6. Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock Options

The 2010 Stock Incentive Plan (the “2010 Plan”) provides for the grant of equity incentive awards to employees, directors and consultants of Opexa in the form of incentive stock options or nonqualified stock options, as well as restricted stock, stock appreciation rights, restricted stock units and performance awards that may be settled in cash, stock or other property.  The 2010 Plan is the successor to and continuation of Opexa’s June 2004 Compensatory Stock Option Plan (the “2004 Plan”). A total of 625,000 shares of common stock are authorized to be issued for awards made under the 2010 Plan through September 2020, plus (i) the number of shares subject to stock options outstanding under the 2004 Plan that are forfeited or terminate prior to exercise and would otherwise be returned to the share reserves under the 2004 Plan and (ii) any reserved shares under the 2004 Plan that were not issued or subject to outstanding grants.  In addition, shares subject to awards granted under the 2010 Plan that terminate or expire before being exercised or settled will become available for grant under the 2010 Plan. As of June 30, 2014, options to purchase an aggregate of 2,465,691 shares were issued and outstanding.

Opexa accounts for share-based compensation, including options and nonvested shares, according to the provisions of FASB ASC 718, “Share Based Payment.” During the six months ended June 30, 2014, Opexa recognized option expense of $591,622. Unamortized stock compensation expense as of June 30, 2014 amounted to $1,783,965.

Stock Option Activity

A summary of stock option activity for the six months ended June 30, 204 is presented below:

	Number of Shares			Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contract Term (# years)		Intrinsic Value
Outstanding at January 1, 2014		1,162,449		$	4.30
Granted		1,350,440			1.82
Exercised		-			-
Forfeited and canceled		(47,198	)		3.40
Outstanding at June 30, 2014		2,465,691		$	2.96		8.5	$	43,363
Exercisable at June 30, 2014		828,235		$	4.83		6.7	$	41,848

Employee Options:

Option awards are granted with an exercise price equal to the market price of Opexa’s stock at the date of issuance, generally have a ten-year life, and have various vesting dates that range from no vesting or partial vesting upon date of grant to full vesting on a specified date. Opexa estimates the fair value of stock options using the Black-Scholes option-pricing model and records the compensation expense ratably over the service period.

During the six months ended June 30, 2014, performance-based options to purchase an aggregate of 510,125 shares at an exercise price of $1.82 were granted to senior management. These options have a term of ten years and vest 100% upon the earlier of achievement of a performance-based, strategic milestone objective or termination of employment without cause following a change of control. Fair value of $918,554 was calculated using the Black-Scholes option-pricing model.  Variables used in the Black-Scholes option-pricing model for these options include (1) discount rate of 2.65%, (2) expected term of 10 years, (3) expected volatility of 172% and (4) zero expected dividends.

During the six months ended June 30, 2014, time-based options to purchase an aggregate of 719,875 shares at exercise prices ranging from $1.65 to $1.82 were granted to employees.  These options have a term of ten years and have a vesting schedule of the earlier of four years or termination of employment without cause following a change of control. Fair value of $1,274,918 was calculated using the Black-Scholes option-pricing model.  Variables used in the Black-Scholes option-pricing model for these options include (1) discount rate range of 2.63% and 2.79%, (2) expected term of 6.25 years, (3) expected volatility range of 182%-186% and (4) zero expected dividends.

During the six months ended June 30, 2014, options to purchase 47,198 shares were forfeited and cancelled.

Non-Employee Options:

During the six months ended June 30, 2014, options to purchase an aggregate of 120,440 shares at exercise prices ranging from $1.82 to $2.00 were granted to non-employee directors for service on Opexa’s Board.  Options to purchase an aggregate of 78,858 shares will expire on the earlier of 10 years or a change in control of the Company, with 50% of the shares vesting immediately and 50% vesting on December 31, 2014.  Options to purchase an aggregate of 26,288 shares have terms of 10 years, with 50% of the shares vesting immediately and 50% vesting on February 28, 2015.  An option to purchase 8,844 shares will expire on the earlier of 10 years or a change in control of the Company, with vesting in quarterly increments beginning on March 31, 2014.  An option to purchase 6,450 shares will expire on the earlier of 10 years or a change in control of the Company, with vesting in three quarterly increments beginning June 30, 2014.  Fair value of $211,097 was calculated using the Black-Scholes option-pricing model.  Variables used in the Black-Scholes option-pricing model for these options include (1) discount rate range of 2.65% and 2.77%, (2) expected term of 5.25 years, (3) expected volatility range of 155% and 157% and (4) zero expected dividends.

Restricted Stock

See Note 5 for a description of restricted stock awards made to employees and non-employee directors under the 2010 Plan during the six months ended June 30, 2014.

Warrant Activity

A summary of warrant activity for the six months ended June 30, 2014 is presented below:

	Number of Shares		Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contract Term (# years)		Intrinsic Value
Outstanding at January 1, 2014		3,069,113	$	4.12
Granted		-		-
Exercised		-		-
Forfeited and canceled		-		-
Outstanding at June 30, 2014		3,069,113	$	4.12		2.7	$	186,750
Exercisable at June 30, 2014		3,069,113	$	4.12		2.7	$	186,750