Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.20.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

6. Stock-Based Compensation

 

The Company issues common stock and stock options as incentive compensation to directors and as compensation for the services of independent contractors and consultants of the Company.

 

On June 20, 2007, the Board of Directors of the Company approved the 2007 Stock Compensation Plan (the “2007 Plan”), which provided for the granting of awards, consisting of stock options, stock appreciation rights, performance shares, and restricted shares of common stock, to employees and independent contractors, for up to 2,500,000 shares of the Company’s common stock, under terms and conditions as determined by the Company’s Board of Directors. The 2007 Plan terminated on June 19, 2017. As of March 31, 2020, unexpired stock options for 1,250,000 shares were issued and outstanding under the 2007 Plan.

 

The fair value of each stock option awarded is calculated on the grant date using the Black-Scholes option-pricing model. The risk-free interest rate is based on the U.S. treasury yield curve in effect as of the grant date. The expected dividend yield assumption is based on the Company’s expectation of dividend payouts and is assumed to be zero. The expected volatility is based on the historical volatility of the Company’s common stock. The expected life of the stock option is considered its full contractual term. The fair market value of the common stock is determined by reference to the quoted market price of the common stock on the grant date.

 

There were no stock options requiring an assessment of value during the three months ended March 31, 2020 and 2019.

 

Effective August 4, 2018, in conjunction with their appointments as directors of the Company, the Company granted stock options to each of Dr. Winson Sze Chun Ho and Dr. Yun Yen to purchase an aggregate of 200,000 shares of the Company’s common stock, exercisable for a period of five years from the vesting date at $0.28 per share, which was the approximate fair market value of the Company’s common stock on such date, with one-half of such stock options (100,000 shares for each director) vesting on August 4, 2018 and the remaining one-half of such stock options (100,000 shares for each director) vesting on August 4, 2019. The aggregate fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $104,920 ($0.2623 per share), of which $52,460 was attributable to the stock options fully-vested on August 4, 2018 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options was charged to operations ratably from August 4, 2018 through August 4, 2019. During the three months ended March 31, 2019, the Company recorded a charge to operations of $12,936, with respect to these stock options.

 

Effective May 22, 2019, in recognition with their service as directors of the Company over the past year, the Company granted to each of Dr. Winson Sze Chun Ho, Dr. Yun Yen, Dr. Stephen Forman, and Dr. Philip Palmedo, fully-vested stock options to purchase an aggregate of 200,000 shares (50,000 shares for each director) of the Company’s common stock, exercisable for a period of five years from the vesting date at $1.10 per share, which was the approximate fair market value of the Company’s common stock on such date. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $189,060 ($0.9453 per share), which was charged to operations on the grant date.

 

Effective May 22, 2019, in recognition of his continuing service as consultant to the Company, the Company granted to Eric Forman fully-vested stock options to purchase 100,000 shares of the Company’s common stock, exercisable for a period of five years from the vesting date at $1.10 per share, which was the approximate fair market value of the Company’s common stock on such date. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $94,525 ($0.9453 per share), which was charged to operations on the grant date.

 

Effective July 23, 2019, the Company granted Francis Johnson, a consultant to the Company, fully vested stock options to purchase 500,000 shares of the Company’s common stock in recognition of Mr. Johnson’s continuing contributions to the development of the Company’s proprietary compounds. The stock options are exercisable for a period of five years from the date of grant at $1.00 per share, which was the fair market value of the Company’s common stock on the grant date. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $434,024 ($0.8680 per share), which was attributable to the stock options fully vested on July 23, 2019 and was therefore charged to operations on that date.

 

A summary of stock-based compensation costs for the three months ended March 31, 2020 and 2019 is as follows:

 

   

Three Months Ended

March 31,

 
    2020     2019  
             
Related parties   $     $ 12,936  
Non-related parties            
Total stock-based compensation costs   $     $ 12,936  

 

A summary of stock option activity, including options issued in the form of warrants, during the three months ended March 31, 2020 is presented below.

 

          Weighted     Weighted
Average
Remaining
 
    Number of     Average     Contractual  
    Shares     Exercise Price     Life (in Years)  
                   
Stock options outstanding at December 31, 2019     7,850,000     $ 0.608          
Granted                    
Exercised                    
Expired                    
Stock options outstanding at March 31, 2020     7,850,000     $ 0.608       2.89  
                         
Stock options exercisable at March 31, 2020     7,850,000     $ 0.608       2.89  

 

There was no deferred compensation expense for the outstanding value of unvested stock options at March 31, 2020.

 

The exercise prices of common stock options outstanding and exercisable, including options issued in the form of warrants, at March 31, 2020 are as follows:

 

Exercise
Prices
    Options
Outstanding (Shares)
    Options
Exercisable (Shares)
 
               
$ 0.120       450,000       450,000  
$ 0.150       300,000       300,000  
$ 0.160       200,000       200,000  
$ 0.200       500,000       500,000  
$ 0.280       400,000       400,000  
$ 0.500       4,200,000       4,200,000  
$ 1.000       1,000,000       1,000,000  
$ 1.100       300,000       300,000  
$ 2.000       500,000       500,000  
          7,850,000       7,850,000  

 

The intrinsic value of exercisable but unexercised in-the-money stock options at March 31, 2020 was approximately $3,486,000, based on a fair market value of $0.98 per share on March 31, 2020.

 

All outstanding stock options to acquire shares of the Company’s common stock were vested at March 31, 2020.

 

The Company expects to satisfy such stock obligations through the issuance of authorized but unissued shares of common stock.