STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS | 10 - STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS Stock Options On July 31, 2014, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the 2014 Equity Incentive Plan (the “2014 Plan”), which reserves a total of 8,100,000 shares of the Company’s common stock for incentive awards. Generally, shares that are expired, terminated, surrendered or cancelled without having been fully exercised will be available for future awards. As of March 31, 2017, there were 915,035 shares available for issuance under the 2014 Plan to eligible employees, non-employee directors and consultants. This number is subject to adjustment in the event of a stock split, reverse stock split, stock dividend, or other change in the Company’s capitalization. During the three months ended March 31, 2017 and 2016, there were 308,333 and 1,468,182 stock options granted to employees, directors or consultants with weighted-average grant date fair values, using the Black-Scholes pricing model, of $0.12 and $0.16, respectively. The Company estimates the fair value of each stock award on the grant date using the Black-Scholes option-pricing model based on the following assumptions and the assumptions regarding the fair value of the underlying common stock on each measurement date: For the three months ended March 31, 2017 Expected Volatility 115% - 116% Risk-free interest rate 1.93% - 2.09% Expected term (in years) 5.0 – 6.0 Expected dividend yield 0% Stock-based compensation expense for stock options was $54,440 and $293,445 for the three months ended March 31, 2017 and 2016, respectively. The Company has an aggregate of $285,972 of unrecognized stock-based compensation expense for stock options as of March 31, 2017 to be amortized over a weighted average period of 1.4 years which excludes $385,275 of unrecognized stock-based compensation expense for stock options of certain awards that vest upon performance-based criteria which are not considered probable to occur as of March 31, 2017. In connection with Wael Fayad’s appointment as the Company’s Chairman, Chief Executive Officer and President in September 2016, the Company granted Mr. Fayad 1,750,000 options to purchase the Company’s common stock outside of the 2014 Plan, and 850,000 options to purchase the Company’s common stock under the 2014 Plan. A summary of aggregate stock option activity both under the 2014 Plan and outside of the 2014 Plan for the three months ended March 31, 2017 is as follows: Weighted- Weighted- Average Average Remaining Exercise Contractual Shares Price Term (years) Outstanding as of December 31, 2016 7,670,823 $ 0.41 8.8 Granted 308,333 $ 0.15 Canceled (26,016 ) $ 0.54 Outstanding as of March 31, 2017 7,953,140 $ 0.40 8.6 Exercisable as of March 31, 2017 4,008,568 $ 0.48 8.2 The aggregate intrinsic value of stock options exercisable as of March 31, 2017 was $3,202. The aggregate intrinsic value was calculated as the difference between the exercise price of the stock options and the fair value of the underlying common stock as of the unaudited condensed consolidated balance sheet date. Restricted Stock Stock-based compensation expense for restricted stock awards was $4,990 and $40,366 for the three months ended March 31, 2017 and 2016, respectively. A summary of restricted stock activity for the three months ended March 31, 2017 is as follows: Weighted- Number of Average Grant Shares Date Fair Value Balance of unvested restricted stock as of December 31, 2016 - Issuance of restricted stock 66,666 $ 0.15 Vested (16,667 ) $ 0.15 Balance of unvested restricted stock as of March 31, 2017 49,999 $ 0.15 The Company has an aggregate of $4,990 of unrecognized stock-based compensation expense for restricted stock awards as of March 31, 2017 to be amortized over a weighted average period of 0.5 years. Warrants A summary of the warrants outstanding as of March 31, 2017 is as follows: Exercise Warrant Type Warrants Price PPO 14,686,510 $ 2.00 PPO Agent 2,000,000 $ 0.125 Enumeral Series B Financing 421,968 $ 0.726 Enumeral 2014 Convertible Promissory Note Financing 765,357 $ 0.245 2016 Placement Agent 4,880,655 $ 0.0625 (1) Total 22,754,490 1) On March 21, 2017 the exercise price of the 2016 Placement Agent Warrants, as defined below, was reduced from $0.125 per share to $0.0625 per share. Warrant Issuance Transactions On July 29, 2016, the Company entered into a Subscription Agreement with certain accredited investors (the “Buyers”), pursuant to which the Buyers purchased the Company’s 12% Senior Secured Promissory Notes (the “2016 Notes”) in the aggregate principal amount of $3,038,256 (the “2016 Note Offering”). On December 12, 2016, the Company consummated an offer to amend and exercise certain outstanding warrants to purchase an aggregate of 21,549,510 shares of its common stock originally issued to investors who participated in the Company’s July 31, 2014 private placement financing (the “Warrant Tender Offer”). Pursuant to the Warrant Tender Offer, an aggregate of 6,863,000 warrants were tendered by their holders, and the Company received gross proceeds in the amount of $3,431,500 for the issuance of 27,452,000 shares of the Company’s common stock. In addition, pursuant to the Warrant Tender Offer, the full principal balance and accrued interest of the 2016 Notes was converted into 48,806,545 shares of the Company’s common stock. In connection with the conversion of the 2016 Notes and pursuant to the terms of the placement agent agreement associated with the 2016 Notes, the Company issued warrants to purchase 4,880,655 shares of the Company’s common stock at an exercise price of $0.125 per share to designees of the placement agent (the “2016 Placement Agent Warrants”). On March 21, 2017, the Company entered into an amendment with the holders of the 2016 Placement Agent Warrants to reduce the exercise price of such warrants from $0.125 per share to $0.0625 per share in consideration of the past efforts as well as future support and cooperation of the agent and its designees on behalf of the Company. The estimated fair value of these warrants at the time of the amendment was determined to be $601,144 using the Black-Sholes pricing model and the following assumptions: expected term of 9.7 years, exercise price of $0.0625 per share, 126.0% volatility, a risk-free rate of 2.43%, and no expected dividends. The Company recorded expense of $8,276 as a result of this amendment. Derivative Liability Warrants (Amended in connection with the Warrant Tender Offer) PPO and PPO Agent Warrants In July 2014, the Company issued warrants to purchase 23,549,510 shares of the Company’s common stock in connection with the Company’s private placement offering that closed on July 31, 2014 (the “PPO”), of which warrants to purchase 21,549,510 shares of the Company’s common stock had an exercise price of $2.00 per share and were issued to the investors in the PPO, and warrants to purchase 2,000,000 shares of the Company’s common stock had an exercise price of $1.00 per share and were issued to the placement agents for the PPO (or their affiliates). Due to a price protection provision included in the warrant agreements, the warrants were deemed to be and were recorded as a derivative liability. As such, these outstanding warrants were revalued each reporting period with the resulting gains and losses recorded as the change in fair value of derivative liabilities on the unaudited condensed consolidated statement of operations. Square 1 Financing In connection with a financing with Square 1 Bank in December 2011, Enumeral issued to Square 1 Bank warrants to purchase an aggregate of 33,944 shares of Series A convertible preferred stock at an exercise price of $1.16 per share, exercisable for seven years. In July 2014, as part of the Merger, these warrants were converted into a warrant to purchase 54,245 shares of the Company’s common stock at an exercise price of $0.726 per share. These warrants were exercised in connection with the Warrant Tender Offer. Derivative Liability Re-Measurement The Company used the Black-Scholes option-pricing model to estimate the fair values of the issued and outstanding warrants during the three months ended March 31, 2016. The Company recorded income of $678,435 for the three months ended March 31, 2016 due to the change in the fair value of the warrants for that period. Outstanding warrants were revalued each reporting period with the resulting gains and losses recorded as the change in fair value of derivative liabilities on the unaudited condensed consolidated statements of operations. Due to the Warrant Tender Offer, and removal of the anti-dilution provisions in connection with the Warrant Tender Offer, the derivative liabilities were re-valued on December 12, 2016 and any remaining value was reclassified to equity upon extinguishment of the derivative liabilities. |