Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.7.0.1
Stock-Based Compensation
6 Months Ended
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [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 provides for the granting of awards, consisting of stock options, stock appreciation rights, performance shares, or 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 June 30, 2017, unexpired stock options for 1,700,000 shares were issued and outstanding under the 2007 Plan.

 

The fair value of each stock option awarded is estimated on the date of grant and subsequent measurement dates using the Black-Scholes option-pricing model. The expected dividend yield assumption is based on the Company’s expectation of dividend payouts. The expected volatilities are based on historical volatility of the Company’s stock. The risk-free interest rate is based on the U.S. treasury yield curve in effect as of the grant date. The expected life of the stock options is the average of the vesting term and the full contractual term of the stock options.

 

For stock options requiring an assessment of value during the six months ended June 30, 2017, the fair value of each stock option award was estimated using the Black-Scholes option-pricing model with the following assumptions:

 

Risk-free interest rate   1.18% to 1.53 %
Expected dividend yield     0 %
Expected volatility     308.51 to 311.11 %
Expected life     1.5 to 3.5 years  

 

For stock options requiring an assessment of value during the six months ended June 30, 2016, the fair value of each stock option award was estimated using the Black-Scholes option-pricing model with the following assumptions:

 

Risk-free interest rate   0.60% to 1.23 %
Expected dividend yield     0 %
Expected volatility     196.75% to 198.43 %
Expected life     2.5 to 5.0 years  

 

On December 24, 2013, the Company entered into an agreement with NDA Consulting Corp. (“NDA”) for consultation and advice in the field of oncology research and drug development. As part of the agreement, NDA also agreed to cause its president, Dr. Daniel D. Von Hoff, M.D., to become a member of the Company’s Scientific Advisory Committee. In connection with this agreement, NDA was granted stock options to purchase 100,000 shares of the Company’s common stock, vesting 25,000 shares on June 24, 2014, and thereafter 25,000 shares annually on June 24, 2015, 2016 and 2017, exercisable for a period of five years from the date of grant at $0.13 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 initially determined to be $12,960 ($0.13 per share). The Company re-measures the non-vested options to fair value at the end of each reporting period. The unvested portion of the fair value of the stock options was charged to operations ratably from December 24, 2013 through June 24, 2017. During the three months ended June 30, 2017 and 2016, the Company recorded a charge (credit) to operations of $(9,646) and $6,254, respectively, with respect to these stock options. During the six months ended June 30, 2017 and 2016, the Company recorded a charge (credit) to operations of $2,492 and $(4,542), respectively, with respect to these stock options.

 

Effective September 14, 2015, the Company entered into a Collaboration Agreement with BioPharmaWorks LLC (“BioPharmaWorks”), pursuant to which the Company engaged BioPharmaWorks to perform certain services for the Company as described at Note 7. In connection with the Collaboration Agreement, the Company agreed to issue to BioPharmaWorks 1,000,000 fully-vested shares of the Company’s common stock, valued at $260,000, based upon the closing price of the Company’s common stock of $0.26 per share, on September 14, 2015. Additionally, the Company issued to BioPharmaWorks two options in the form of warrants to purchase 1,000,000 shares (500,000 shares per warrant) of the Company’s common stock. The first warrant vested on September 14, 2016, and is exercisable for a period of five years from the date of grant at $1.00 per share. The second warrant will vest on September 14, 2017, and is exercisable for a period of five years from the date of grant at $2.00 per share. The fair value of the first and second warrants, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $128,400 ($0.2568 per share) and $127,850 ($0.2557 per share), respectively. The Company re-measures the non-vested options to fair value at the end of each reporting period. At June 30, 2017, the fair value of non-vested options was determined to be $6,160 which will be charged to operations through September 14, 2017. During the three months ended June 30, 2017 and 2016, the Company recorded a charge (credit) to operations of $(42,389) and $63,757, respectively, with respect to these common shares and warrants. During the six months ended June 30, 2017 and 2016, the Company recorded a charge to operations of $13,568 and $43,024, respectively, with respect to these common shares and warrants.

 

On November 28, 2015, the Company entered into a two-year advisory agreement with Dr. Fritz Henn, M.D., Ph.D., for consultation and advice on the development of certain of the Company’s products for clinical neurological and neuropsychiatric applications. Dr. Henn is an internationally recognized investigative neuroscientist and psychiatrist. In connection with the advisory agreement, and as sole compensation, Dr. Henn was granted stock options to purchase 200,000 shares of the Company’s common stock, with 100,000 shares vesting on November 28, 2015, and 100,000 shares vesting on November 28, 2016. The stock options are exercisable for a period of five years from the grant date at $0.50 per share. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was initially determined to be $103,360 ($0.5168 per share), of which $51,680 was attributable to the stock options fully-vested on November 28, 2015 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 November 28, 2015 through November 28, 2016. During the three months and six months ended June 30, 2016, the Company recorded a charge to operations of $7,280 and $8,439, respectively, with respect to these stock options.

 

Effective April 25, 2016, in connection with her continuing role as a member of the Company’s Board of Directors, Dr. Kathleen P. Mullinix was granted fully-vested stock options under the 2007 Plan to purchase 150,000 shares of the Company’s common stock. The stock options are exercisable for a period of five years from the date of grant at $0.12 per share, which was the 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 $17,535 ($0.1169 per share), which was charged to operations on the date of grant. Effective November 22, 2016, Dr. Mullinix resigned as a Director of the Company. Consequently, pursuant to the stock option agreement, Dr. Mullinix had twelve months from November 22, 2016 to exercise her stock options to acquire 150,000 shares of the Company’s common stock. On July 6, 2017, Dr. Mullinix exercised her option in full by making an $18,000 cash payment to the Company.

 

Effective April 25, 2016, in connection with his continuing role as a member of the Company’s Board of Directors, Dr. Philip F. Palmedo was granted fully-vested stock options under the 2007 Plan to purchase 450,000 shares of the Company’s common stock. The stock options are exercisable for a period of five years from the date of grant at $0.12 per share, which was the 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 $52,604 ($0.1169 per share), which was charged to operations on the date of grant.

 

Effective May 13, 2016, in conjunction with his appointment as a director of the Company, the Company granted to Dr. Stephen J. Forman stock options to purchase an aggregate of 200,000 shares of common stock under the 2007 Plan, exercisable for a period of five years from vesting date at $0.16 per share, which was the fair market value of the Company’s common stock on such date. One-half of such stock option (100,000 shares) vested on May 13, 2016 and the remaining one-half of such stock option (100,000 shares) vested on May 13, 2017. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $31,180 ($0.1559 per share), of which $15,590 was attributable to the stock options fully-vested on May 13, 2016 and was therefore was charged to operations on that date. The remaining unvested portion of the fair value of the stock options was charged to operations ratably from May 13, 2016 through May 13, 2017. During the three months ended June 30, 2017 and 2016, the Company recorded a total charge to operations of $1,837 and 17,640, respectively, with respect to these stock options. During the six months ended June 30, 2017 and 2016, the Company recorded a total charge to operations of $5,681 and 17,640, respectively, with respect to these stock options.

 

Effective June 7, 2016, in connection with his continuing role as a consultant to the Company, Eric Forman was granted fully-vested stock options under the 2007 Plan to purchase 100,000 shares of the Company’s common stock. The stock options are exercisable for a period of five years from the date of grant at $0.15 per share. The fair market value of the Company’s common stock on the date of grant was $0.14 per share. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $13,625 ($0.1363 per share), which was charged to operations on the date of grant.

 

Effective September 12, 2016, in connection with his continuing role as a consultant to the Company, Francis Johnson was granted fully-vested stock options under the 2007 Plan to purchase 500,000 shares of the Company’s common stock. The stock options are exercisable for a period of five years from the date of grant at $0.25 per share. The fair market value of the Company’s common stock on the date of grant was $0.25 per share. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $98,901 ($0.1978 per share), which was charged to operations on the date of grant.

 

Total stock-based compensation expense (credit) was $(50,198) and $178,695 for the three months ended June 30, 2017 and 2016, respectively. Total stock-based compensation expense was $21,741 and $148,325 for the six months ended June 30, 2017 and 2016, respectively.

 

A summary of stock option activity during the six months ended June 30, 2017 is presented in the tables below.

 

                Weighted  
                Average  
          Weighted     Remaining  
    Number     Average     Contractual  
    Of     Exercise     Life  
    Shares     Price     (in Years)  
                   
Stock options outstanding at December 31, 2016     8,600,000     $ 0.583          
Granted                    
Exercised                    
Expired                    
Stock options outstanding at June 30, 2017     8,600,000     $ 0.583       2.05  
                         
Stock options exercisable at December 31, 2016     7,975,000     $ 0.501          
Stock options exercisable at June 30, 2017     8,100,000     $ 0.495       1.98  

 

Total deferred compensation expense for the outstanding value of unvested stock options was $6,160 at June 30, 2017, which is being recognized subsequent to June 30, 2017 over a weighted-average period of approximately three months.

 

The exercise prices of common stock options outstanding and exercisable are as follows at June 30, 2017:

 

      Options     Options  
Exercise     Outstanding     Exercisable  
Prices     (Shares)     (Shares)  
               
$ 0.120       600,000       600,000  
$ 0.130       100,000       100,000  
$ 0.150       100,000       100,000  
$ 0.160       200,000       200,000  
$ 0.200       500,000       500,000  
$ 0.250       500,000       500,000  
$ 0.500       4,400,000       4,400,000  
$ 0.650       700,000       700,000  
$ 1.000       1,000,000       1,000,000  
$ 2.000       500,000        
          8,600,000       8,100,000  

 

The intrinsic value of exercisable but unexercised in-the-money stock options at June 30, 2017 was approximately $600, based on a fair market value of $0.1210 per share on June 30, 2017.

 

The intrinsic value of exercisable but unexercised in-the-money stock options at December 31, 2016 was approximately $12,800, based on a fair market value of $0.1401 per share on December 31, 2016.

 

Outstanding options to acquire 500,000 shares of the Company’s common stock had not vested at June 30, 2017.

 

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