Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v2.3.0.15
Stock-Based Compensation
 9 Months Ended
Sep. 30, 2011
Stock-Based Compensation  
Stock-Based Compensation
14.
Stock-Based Compensation
 
On August 5, 2003, the Company established a stock option plan (the "Plan").  Under the Plan, the Company grants stock options to key employees, directors and consultants of the Company.  For all grants prior to September 12, 2005 and grants to employees of the Company after September 12, 2005, the vesting period is 30% on the first anniversary of the grant date, an additional 30% on the second anniversary and the remaining 40% on the third anniversary.  Options expire between five and ten years from the date of grant.
 
For grants to non-employee consultants of the Company after September 12, 2005, the vesting period is between one to three years, subject to the fulfillment of certain conditions in the individual stock option grant agreements, or 100% upon the occurrence of certain events specified in the individual stock option grant agreements.  Options authorized for issuance under the Plan total 17,000,000 after giving effect to an amendment to the Plan approved at the Annual Meeting of the Stockholders of the Company on June 2, 2006.  At September 30, 2011, 8,218,000 shares of common stock were available for issuance.
 
Prior to adoption of the Plan, the Company made restricted stock grants.  During 2003 all existing restricted stock grants were converted to stock options.  The converted options maintained the same full vesting period as the original restricted stock grants.
 
Accounting for Employee Awards
 
The Company's results of operations for the three months ended September 30, 2011 and 2010 include share-based employee compensation expense totaling $161,876 and $115,907 respectively.  The Company's results of operations for the nine months ended September 30, 2011 and 2010 include share-based compensation expense totaling $466,739 and $338,899 respectively.  Such amounts have been included in the statement of operations in general and administrative and research and development expenses.  No income tax benefit has been recognized in the statement of operations for share-based compensation arrangements as the Company has provided for a 100% valuation allowance on its deferred tax assets.
 
Employee stock option compensation expense is the estimated fair value of options granted amortized on a straight-line basis over the requisite vesting service period for the entire portion of the award.
 
Accounting for Non-Employee Awards
 
Stock compensation expenses related to non-employee options were ($20,787) and ($4,305) for the three months ended September 30, 2011 and 2010, respectively.  Stock compensation expenses related to non-employee options were $46,515 and $96,406, for the nine months ended September 30, 2011 and 2010, respectively.  Such amounts have been included in the statement of operations in general and administrative and research and development expenses.

 
Summary of Stock Compensation Expense Recognized
 
Total stock-based compensation recognized by the Company in the three and nine months ended September 30, 2011 and 2010, and the period from inception (March 19, 2001) to September 30, 2011, is as follows:
 
   
Three Months Ended September 30,
    
Nine Months Ended September 30,
    
Cumulative from
March 19, 2001
(Inception) to
September 30,
  
 
2011
    
2010
    
2011
    
2010
    
2011
  
Statement of operations line item: General and administrative:
                  
Payroll
   $ 138,170     $ 94,375     $ 397,192     $ 286,011     $ 2,390,708  
Consulting and other professional fees
     (16,915 )     (6,851 )     30,265       81,961       790,220  
Research and development:
                                        
Payroll
     23,706       21,532       69,546       52,888       945,844  
Consulting and other professional fees
     (3,872 )     2,546       16,252       14,445       1,325,505  
                                         
Total
   $ 141,089     $ 111,602     $ 513,255     $ 435,305     $ 5,452,277  
 
Summary of Stock Option Transactions
 
The table below summarizes the stock options granted for the nine months ended September 30, 2011 and 2010:

For the nine months ended September 30, 2011
  
Date Granted
  
Number of Options Granted
    
Exercise Price
    
Grant Date Fair Value
  
February 7, 2011
     130,000     $ 1.84     $ 180,326  
June 6, 2011
     100,000     $ 1.25       91,334  
June 10, 2011
     20,000     $ 1.22       17,915  
September 8, 2011
     150,000     $ 1.12       121,595  
Total
     400,000             $ 411,170  
For the nine months ended September 30, 2010
  
Date Granted
  
Number of Options Granted
    
Exercise Price
    
Grant Date Fair Value
  
February 17, 2010
     375,000     $ 1.33     $ 304,043  
June 14, 2010
     160,000     $ 1.17       142,150  
September 17, 2010
     190,000     $ 1.19       171,280  
Total
     725,000             $ 617,473  
 
 
The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model.  The Company took into consideration guidance under Accounting Standards Codification ("ASC") 718, "Compensation-Stock Compensation" and Staff Accounting Bulletin ("SAB") 107 when reviewing and updating assumptions.  The expected volatility is based upon historical volatility of the Company's stock.  The expected term is based upon the simplified method as allowed under SAB 107.

The assumptions made in calculating the fair values of options are as follows:

   
Nine Months Ended September 30,
  
   
2011
    
2010
  
Black-Scholes weighted average assumptions
            
Expected dividend yield
     0 %     0 %
Expected volatility
     96-101 %     100-114 %
Risk free interest rate
     0.11-2.29 %     0.26-2.40 %
Expected term (in years)
  
5 years
    
1- 5 years
  
 
The following table summarizes the employee and non-employee share-based transactions:
 
   
2011
    
2010
  
   
Number of Options
    
Weighted Avg. Exercise Price
    
Number of Options
    
Weighted Avg. Exercise Prices
  
Outstanding at  January 1
     8,076,795     $ 1.01       7,715,795     $ 0.98  
Granted
     400,000       1.39       725,000       1.26  
Exercised
     (103,000 )     0.39       (155,500 )     0.69  
Cancelled
     (192,000 )     1.21       (78,500 )     1.00  
                                 
Outstanding at September 30
     8,181,795     $ 1.03       8,206,795     $ 1.02  

 
 
The following table summarizes information about stock options outstanding as of September 30, 2011 and December 31, 2010.
 
   
Number of Options
    
Weighted Avg. Exercise Prices
  
Weighted Average Remaining Contractual Term
  
Aggregate Intrinsic Value
  
Outstanding at
September 30, 2011
     8,181,795     $ 1.03  
4.9 years
   $ 1,466,974  
                           
Exercisable at
September 30, 2011
     6,971,795     $ 1.02  
4.3 years
   $ 1,356,324  
                           
Outstanding at
December 31, 2010
     8,076,795     $ 1.01  
5.4 years
   $ 2,198,790  
                           
Exercisable at
December 31, 2010
     6,762,795     $ 1.00  
4.8 years
   $ 2,198,790  
 
The total intrinsic value of the options exercised was $103,450 and $239,560 for the nine months ended September 30, 2011 and 2010, respectively.  The total intrinsic value of the options exercised was $9,200 for the three months ended September 30, 2011.  There were no options exercised in the three months ended September 30, 2010.  The weighted average fair value of the options vested was $0.85 and $0.91 for the nine months ended September 30, 2011 and 2010, respectively.
 
A summary of the Company's unvested shares as of September 30, 2011 and changes during the nine months ended September 30, 2011 is presented below:
 
   
2011
  
   
Number of Options
    
Weighted Average Fair Value at Grant Date
  
Unvested at January 1, 2011
     1,314,000     $ 0.77  
Granted
     400,000     $ 1.03  
Vested
     (415,000 )   $ 0.85  
Cancelled
     (89,000 )   $ 0.90  
                 
Unvested at September 30, 2011
     1,210,000     $ 0.80  
 
As of September 30, 2011 and December 31, 2010, there was $524,820 and $685,636 of total unrecognized compensation cost, respectively, related to all unvested stock options, which is expected to be recognized over a weighted average vesting period of 1.2 years and 1.4 years, respectively.