Stockholders' Equity | 3 Months Ended |
Mar. 31, 2015 |
Equity [Abstract] | |
Stockholders' Equity | 3 | | Stockholders’ Equity | | | | | | | | | | | | | | |
The Company records compensation expense associated with share based awards granted to employees at the fair value of the award on the date of grant. The expense is recognized over the period during which an employee is required to provide services in exchange for the award. |
The Company’s 2008 Equity Compensation Plan (the “Plan”) allows for grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards. All of the Company’s officers, directors, employees, consultants and advisors are eligible to receive grants under the Plan. Under the Plan, the maximum number of shares authorized for issuance is 21,000,000 and the maximum number of shares of stock that may be granted to any one participant during a calendar year is 1,000,000 shares. Options to purchase shares of common stock are granted at exercise prices not less than 100% of fair market value on the dates of grant. The term of each option is 10 years and the options typically vest in quarterly installments over a three-year period. As of March 31, 2015, the Plan had 4,016,156 shares available for grant. Stock option exercises are satisfied through the issuance of new shares. |
|
Stock Options |
A summary of stock option activity under the Plan as of March 31, 2015, and the changes during the three months then ended is as follows: |
|
| | | | | | | | | | | | | | | | |
| | Number of | | | Weighted | | | Weighted | | | Aggregate | |
Shares | Average | Average | Intrinsic |
| Exercise | Remaining | Value ($) |
| Price ($) | Contractual | |
| | Term (Years) | |
Outstanding at December 31, 2014 | | | 7,245,485 | | | | 2.25 | | | | | | | | | |
Granted | | | 275,000 | | | | 2.59 | | | | | | | | | |
Exercised | | | — | | | | — | | | | | | | | — | |
Cancelled/Forfeited | | | (19,959 | ) | | | 3.16 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Outstanding at March 31, 2015 | | | 7,500,526 | | | | 2.26 | | | | 6.6 | | | | 5,249,105 | |
| | | | | | | | | | | | | | | | |
Exercisable at March 31, 2015 | | | 5,230,969 | | | | 1.96 | | | | 5.4 | | | | 4,970,719 | |
| | | | | | | | | | | | | | | | |
In March 2015, the Company granted to its executive officers, as consideration for 2014 performance, a total of 245,000 stock options, which vest quarterly over a one-year period. The per share weighted average fair values of all options granted during the first three months of 2015 and 2014 were estimated as $1.35 and $2.55, respectively, on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below. Expected volatilities are based on the historical volatility of the Company’s stock price. The weighted average expected life is based on both historical and anticipated employee behavior. |
|
| | | | | | | | | | | | | | | | |
| | March 31, | | | | | | | | | |
| | 2015 | | | 2014 | | | | | | | | | |
Risk-free interest rate | | | 1.5 | % | | | 1.7 | % | | | | | | | | |
Annualized volatility | | | 54.8 | % | | | 61.7 | % | | | | | | | | |
Weighted average expected life, in years | | | 6 | | | | 6 | | | | | | | | | |
Expected dividend yield | | | 0 | % | | | 0 | % | | | | | | | | |
There were no stock option exercises in the first three months of 2015. In the first three months of 2014, 570,178 stock options with a weighted average exercise price of $1.21 were exercised which generated proceeds of $691,935 to the Company. |
Total recognized compensation expense for stock options was approximately $641,000 and $360,000 for the first three months of 2015 and 2014, respectively. As of March 31, 2015, there was approximately $3,133,000 of total unrecognized compensation cost related to nonvested outstanding stock options that is expected to be recognized over a weighted average period of approximately 2.0 years. |
Stock Awards |
At times, the Company makes discretionary grants of its common stock to members of management and other employees in lieu of cash bonus awards or in recognition of special achievements. There were no discretionary grants of common stock in the first three months of 2015. In the first three months of 2014, there were 150,000 shares of common stock granted to members of executive management as bonus compensation for achievements in 2013. |
Expense is recognized on a straight line basis over the vesting period and is based on the fair value of the stock on the grant date. The fair value of each stock award is determined based on the number of shares granted and the market price of the Company’s common stock on the date of grant. |
In addition to the shares granted to members of management and employees, at times directors receive a portion of their annual compensation in shares of Company common stock. In 2015 and 2014, no shares were granted to the directors, as all directors’ compensation was paid in cash and stock options. Expense is recognized on a straight line basis over the one-year period in which the compensation is earned. Expense recognized in connection with shares granted to directors was $179,600 in the three-month period ended March 31, 2014. |
Long Term Incentive Program (LTIP) |
The Company’s Board of Directors has approved a long term incentive program (“LTIP”) for the benefit of the Company’s senior executives. Pursuant to the LTIP, the Company’s senior executives have been awarded stock options, restricted stock units (“RSU”) and performance stock units (“PSU”) with targeted values based on values granted by the Company’s peer group. |
The stock options have a ten-year term, have an exercise price equal to the closing price of the Company’s common stock on the date of grant, vest in quarterly installments over three years, were otherwise granted on the same standard terms and conditions as other stock options granted pursuant to the Plan and are included in the stock options table above. |
The RSUs vest in three equal annual installments. Expense recognized in the first three months of 2015 and 2014 in connection with the RSUs was approximately $57,800 and $51,000, respectively. |
The PSU awards made to the senior executives will be vested and convert into actual shares of the Company’s common stock based on the Company’s attainment of certain performance goals over a performance period of three years. The 2014 awards included PSUs that will be earned based on the Company’s total shareholder return (“TSR”) as compared to the Nasdaq Biotechnology Index (“NBI”) at the end of the performance period, which performance period is January 1, 2014 to December 31, 2016. These PSUs were granted with a grant date fair value of $2.64. Depending on the outcome of the performance goal, a recipient may ultimately earn a number of shares greater or less than their target number of shares granted, ranging from 0% to 150% of the PSUs granted. The fair value of the TSR PSUs granted in May 2014 was determined using a Monte Carlo simulation and utilized the following inputs and assumptions: |
|
| | | | | | | | | | | | | | | | |
Closing stock price on grant date | | $ | 3.09 | | | | | | | | | | | | | |
Performance period starting price | | $ | 4.08 | | | | | | | | | | | | | |
Term of award (in years) | | | 2.59 | | | | | | | | | | | | | |
Volatility | | | 50.87 | % | | | | | | | | | | | | |
Risk-free interest rate | | | 0.61 | % | | | | | | | | | | | | |
Expected dividend yield | | | 0 | % | | | | | | | | | | | | |
Fair value per TSR PSU | | $ | 2.64 | | | | | | | | | | | | | |
The performance period starting price is measured as the average closing price over the last 20 trading days prior to the performance period start. The Monte Carlo simulation model also assumed correlations of returns of the prices of the Company’s common stock and the common stocks of the NBI companies and stock price volatilities of the NBI companies. |
The fair value of the target number of shares that can be earned under the TSR PSUs is being recognized as compensation expense over the performance period, and expense of $31,500 was recognized in connection with this award in the first three months of 2015. Expense recognized in the first three months of 2015 and 2014 in connection with other PSU awards for defined performance goals considered probable of achievement was $3,600 and $31,000, respectively. |
At March 31, 2015 and December 31, 2014, there were 463,542 PSUs outstanding with a weighted average fair value of $3.08. At March 31, 2015 and December 31, 2014, there were 231,124 restricted shares or RSUs outstanding, with a weighted average fair value of $3.07. There were no PSUs or RSUs granted, vested, forfeited or expired in the first quarter of 2015. |
|
Shares issued in the first three months of 2015 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were 4,779 and 25,545 in the three-month periods ended March 31, 2015 and 2014, respectively, and were based on the value of the shares on their vesting date as determined by the Company’s closing stock price. Total payments for the employees’ tax obligations to the taxing authorities were $11,277 and $115,123 in the three-month periods ended March 31, 2015 and 2014, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows. These net-share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company. |
Warrants |
In the first three months of 2014, the Company received proceeds of $545,000 from the exercise of 545,000 warrants. There were no warrants outstanding at March 31, 2015 or December 31, 2014. |