Stock Options

6 Months Ended

Jun. 30, 2012

Stock Options [Abstract]

STOCK OPTIONS

10. STOCK OPTIONS

In 2007, the Company adopted the 2007 Employee, Director and Consultant Stock Plan (the “2007 Plan”). Pursuant to the 2007 Plan, the Company’s Board of Directors (or committees and/or executive officers delegated by the Board of Directors) may grant incentive and nonqualified stock options to the Company’s employees, officers, directors, consultants and advisors. As of June 30, 2012, there were options to purchase an aggregate of 3,691,577 shares of Common Stock outstanding under the 2007 Plan and no shares available for future grants under the 2007 Plan.

On October 26, 2010, the Company’s Board of Directors adopted the 2010 Equity Incentive Plan, (the “2010 Plan”). The Company’s shareholders approved the 2010 Plan, as amended, on August 3, 2011 and on May 30, 2012 approved an amendment to the 2010 Plan to increase the number of shares available for issuance under the 2010 Plan. The 2010 Plan provides for grants of incentive stock options to employees and nonqualified stock options and restricted Common Stock to employees, consultants and non-employee directors of the Company. As of June 30, 2012, the number of shares authorized for issuance under the 2010 Plan, as amended, was 6,500,000 shares. As of June 30, 2012, there were options to purchase an aggregate of 3,874,890 shares of Common Stock outstanding under the 2010 Plan and 2,625,110 shares available for future grants under the 2010 Plan. Options issued under the 2007 Plan and the 2010 Plan (collectively the “Plans”) are exercisable for up to 10 years from the date of issuance.

Share-based compensation

For stock options issued and outstanding for the three and six months ended June 30, 2012, the Company recorded non-cash, stock-based compensation expense of $530,413 and $767,955, respectively, net of forfeitures.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Due to its limited operating history and limited number of sales of its Common Stock, the Company estimated its volatility in consideration of a number of factors including the volatility of comparable public companies. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the financial statements, to estimate option exercises and employee terminations within the valuation model. The expected term of options granted under the Plans, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period (generally 48 months). For non-employee options, the expected term is the contractual term. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option.

The assumptions used principally in determining the fair value of options granted to employees were as follows:

	2012
Risk-free interest rate	1.07%-2.41%
Expected dividend yield	0%
Expected term (employee grants)	6.08 years
Expected volatility	68%

A summary of option activity under the Plans and options granted to officers of the Company outside any plan as of June 30, 2012 and changes during the six months then ended is presented below:

Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Aggregate Intrinsic Value
Outstanding at December 31, 2011		6,302,893		$	0.76
Granted		1,961,001		$	2.54
Forfeited		(10,000	)	$	0.85
Exercised		(687,428	)	$	0.07
Outstanding at June 30, 2012		7,566,466		$	1.29		7.96	$	8,108,171
Vested at June 30, 2012		3,273,837		$	0.60		6.51	$	5,564,395

The weighted average grant-date fair value of options granted during the six months ended June 30, 2012 was $2.54 per share. The total fair value of options that vested in the three months ended June 30, 2012 was $511,220. As of June 30, 2012, there was approximately $4,005,000 of total unrecognized compensation expense, related to non-vested share-based compensation arrangements. The unrecognized compensation expense is estimated to be recognized over a period of 3.1 years at June 30, 2012.

In September 2011, the Company granted 80,000 shares of Common Stock under the 2010 Plan to a consultant as a restricted stock award with 30,000 shares vesting upon FDA clearance of an Investigational Device Exemption to permit the commencement of a human clinical trial and 50,000 shares vesting upon FDA approval of the Company’s biopolymer scaffolding device to treat spinal cord injuries. The Company had previously determined that the vesting of the 30,000 shares was probable and the fair value of these shares at $23,400 was being amortized over an eight month period from September 2011 through April 2012. In March of 2012, the contract with the consultant was terminated and the consultant had no vested right to the restricted stock, so accordingly, the $11,700 of expense previously recorded in 2011 was reversed in 2012.