Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.10.0.1
Stock-Based Compensation
9 Months Ended
Sep. 30, 2018
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 September 30, 2018, unexpired stock options for 1,350,000 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 nine months ended September 30, 2018, 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   2.44% to 3.01 %
Expected dividend yield     0 %
Expected volatility     170.32 %
Expected life     0.5 to 5.5 years  

 

For stock options requiring an assessment of value during the nine months ended September 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 332.63 %
Expected life     1.5 to 3.5 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-measured 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 nine months ended September 30, 2017, the Company recorded a charge to operations of $2,492 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 vested 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-measured the non-vested stock options to fair value at the end of each reporting period through September 30, 2017. During the three months and nine months ended September 30, 2017, the Company recorded charges to operations of $15,960 and $29,528, respectively, with respect to these warrants.

 

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 nine months ended September 30, 2017, the Company recorded a charge to operations of $5,681 with respect to these stock options.

 

Effective August 4, 2018, in conjunction with their appointments as directors of the Company, the Company granted to Dr. Winson Ho and Dr. Yun Yen stock options for each to purchase an aggregate of 200,000 shares of 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. One-half of such stock options (100,000 shares each) vested on August 4, 2018 and the remaining one-half of such stock options (100,000 shares each) will vest on August 4, 2019. The 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 was charged to operations on that date. The remaining unvested portion of the fair value of the stock options will be charged to operations ratably from August 4, 2018 through August 4, 2019. During the three months and nine months ended September 30, 2018, the Company recorded a charge to operations of $60,652 with respect to these stock options.

 

Total stock-based compensation expense was $772,390 and $15,960 for the three months ended September 30, 2018 and 2017, respectively. Total stock-based compensation expense was $772,390 and $37,701 for the nine months ended September 30, 2018 and 2017, respectively. The total stock-based compensation expense for the three months and nine months ended September 30, 2018 of $772,390 includes $711,738 of costs associated with the extension of stock options previously granted to Gil Schwartzberg, as described at Note 5.

 

A summary of stock option activity, including options issued in the form of warrants, during the nine months ended September 30, 2018 is presented in the table below.

 

                Weighted  
                Average  
          Weighted     Remaining  
    Number     Average     Contractual  
    of     Exercise     Life  
    Shares     Price     (in Years)  
                   
Stock options outstanding at December 31, 2017     7,470,000     $ 0.545          
Granted     400,000       0.280          
Exercised     (20,000 )     0.150          
Expired                    
Stock options outstanding at September 30, 2018     7,850,000     $ 0.533       3.88  
                         
Stock options exercisable at December 31, 2017     7,470,000     $ 0.545          
Stock options exercisable at September 30, 2018     7,650,000     $ 0.539       3.86  

 

Total deferred compensation expense for the outstanding value of unvested stock options was approximately $44,000 at September 30, 2018, which will be recognized subsequent to September 30, 2018 over a weighted-average period of approximately ten months.

 

The exercise prices of common stock options outstanding and exercisable, including options issued in the form of warrants, are as follows at September 30, 2018:

 

      Options     Options  
Exercise     Outstanding     Exercisable  
Prices     (Shares)     (Shares)  
               
$ 0.120       450,000       450,000  
$ 0.130       100,000       100,000  
$ 0.150       300,000       300,000  
$ 0.160       200,000       200,000  
$ 0.200       500,000       500,000  
$ 0.250       500,000       500,000  
$ 0.280       400,000       200,000  
$ 0.500       4,400,000       4,400,000  
$ 1.000       500,000       500,000  
$ 2.000       500,000       500,000  
          7,850,000       7,650,000  

 

The intrinsic value of exercisable but unexercised in-the-money stock options at September 30, 2018 was approximately $2,362,500, based on a fair market value of $0.7500 per share on September 30, 2018.

 

Outstanding options to acquire 200,000 shares of the Company’s common stock had not vested at September 30, 2018.

 

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