Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.20.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2020
Stock-Based Compensation  
Stock-Based Compensation

5. Stock-Based Compensation

Stock Incentive Plans

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 71,429 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 the 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 7,143. Options become exercisable over various periods from the date of grant, and generally expire ten years after the grant date. As of March 31, 2020, there were 7,052 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 85,714 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 Stock Plan to increase the number of shares of the Company’s common stock reserved for issuance under the Plan from 85,714 to 171,429. On May 15, 2015, the stockholders approved and adopted an amendment to the Company’s 2010 Stock Plan to increase the number of shares of the Company’s common stock reserved for issuance under the Plan from 171,429 to 228,572. 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 228,572 to 400,000. On September 7, 2017, 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 400,000 to 500,000. On September 24, 2018, 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 500,000 to 1,000,000. On September 5, 2019, the stockholders approved and adopted an amendment to the 2010 Stock Plan to increase the number of shares of the Common Stock reserved for issuance under the 2010 Stock Plan from 1,000,000 to 4,000,000. 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 periods from the date of grant, and expire between five and ten years after the grant date. As of March 31, 2020, there were 2,494,960 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. Stock forfeitures are recognized as incurred. There is no deferred compensation recorded upon initial grant date. Instead, the fair value of the stock-based payment is recognized as compensation expense 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 is estimated on the date of grant using the Black-Scholes option pricing model. There were no options granted during the three months ended March 31, 2020 and 2019. The assumptions used for the awards during the year ended December 31, 2019 were as follows:

 

 

 

 

 

 

Exercise price

    

$

0.42

 

Expected dividends

 

 

 0

%

Expected volatility

 

 

84

%

Risk free interest rate

 

 

1.61

%

Expected life of option

 

 

4.5

years

 

Expected dividends —The Company has never declared or paid dividends on its common stock and has no plans to do so in the foreseeable future.

Expected volatility—Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period.

Risk-free interest rate—The assumed risk free rate used is a zero coupon U.S. Treasury security with a maturity that approximates the expected term of the option.

Expected life of the option—The period of time that the options granted are expected to remain unexercised. Options granted during 2019 have a maximum term of seven years. The Company estimates the expected life of the option based on the weighted average life between the dates that options become fully vested and the maximum life of options granted.

The Company records stock-based compensation based upon the stated vesting 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;

·

in full on one-year anniversary date of grant date;

·

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.

A summary of stock option activity for the three months ended March 31, 2020 and the year ended December 31, 2019 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Weighted

    

Weighted Average

    

Aggregate

 

 

 

 

Average Exercise

 

Remaining

 

Intrinsic

 

 

Options

 

Price

 

Contractual Life

 

Value

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2018

 

938,932

 

$

15.18

 

6.19 years

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

Granted

 

1,725,000

 

 

0.42

 

  

 

 

  

Exercised

 

 —

 

 

 —

 

 

 

 

 

Expired

 

(94,738)

 

 

58.25

 

  

 

 

  

Forfeited

 

(67,232)

 

 

5.95

 

  

 

 

  

Balance - December 31, 2019

 

2,502,012

 

$

3.62

 

6.51 years

 

$

153,353

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 —

 

 

 —

 

  

 

 

  

Exercised

 

 —

 

 

 —

 

 

 

 

 

Expired

 

 —

 

 

 —

 

  

 

 

  

Forfeited

 

 —

 

 

 —

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2020 - outstanding

 

2,502,012

 

$

3.62

 

6.26 years

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2020 - exercisable

 

493,696

 

$

16.17

 

5.29 years

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

Grant date fair value of options granted -  three months ended March 31, 2020

 

 

 

$

 —

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Weighted average grant date fair value -  three months ended March 31, 2020

 

 

 

$

 —

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Grant date fair value of options granted - year ended December 31, 2019

 

 

 

$

470,000

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Weighted average grant date fair value - year ended December 31, 2019

 

 

 

$

0.27

 

  

 

 

  

 

Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to employees for the three months ended March 31, 2020 and 2019 was  $55,000 and $54,000, 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 three months ended March 31, 2020 and 2019 were $28,000 and $10,000, respectively.

As of March 31, 2020, total unrecognized stock-based compensation expense related to stock options was $577,000, which is expected to be expensed through July 2022.

The FASB’s guidance for stock-based payments requires cash flows from excess tax benefits to be classified as a part of cash flows from operating 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 during the three months ended March 31, 2020 and 2019.