
3.88 years
 
$
1.72
 
 
25,000,000
 
 
25,000,000
 
 
1.00 years
 
$
1.75
 
 
7,029,808
 
 
7,029,808
 
 
2.78 years
 
$
1.77
 
 
57,341,642
 
 
57,341,642
 
 
2.47 years