| Accounting for Stock-Based Compensation | 10. Accounting for Stock-Based Compensation Common Stock Options and Grants 2014 Plan In July 2014, our Company adopted the 2014 Stock Option and Grant Plan (the “2014 Plan”). Upon adoption of the 2014 Plan, the maximum aggregate number of shares issuable thereunder was 7,499 shares post-reverse split. In March 12, 2017, our Board amended the 2014 Plan to increase the shares of Common Stock reserved for issuance thereunder to 1,695,484. As of March 31, 2018, no shares were issuable under the 2014 Plan. 2017 Plan In connection with our IPO, we adopted the 2017 Incentive Award Plan (the “2017 Plan”), effective as of August 9, 2017. The aggregate number of shares of Common Stock reserved for issuance pursuant to awards granted under the 2017 Plan equals: (i) 2,263,213, plus (ii) any shares which, as of the effective date of the 2017 Plan, subject to awards under the 2014 Plan which forfeited or lapsed unexercised following the effective date of the 2017 Plan, plus (iii) an annual increase on the first day of each calendar year beginning on January 1, 2018 and ending on and including January 1, 2027 equal to the lesser of (a) 5% of the shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, or (b) such smaller number of shares as determined by our Board. The 2017 Plan permits the grant of incentive stock options, restricted stock, restricted stock units, stock appreciation rights, performance-based awards to our employees, directors and consultants. Shares issued pursuant to awards under the 2017 Plan that are settled for cash by our Company or that expire or are forfeited will become available for future grant or sale. Shares used to pay the exercise price of an award or to satisfy the minimum tax withholding obligations related to an award will not be available for future grants under the 2017 Plan. As of March 31, 2018, 1,764,379 shares remained available for issuance under the 2017 Plan. With the exception of accelerated options, our typical options vest over four years from the grant date, with 25% of the award vesting on the first anniversary of the grant date and the remainder vesting over the next 36 months. Stock compensation expense related to these equity awards was recorded based upon the estimated fair value of the shares amortized over the vesting period.
Shares
Weighted- Average Exercise Price
Weighted- Average Remaining Contractual Life (in Years)
Aggregate Intrinsic Value (1)
Outstanding at December 31, 2017
1,527,768
$
7.74
9.29
$
—
Granted
125,500
2.78
9.92
—
Exercised
—
—
—
—
Cancelled
(31,391
)
6.55
—
Outstanding at March 31, 2018
1,621,877
7.38
9.12
—
Exercisable at March 31, 2018
794,659
7.90
9.03
—
(1)
Based on our Company’s closing stock price of $2.88 on March 29, 2018. Unamortized stock-based compensation expense relating to stock options was $1.4 million at March 31, 2018, which is expected to be recognized over a weighted-average period of 2.0 years. Valuation We use the Black-Scholes option pricing model to calculate the fair value of each option grant. The expected volatility is based on historical volatility of the stock price of comparable public companies. We estimate the expected term based upon the historical exercise behavior of employees. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. We estimated a zero-forfeiture rate for these stock option grants as the awards have short vesting terms and have a low probability of forfeiture based on the recipients of the stock options. The fair values of stock options granted have been estimated utilizing the following assumptions:
Three Months Ended March 31,
2018
2017
Fair value of common stock
$
2.78
$
5.88
Exercise price of common stock option
$
2.78
$
8.40
Risk-free interest rate
2.38
%
2.10
%
Expected term (in years)
10.00
5.95
Dividend yield
0.00
%
0.00
%
Expected volatility
49
%
40
% Restricted Stock Units Our Company granted 375,000 Restricted Stock Units (“RSUs”) to our Company’s officers during the three months ended March 31, 2018. All RSUs grants vest on the satisfaction of only a service-based condition. As of March 31, 2018, there were 685,944 shares of our Common Stock issuable upon the vesting of outstanding RSUs. Unrecognized compensation expenses related to shares of our Common Stock subject to unvested RSUs was $2.2 million at March 31, 2018, which is expected to be recognized as expense over the weighted-average period of 3.1 years. The service conditions are generally satisfied for the RSUs granted to our officers and Board over four years starting from such person’s hiring date and the earlier to occur of the first anniversary of the grant date or the annual meeting of stockholders, respectively. For the three months ended March 31, 2018, our Company withheld 25,906 shares of Common Stock (“Net Settlement”) and remitted $73,636 in cash to meet the related tax withholding requirements on behalf of our officers. We will continue to evaluate the Net Settlement of RSUs that vest in the future. Stock-Based Compensation Expense Our Company recognized stock-based compensation expense related to stock options and RSUs, included in general and administrative expenses as follows:
Three Months Ended March 31,
2018
2017
Stock-based compensation
$
452,176
$
538,872 |
