XML 13 R9.htm IDEA: XBRL DOCUMENT

Common Stock Options

9 Months Ended

Sep. 30, 2015

Approval of the 2013 Long-Term Incentive Plan

On June 20, 2013, the Board of Directors (the "Board") adopted, subject to receiving shareholder approval, the 2013 Long-Term Incentive Plan (the "Incentive Plan"). The Incentive Plan provides for the issuance of stock options of up to 20,000,000 shares (subject to adjustment) of the Company's common stock to officers, directors, key employees and consultants of the Company. Options granted to employees under the Incentive Plan, including directors and officers who are employees, may be incentive stock options or non-qualified stock options; options granted to others under the Incentive Plan are limited to non-qualified stock options. On November 15, 2013, shareholders owning a majority of the Company's issued and outstanding shares approved the Incentive Plan.

The Incentive Plan is administered by the Board or a committee designated by the Board. Subject to the provisions of the Incentive Plan, the Board has the authority to determine the officers, employees and consultants to whom options will be granted, the number of shares covered by each option, vesting rights and the terms and conditions of each option that is granted to them; however, no person may be granted in any of the Company's fiscal year, options to purchase more than 2,000,000 shares under the Incentive Plan, and the aggregate fair market value (determined at the time the option is granted) of the shares with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year cannot exceed $100,000. Options granted pursuant to the Incentive Plan are exercisable no later than ten years after the date of grant.

The exercise price per share of common stock for options granted under the Incentive Plan will be the fair market value of the Company's common stock on the date of grant, using the closing price of the Company's common stock on the last trading day prior to the date of grant, except for incentive stock options granted to a holder of ten percent or more of the Company's common stock, for whom the exercise price per share will not be less than 110% of the fair market value. No option can be granted under the Incentive Plan after June 20, 2023.

On May 29, 2015, the Company appointed Patricia Jeanne Riley to its Scientific Advisory Board and issued Ms. Riley a stock option to purchase up to 7,500 shares of the Company's common stock at a price of $1.43 per share, the closing price of the Company's common stock as quoted on the OTCQB on May 29, 2015. On June 15, 2015, the Company appointed Dr. Steven Wang to its Scientific Advisory Board and issued Dr. Wang a stock option to purchase up to 7,500 shares of the Company's common stock at a price of $1.25 per share, the closing price of the Company's common stock as quoted on the OTCQB on June 15, 2015. The shares underlying the options may be exercised on a "cashless basis" using the formula contained therein and, subject to each individual's continued service with the Company. The shares underlying the options vest on November 30, 2015 and December 15, 2015, respectively.

On July 1, 2015, the Company appointed Dr. Richard Simman to its Scientific Advisory Board and issued Dr. Simman an option to purchase up to 7,500 shares of the Company's common stock at a price of $1.34 per share, the closing price of the Company's common stock as quoted on the OTCQB on July 1, 2015. The shares underlying the option may be exercised on a "cashless basis" using the formula contained therein and, subject to Dr. Simman's continued service with the Company. The shares underlying the option vest on December 31, 2015.

As of September 30, 2015, there were 19,792,500 shares available for grant.

Stock Option Activity

The following table summarizes stock option activity for the period ended September 30, 2015:

					Weighted
					Average
			Weighted		Remaining		Aggregate
	Options		Average		Contractual		Intrinsic
	Outstanding		Exercise Price		Life (Years)		Value
Balance January 1, 2015		185,000	$	0.83		8.62	$	133,000
Options granted		22,500		1.34		9.75	$	4,725
Balance September 30, 2015		207,500	$	0.89		8.52	$	137,725
Exercisable at September 30, 2015		125,000	$	0.77		8.46	$	97,000

The fair value of each stock option is estimated at the date of grant using the Black-Scholes option pricing model. There were 7,500 stock options granted during the three months ended September 30, 2015 to a member of the Company's Scientific Advisory Board. The weighted-average fair value of stock options granted in 2015 was approximately $1.34 per share. The weighted average fair value of stock options granted during 2014 was $1.05 per share. Assumptions regarding volatility, expected term, dividend yield and risk-free interest rate are required for the Black-Scholes model. The volatility assumption is based on the Company's historical experience. The risk-free interest rate is based on a U.S. treasury note with maturity similar to the option award's expected life. The expected life represents the average period of time that options granted are expected to be outstanding. The assumptions for volatility, expected life, dividend yield and risk-free interest rate for options granted are presented in the table below:

	2015	2014
Weighted average risk-free interest rate	1.49 – 1.70%	1.43 – 1.62%
Expected life in years	5.0	4.50 – 5.50
Weighted Avg. Expected Volatility	88.4 -105.3%	99.5 – 105.3%
Expected dividend yield	$0	$0

Stock option expense reflected in the consolidated statements of operations related to stock options issued to our non-employee scientific advisory board members and consultants are recognized at fair value using the Black-Scholes option-pricing model with weighted average assumptions described above. For the three months ended September 30, 2015 and 2014, stock-based compensation expense recognized from stock option awards granted to non-employees included in total stock-based compensation expense amounted to $12,914 and $0, respectively. For the nine months ended September 30, 2015 and 2014, stock-based compensation expense recognized from stock option awards granted to non-employees included in total stock-based compensation expense amounted to $14,810 and $0, respectively.

During the three months ended September 30, 2015, total stock-based compensation expense of $18,879 was recognized as general and administrative expenses. During the three months ended September 30, 2014, total stock-based compensation expense of $27,646 was recognized as general and administrative expenses. During the nine months ended September 30, 2015, total stock-based compensation expense of $39,542 was recognized as general and administrative expenses. During the nine months ended September 30, 2014, total stock-based compensation expense of $47,001 was recognized as general and administrative expenses.

There were 125,000 stock options vested and 82,500 stock options unvested as of September 30, 2015. As of September 30, 2015, the Company had $28,714 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized by September 15, 2020.

The Company issues new shares when options are exercised.