8. Equity Incentive Plan

 

In 2005, the Company approved the 2005 Equity Incentive Plan (the “2005 Plan”). The 2005 Plan provides for the granting of options, restricted stock or other stock-based awards to employees, officers, directors, consultants and advisors. During 2010, the maximum number of shares of Common Stock that may be issued pursuant to the 2005 Plan was increased to 891,222 shares. The Board of Directors (the “Board”) is responsible for administration of the 2005 Plan. The Company’s Board determines the term of each option, the option exercise price, the number of shares for which each option is granted and the rate at which each option is exercisable. Incentive stock options may be granted to any officer or employee at an exercise price per share of not less than the fair value per common share on the date of the grant (not less than 110% of fair value in the case of holders of more than 10% of the Company’s voting stock) and with a term not to exceed ten years from the date of the grant (five years for incentive stock options granted to holders of more than 10% of the Company’s voting stock). Nonqualified stock options may be granted to any officer, employee, consultant or director at an exercise price per share of not less than the par value per share.  Following adoption of the 2014 Equity Incentive Plan (the “2014 Plan”), no further grants were made under the 2005 Plan.

 

The Company’s Board adopted the 2014 Plan and the Employee Stock Purchase Plan (the “ESPP”), and the Company’s Stockholders approved the 2014 Plan and the ESPP Plan in February 2015. As of March 31, 2018, the maximum number of shares of Common Stock that may be issued pursuant to the 2014 Plan and the ESPP is 2,040,123 and 170,567 shares, respectively.

 

In January 2018, the number of shares of common stock issuable under the 2014 Plan automatically increased by 350,000 shares pursuant to the terms of the 2014 Plan. These additional shares are included in the total of 2,040,123 shares issuable under the 2014 Plan.

 

The following is a summary of stock option activity for the three months ended March 31, 2018 and 2017:

 

		Number of Options			Weighted- Average Exercise Price			Weighted-Average Contractual Life  (In Years)
Outstanding at December 31, 2017			1,893,003		$	2.49			5.40
Granted			275,500			0.57			9.90
Forfeited			(1,500)			0.83
Outstanding at March 31, 2018			2,167,003		$	2.24			5.49
Exercisable at March 31, 2018			1,272,677		$	2.72			3.90
Vested and Expected to Vest at March 31, 2018			1,272,677		$	2.72			3.90
Outstanding at December 31, 2016			1,509,711		$	2.85			5.04
Granted			51,450			1.71			9.85
Exercised			(1,083)			1.70
Expired			(70,144)			2.16
Outstanding at March 31, 2017			1,489,934		$	2.87			5.27
Exercisable at March 31, 2017			1,051,719		$	2.75			4.49
Vested and Expected to Vest at March 31, 2017			1,051,719		$	2.75			4.49

 

On February 28, 2018, the Board approved the grant of options to purchase 275,000 shares of its common stock to sixteen employees. On March 21, 2018, the Board approved the grant of options to purchase 500 shares of its common stock to one employee. All grants were pursuant to the 2014 Plan. In general, options granted under the 2014 Plan vest 33.33% on the one-year anniversary of the grant date and the remainder ratably over a 24-month period. 

 

On January 31, 2017, the Board approved the grant of options to purchase 36,000 shares of its Common Stock to three consultants of the Company. On February 6, 2017, the Board approved the grant of options to purchase 15,450 shares of its Common Stock to three employees. All grants were pursuant to the 2014 Plan. In general, grants under the 2014 Plan vest 33.33% on the one-year anniversary of the grant date, and the remainder ratably over the 24-month period following the one-year anniversary.  

 

On February 6, 2017, the Board approved the grant of 104,000 shares of restricted stock to eight employees pursuant to the 2014 Plan. These vest 33.33% on the one-year anniversary of the grant date, and the remainder ratably over the 24-month period following the one-year anniversary. As of March 31, 2018, 37,190 of these shares were vested and 1,000 shares were cancelled due to an employee termination.

 

For the quarters ended March 31, 2018 and 2017, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes Option Pricing Model with the following weighted-average assumptions:

 

		2018			2017
Risk-Free Interest Rate			1.82	%		1.82	%
Expected Life			7.00 years			9.20 years
Expected Volatility			159	%		174	%
Expected Dividend Yield			0	%		0	%

 

 

The total stock-based compensation expense for employees and non-employees is included in the accompanying Condensed Consolidated Statements of Operations and as follows: 

 

		Three Months Ended March 31,
		2018			2017
Research and Development		$	57,078		$	164,932
General and Administrative			88,469			111,969
		$	145,547		$	276,901

 

The fair value of options granted for the three months ended March 31, 2018 and March 31, 2017 was $151,174 and $22,862, respectively. As of March 31, 2018, and March 31, 2017, there was approximately $945,000 and $1,007,000 of total unrecognized compensation expense related to unvested stock-based compensation arrangements (stock options and unvested restricted stock) granted, which cost is expected to be recognized over a weighted-average period of 1.57 and 1.61 years, respectively. The aggregate intrinsic value of stock options outstanding and exercisable at March 31, 2018 and March 31, 2017 was approximately $0 and $1,181,000. The intrinsic value of stock options exercised during March 31, 2018 and March 31, 2017 was approximately $0 and $1,000, respectively.