Share Based Awards | (6) Share Based Awards Equity Issued by Parent Prior to January 14, 2015 and the Company’s IPO, the Parent granted options to purchase its ordinary shares and granted awards of restricted ordinary shares, to both employees and non-employees of the Company and share-based compensation related to such awards is recognized as expense in the accompanying consolidated statements of Operation and Comprehensive Loss. Information regarding prior period awards is available in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014. No new options or restricted shares were granted by the Parent during the nine month period ended September 30, 2015. On May 13, 2015, the shareholders of the Parent approved a plan in which all options and unvested restricted shares outstanding as of that date were to become fully vested and, in the case of the options, the expiration date of the options were accelerated to September 15, 2015. On May 13, 2015, approximately 4.7 million options were outstanding and 1.4 million restricted shares were unvested. During the prescribed exercise period, 3,785,000 options were exercised at an exercise price of $0.08 and 956,250 options were cancelled or forfeited at an average exercise price of $0.24 per option. Stock-based compensation expense of approximately $21,000 was recorded in the nine month period ended September 30, 2015 in connection with the acceleration of the vesting periods for 665,000 unvested options. The following table sets forth the Parent’s option activity for the nine months ended September 30, 2015: Weighted Average Number Of Exercise Aggregate Parent's PricePer Intrinsic Parent Shares Share Value Balance, December 31, 2014 4,835,000 $ 0.11 Granted — $ — Exercised (3,860,000 ) $ 0.08 $ 656 Forfeited/cancelled (975,000 ) $ 0.24 Balance, September 30, 2015 — $ — Restricted Shares No restricted shares were granted by the Parent during the nine months ended September 30, 2015. As of May 13, 2015, there were 1,400,000 unvested restricted shares of the Parent with a weighted average grant date fair value of $0.30 per share. Pursuant to the plan to immediately accelerate the vesting periods of the restricted shares adopted on May 13, 2015, approximately $104,000, using a fair value of $0.26 per ordinary share, was recognized as stock-based compensation in the nine months ended September 30, 2015 in connection with 400,000 unvested shares. The other 1.0 million unvested restricted shares had been fully expensed at the time of grant in 2013. Unrecognized Share-based Compensation As of September 30, 2015, there was no unrecognized stock-based compensation expense related to the awards issued by the Parent. Equity Issued by Presbia PLC Presbia Incentive Plan On January 14, 2015, the Company approved a compensation incentive plan (the “Presbia Incentive Plan”). The Presbia Incentive Plan permits the Company to grant awards of options, restricted shares, share appreciation rights, restricted share units, performance shares, performance share units, dividend equivalent rights in respect of awards and other share-based and cash-based awards, including annual and long-term cash incentive awards. A total of 1,800,000 ordinary shares are authorized for issuance under the Presbia Incentive Plan of which approximately 701,000 were available on September 30, 2015 for future grants and awards. The exercise price of each option award shall be determined by the Board of Directors (or a committee thereof) at the date of grant in accordance with the terms of the 2005 Plan, and under the Presbia Incentive Plan awards generally vest 20% annually over a five-year period and expire no later than 10 years from the grant date. The Presbia Incentive Plan terminates on January 14, 2025, unless terminated earlier by the board of directors. Awards under the Presbia Incentive Plan may be granted to employees, directors, consultants and other persons who perform services for the Company or a subsidiary of the Company. The following table shows share-based compensation expense included in the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2015 and 2014. Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Research and development $ 54 $ 81 $ 161 $ 216 General and administrative 334 29 1,554 78 Sales and marketing 46 4 122 14 Total $ 434 $ 114 $ 1,837 $ 308 Options The following table sets forth the Company’s option activity for the nine months ended September 30, 2015: Weighted Average Exercise Number Of Price Per Shares Share Balance, December 31, 2014 — $ — Granted 1,103,000 $ 9.74 Forfeited/cancelled (19,667 ) $ 9.09 Balance, September 30, 2015 1,083,333 $ 9.76 Vested and expected to vest, September 30, 2015 988,636 $ 9.76 Exercisable, September 30, 2015 90,000 $ 10.00 Employee Options The Company utilizes the Black-Scholes valuation model for estimating the fair value of share-based compensation with the following assumptions. The Company estimated expected life utilizing the simplified method because of its limited history of option exercise activity and its options meet the criteria of the "plain-vanilla" options as defined by the Securities Exchange Commission. Due to its limited stock price volatility history, the Company uses a peer group average under ASC 718 consistent with the expected term of the stock options in effect at the time of the grants. The risk-free rate is based on the U.S. Treasury yield consistent with the expected term of the stock options at the time of the grant. The simplified method calculates the expected term as the average of the vesting and contractual terms of the award. The following table presents the grant date assumptions used in the Black-Scholes model for determining the fair value of 1,027,500 employee options issued during the nine months ended September 30, 2015: Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015 Expected life 6.5 years 5.5-6.5 years Expected volatility 84.5% 76.8% - 84.5% Expected dividends 0% 0% Risk-free rate 2.0% 1.3% - 2.0% The weighted-average grant date fair value of the employee options granted during the nine months ended September 30, 2015 was $6.98 per share. For those options granted to employees, stock-based compensation expense is based upon the fair value of the option as of the grant-date and attributed to future reporting periods on a straight-line basis over the vesting period, or the requisite service period. A 5% forfeiture rate assumption was applied, which reduces the amount of expense recognized each period anticipating that a portion of all options granted will, more likely than not, be cancelled prior to the dates of its vesting periods. The forfeiture rate is subject to review and may be adjusted based upon experience. Non-Employee Options During the nine months ended September 30, 2015, 75,500 options were granted to non-employee consultants and medical advisors in which the following assumptions were used in the Black-Scholes valuation model to determine the option fair values: Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015 Expected life 9.5-9.8 yrs. 9.5-9.8 yrs. Expected volatility 78.8% 78.80% Expected dividends 0% 0% Risk-free rate 2.1% 1.9% - 2.4% In contrast to the determination of the fair value of options granted to employees, which are determined based upon the grant-date assumptions and applying the Black-Scholes model, the fair values for non-employee options and the related stock-based compensation expense are remeasured each financial reporting period based upon the assumptions applicable on the dates in which the financial statements are prepared. Because the performance criteria of these grants is based solely upon a requisite service period, but are subject to forfeiture if the service conditions are not met, stock-based compensation expense is determined by a straight-line attribution of the remeasured expense (mark-to-market) over the requisite service period subject to a forfeiture rate of 5%. Restricted Shares On March 16, 2015, the Company’s board of directors approved grants of 9,270 restricted ordinary shares of the Company each to Robert J. Cresci and to Dr. Mark Blumenkranz, both of whom were at that time board members. On August 3, 2015, in connection with the appointment of Dr. Gerd Auffarth to the board of directors, the Company’s board approved a grant of 11,019 restricted ordinary shares of the Company to Dr. Auffarth and cancelled, as a result of the resignation from the board of directors of Dr. Blumenkranz, 7,416 restricted ordinary shares. Also on August 3, 2015, the remaining 1,854 restricted shares held by Dr. Blumenkranz were fully vested. The aggregate grants of 29,559 shares vest in five equal, annual installments commencing one year after the date of grant. The weighted-average grant date fair value for the restricted shares was estimated using the market price of the ordinary shares on the date of grant ($8.63 per share on March 16, 2015 and $7.26 on August 3, 2015). As of September 30, 2015, there were 20,289 unvested restricted shares of the Company outstanding with a weighted average grant date fair value of $7.89 per share. The Company recorded compensation expense related to restricted shares of approximately $17,900 and $27,200 for the three months and nine months ended September 30, 2015, respectively. The following table sets forth the Company’s restricted share activity for the nine months ended September 30, 2015: Weighted Unvested Average Number Of Fair Value Shares Per Share Balance, December 31, 2014 — $ — Granted 29,559 $ 8.12 Vested (1,854 ) $ 8.63 Forfeited/cancelled (7,416 ) $ 8.63 Unvested, September 30, 2015 20,289 $ 7.89 Vested and expected to vest, September 30, 2015 22,143 $ 7.95 Vested, September 30, 2015 1,854 $ 8.63 Unrecognized Share-based Compensation As of September 30, 2015, there was $4.7 million and $0.3 million of unrecognized compensation expense related to employee and non-employee options of the Company, respectively, which collectively is expected to be recognized by the Company over the weighted average vesting period of 3.9 years. Unrecognized compensation expense related to restricted shares was $130,000 as of September 30, 2015 and is expected to be recognized over the weighted average vesting period of 4.7 years. |