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Accounting for Shared-Based Payments
 9 Months Ended
Sep. 30, 2015
Accounting for Shared-Based Payments  
Accounting for Shared-Based Payments

 

7. Accounting for Shared-Based Payments

 

Stock Options

 

ASC Topic 718 “Compensation—Stock Compensation” requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the estimated fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award.  Synergy accounts for shares of common stock, stock options and warrants issued to employees based on the fair value of the stock, stock option or warrant, if that value is more reliably measurable than the fair value of the consideration or services received.

 

The Company accounts for stock options issued and vesting to non-employees in accordance with ASC Topic 505-50 “ Equity -Based Payment to Non-Employees” and accordingly the value of the stock compensation to non-employees is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Accordingly the fair value of these options is being “marked to market” quarterly until the measurement date is determined.

 

Synergy adopted the 2008 Equity Compensation Incentive Plan (the “Plan”) during the quarter ended September 30, 2008. Stock options granted under the Plan typically vest after three years of continuous service from the grant date and have a contractual term of ten years. On June 8, 2015, Synergy amended its 2008 Equity Compensation Incentive Plan and increased the number of shares of its common stock reserved for issuance under the Plan from 15,000,000 to 30,000,000.

 

Stock-based compensation has been recognized in operating results as follows:

 

 

 

Three Months
Ended September 30,

 

Nine Months
Ended September 30

 

($ in thousands)

 

2015

 

2014

 

2015

 

2014

 

Employees—included in research and development

 
592

 
522

 
1,702

 
1,391

 

Employees—included in general and administrative

 
(661

)
400

 
6,022

 
1,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stock-based compensation expense (income)

 

$
(69

)

$
922

 

$
7,724

 

$
3,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The unrecognized compensation cost related to non-vested stock options outstanding at September 30, 2015, net of expected forfeitures, was approximately $16.5 million to be recognized over a weighted-average remaining vesting period of approximately 2.25 years. This unrecognized compensation cost does not include amounts related to 4,364,000 shares of stock options which vest and will be measured upon a change of control.

 

The estimated fair value of stock option awards was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions during the periods indicated.

 

 

 

Nine Months Ended
September 30, 2015

 

Nine Months Ended
September 30, 2014

 

Risk-free interest rate

 

1.46%-2.02%

 

1.78%-1.98%

 

Dividend yield

 

—

 

—

 

Expected volatility

 

57%-80%

 
60% 

 

Expected term (in years)

 

6 years

 

6 years

 

 

A summary of stock option activity and of changes in stock options outstanding under the Plan is presented below:

 

 

 

Number of
Options

 

Exercise Price
Per Share

 

Weighted Average
Exercise Price
Per Share

 

Intrinsic
Value
(in thousands)

 

Weighted Average
Remaining
Contractual Term

 

Balance outstanding, December 31, 2014(1)

 
16,567,020

 

$

0.44-17.79

 

$
3.20

 

$
8,949

 

7.29 years

 

Granted

 
3,706,112

 

3.33-9.33

 
6.70

 

—

 

 

 

Exercised

 
(248,387

)

3.40-6.28

 
4.34

 

—

 

 

 

Forfeited

 
(256,789

)

3.33-9.45

 
6.93

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance outstanding, September 30, 2015(1)

 
19,767,956

 

$

0.44-9.12

 

$
3.74

 

$
36,270

 

7.22 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable, at September 30, 2015

 
7,560,758

 

$

0.44-9.12

 

$
3.19

 

$
16,387

 

5.61 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Number of options represented above includes 4,364,000 options vesting upon a change of control, granted during the years ended December 31, 2009 and 2010, at an exercise price of $0.70 per share. Because the probability of a change of control transaction is not predictable no stock based compensation expense associated with these options has been recognized since the grant date.