Accounting for Shared-based Payments

3 Months Ended

Mar. 31, 2017

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

Accounting for Share-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 March 31,		Three Months Ended March 31,
($ in thousands)	2017		2016
Included in research and development	$	1,873	$	810
Included in general and administrative	1,024		392
Total stock-based compensation expense	$	2,897	$	1,202

The unrecognized compensation cost related to non-vested stock options outstanding at March 31, 2017, net of expected forfeitures, was approximately $16.4 million to be recognized over a weighted-average remaining vesting period of approximately 2.16 years. This unrecognized compensation cost does not include amounts related to 2,159,500 shares of common stock underlying 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.



	Three Months Ended March 31, 2017		Three Months Ended March 31, 2016
Risk-free interest rate	1.96%-2.26%		1.47%-1.74%
Dividend yield	—		—
Expected volatility	50	%	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, 2016 ⁽¹⁾	27,867,171		$0.44-9.12	$	3.78	$	65,618	7.1 years
Granted	843,500		$4.57-6.77	6.06		—
Exercised ⁽²⁾	(89,978	)	$1.90-5.34	1.90		203,957
Forfeited	(836,145	)	$2.83-7.91	4.50		—
Balance outstanding, March 31, 2017 ⁽¹⁾	27,784,548		$0.44-9.12	$	3.91	$	31,558	6.9 years

Exercisable, at March 31, 2017	13,913,788		$0.44-9.12	$	3.70	$	17,227	5.7 years

__________________________

(1) Number of options represented above includes 2,159,500 options vesting upon a change of control, granted between November 20, 2009 and June 22, 2010. The fair value at the date of grant was approximately $28.6 million. 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.


(2)	The Company received proceeds of approximately $0.3 million from the exercise of stock options during the three months ended March 31, 2017.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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