Stock Option Plans and 401(k) Plan

12 Months Ended

Mar. 31, 2016

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

Stock Option Plans and 401(k) Plan

13.  Stock Option Plans and 401(k) Plan 

We have the following share-based compensation plans. 

2008 Stock Incentive Plan 

Our 2008 Stock Incentive Plan (the 2008 Plan) was adopted by the shareholders of VistaGen California on December 19, 2008 and assumed by the Company in connection with the Merger. The maximum number of shares of our common stock that may be granted pursuant to the 2008 Plan is 1,000,000 shares, subject to adjustments for stock splits, stock dividends or other similar changes in the common stock or capital structure. 

1999 Stock Incentive Plan 

Our 1999 Stock Incentive Plan (the 1999 Plan) was adopted by the shareholders of VistaGen California on December 6, 1999 and assumed by the Company in connection with the Merger. We initially reserved 45,000 shares for the issuance of awards under the 1999 Plan. The 1999 Plan has terminated under its own terms and, as a result, no awards may currently be granted under the 1999 Plan. The unexpired options and awards that have already been granted pursuant to the 1999 Plan remain operative. 

Description of the 2008 Plan 

Under the terms of the 2008 Plan, the Compensation Committee of our Board of Directors may grant shares, options or similar rights having either a fixed or variable price related to the fair market value of the shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any other security with the value derived from the value of the shares. Such awards include stock options, restricted stock, restricted stock units, stock appreciation rights and dividend equivalent rights.  

The Compensation Committee may grant nonstatutory stock options under the 2008 Plan at a price of not less than 100% of the fair market value of our common stock on the date the option is granted. Incentive stock options under the 2008 Plan may be granted at a price of not less than 100% of the fair market value of our common stock on the date the option is granted. Incentive stock options granted to employees who, on the date of grant, own stock representing more than 10% of the voting power of all of our classes of stock are granted at an exercise price of not less than 110% of the fair market value of our common stock and the maximum term of such incentive stock options may not exceed five years. The maximum term of an incentive stock option granted to any other participant may not exceed ten years. The Compensation Committee determines the term and exercise or purchase price of all other awards granted under the 2008 Plan. The Compensation Committee also determines the terms and conditions of awards, including the vesting schedule and any forfeiture provisions. Awards under the 2008 Plan may vest upon the passage of time or upon the attainment of certain performance criteria established by the Compensation Committee.  We currently have no performance-based awards outstanding. 

Unless terminated sooner, the 2008 Plan will automatically terminate in 2017. The Board of Directors may at any time amend, suspend or terminate our 2008 Plan.

During September 2015, we granted options to purchase an aggregate of 90,000 shares of our common stock at an exercise price of $9.25 per share to our non-officer employees and certain strategic consultants. In February 2016, we granted options to purchase an aggregate of 30,000 shares of our common stock at an exercise price of $8.00 per share to two parties in connection with an investor relations agreement.  In March 2016, we granted options to purchase 25,000 shares of our common stock at an exercise price of $8.00 per share to a new independent member of our Board of Directors.  We did not grant any stock options during fiscal 2015.   

The following table summarizes share-based compensation expense, including share-based expense related to grants of warrants to certain of our officers, independent directors, consultants and service providers as described in Note 9, Capital Stock, included in the accompanying Consolidated Statement of Operations and Comprehensive Loss for the years ended March 31, 2016 and 2015. 

	Twelve Months Ended
	March 31,
	2016		2015
Research and development expense:
Stock option grants	$	227,700	$	176,200
Warrants granted to officer in March 2014 and March 2013		11,400		145,100
Fully-vested warrants granted to officer in September 2015		852,200		-
Fully-vested warrants granted to officer and consultants in January 2015		-		527,500
		1,091,300		848,800
General and administrative expense:
Stock option grants		93,800		98,800
Warrants granted to officers and directors in March 2014 and March 2013		15,600		283,100
Fully-vested warrants granted to officers, directors and consultants in September 2015		2,840,700		-
Fully-vested warrants granted to officers, directors and consultants in January 2015		-		1,229,400
		2,950,100		1,611,300
Total stock-based compensation expense	$	4,041,400	$	2,460,100

We used the Black-Scholes Option Pricing model with the following assumptions to determine share-based compensation expense related to option grants during the fiscal years ended March 31, 2016 and 2015: 

	Fiscal Years Ended March 31,
	2016			2015
	(weighted average)
Exercise price	$	8.78		not applicable
Market price on date of grant	$	8.69		not applicable
Risk-free interest rate		1.99	%	not applicable
Expected term (years)		8.45		not applicable
Volatility		93.27	%	not applicable
Expected dividend yield		0.00	%	not applicable
Fair value per share at grant date	$	7.09		not applicable

The expected term of options represents the period that our share-based compensation awards are expected to be outstanding. We have calculated the weighted-average expected term of the options using the simplified method as prescribed by Securities and Exchange Commission Staff Accounting Bulletins No. 107 and No. 110 (SAB No. 107 and 110). The utilization of SAB No. 107 and 110 is based on the lack of relevant historical data due to both our limited historical experience as a publicly traded company as well as the historical lack of liquidity resulting from the limited number of freely-tradable shares of our common stock. Limited historical experience and lack of liquidity in our stock also resulted in our decision to utilize the historical volatilities of a peer group of public companies’ stock over the expected term of the option in determining our expected volatility assumptions.  The risk-free interest rate for periods related to the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is zero, as we have not paid any dividends and do not anticipate paying dividends in the near future. We calculated the forfeiture rate based on an analysis of historical data, as it reasonably approximates the currently anticipated rate of forfeitures for granted and outstanding options that have not vested.  

The following table summarizes activity for the fiscal years ended March 31, 2016 and 2015 under our stock option plans: 

	Fiscal Years Ended March 31,
	2016					2015
				Weighted					Weighted
				Average					Average
	Number of			Exercise		Number of			Exercise
	Shares			Price		Shares			Price
Options outstanding at beginning of period		207,638		$	10.09		212,486		$	10.09
Options granted		145,000		$	8.78		-		$	-
Options exercised		-		$	-		-		$	-
Options forfeited		(10,359	)	$	9.26		(2,001	)	$	9.25
Options expired		(5,292	)	$	9.42		(2,847	)	$	10.56
Options outstanding at end of period		336,987		$	9.56		207,638		$	10.09
Options exercisable at end of period		201,779		$	10.11		199,013		$	10.09
Weighted average grant-date fair value of
options granted during the period				$	7.09				$	-

The following table summarizes information on stock options outstanding and exercisable under our stock option plans as of March 31, 2016: 

		Options Outstanding						Options Exercisable
				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Exercise		Number		Years until		Exercise		Number		Exercise
Price		Outstanding		Expiration		Price		Exercisable		Price
$	8.00		102,089		8.35	$	8.00		46,881	$	8.00
$	9.25		80,000		9.42	$	9.25		-	$	9.25
$	10.00		145,039		3.83	$	10.00		145,039	$	10.00
$	14.40 to $36.00		9,859		4.04	$	21.80		9,859	$	21.80
			336,987		6.53	$	9.56		201,779	$	10.11

At March 31, 2016, there were 660,242 shares of our common stock remaining available for grant under the 2008 Plan.  There were no option exercises during the years ended March 31, 2016 or 2015. 

Aggregate intrinsic value is the sum of the amounts by which the fair value of the underlying common stock exceeded the exercise price of the option (in-the-money-options). Based on the $8.75 per share quoted market price of our common stock on March 31, 2016, the aggregate intrinsic value of outstanding options at that date was $76,600, of which $35,200 related to exercisable options. 

As of March 31, 2016, there was approximately $746,900 of unrecognized compensation cost related to non-vested share-based compensation awards from the 2008 Plan, which is expected to be recognized through September 2017.  Additionally, at March 31, 2016, there was no remaining unrecognized compensation cost related to warrant grants to independent directors and officers, all of which grants were completely vested as of April 1, 2016. 

401(k) Plan 

Through a third-party agent, we maintain a retirement and deferred savings plan for our employees. This plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code. The retirement and deferred savings plan provides that each participant may contribute a portion of his or her pre-tax compensation, subject to statutory limits. Under the plan, each employee is fully vested in his or her deferred salary contributions. Employee contributions are held and invested by the plan’s trustee. The retirement and deferred savings plan also permits us to make discretionary contributions, subject to established limits and a vesting schedule. To date, we have not made any discretionary contributions to the retirement and deferred savings plan on behalf of participating employees.