Stock-based Compensation

3 Months Ended

Mar. 31, 2017

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

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

Note 13 - Stock-based Compensation

Effective December 2008, the Company established the 2008 – 2009 Non-Qualified Stock Option Plan (the “2008 – 2009 Plan”) under which 20,000 stock options remain outstanding at March 31, 2017. The stock-based awards were issued with a price not less than $15.00 per share or 100% of the fair value of a share of common stock on the date of grant. After July 2015, no further awards were granted under the 2008 – 2009 Plan. Such outstanding awards will continue to be governed by their existing terms under the 2008 – 2009 Plan.

Effective July 2015, the Company’s stockholders approved the 2015 Equity Incentive Plan (the “2015 Plan”), which permits the issuance of up to 2,000,000 shares reserved for the grant of stock options, stock appreciation rights, restricted stock units and other stock-based awards for employees, directors or consultants of the Company. The Board of Directors and the Company’s stockholders approved an additional 1,000,000 shares of common stock for issuance under the 2015 Plan, effective September 26, 2016. The stock-based awards are generally issued with a price equal to no less than fair value at the date of grant. Options granted under the 2015 Plan generally vest immediately, or ratably over a two- to 36-month period coinciding with their respective service periods; however, participants may exercise their options prior to vesting as provided by the 2015 Plan. Unvested shares issued for option exercised early may be subject to a repurchase by the Company if the participant terminates at the original exercise price. Options under the 2015 Plan generally have a contractual term of five or ten years. Certain stock option awards provide for accelerated vesting upon a change in control or an initial public offering. As of March 31, 2017, the Company had 994,480 shares of common stock available for issuance under the 2015 Plan.

The Company measures the fair value of stock options with service-based and performance-based vesting criteria to employees, directors and consultants on the date of grant using the Black-Scholes option pricing model. The fair value of equity instruments issued to non-employees is re-measured as the award vests. The Black-Scholes valuation model requires the Company to make certain estimates and assumptions, including assumptions related to the expected price volatility of the Company’s stock, the period under which the options with be outstanding, the rate of return on risk-free investments, and the expected dividend yield for the Company’s stock.

The weighted-average assumptions used in the Black-Scholes option-pricing model used to calculate the fair value of options granted during the three months ended March 31, 2017, were as follows:

	Employee			Non-Employee
Expected volatility		79.8% -83.7	%		N/A
Expected dividend yield		—			N/A
Expected term (in years)		3.25			N/A
Risk-free interest rate		1.87%-1.94	%		N/A

Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption was determined based on historical volatilities from traded options of biotech companies of comparable in size and stability, whose share prices are publicly available. The expected term of options granted to employees is calculated based on the mid-point between the vesting date and the end of the contractual term according to the simplified method as described in SEC Staff Accounting Bulletin

110 because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term due to the limited period of time its awards have been outstanding. For non-employee options, the expected term of options granted is the contractual term of the options. The risk-free rate by reference to the implied yields of U.S. Treasury securities with a remaining term equal to the expected term assumed at the time of grant. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not intend to pay dividends.

The table summarizes the stock option activity, for both plans, for the periods indicated as follows:

	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value(1)
Outstanding at December 31, 2016		1,477,300		1.61		5.8	$	9,662
Granted		25,000	$	8.04		5.0	$	-
Exercised		-	$	-		-	$	-
Forfeited		-	$	-		-	$	-
Expired		-	$	-		-	$	-
Outstanding at March 31, 2017		1,502,300		1.72		5.5	$	9,299
Exercisable at March 31, 2017		1,044,286	$	1.28		5.3	$	6,924

(1) The aggregate intrinsic value on the table was calculated based on the difference between the estimated fair value of the Company’s stock and the exercise price of the underlying option. The estimated stock values used in the calculation was $7.91 and $8.15 per share for the three months ended March 31, 2017 and the year ended December 31, 2016, respectively.

The stock-based compensation expense was recorded as follows:

	Three Months Ended March 31,
	2017		2016
Research and development	$	94	$	87
General and administrative		967		1,044
Total stock-based compensation expense	$	1,061	$	1,131

The allocation between research and development and general and administrative expense was based on the department and services performed by the employee or non-employee.

At March 31, 2017, the total compensation cost related to non-vested options not yet recognized was $3,892, which will be recognized over a weighted average period of four years, assuming the employees complete their service period required for vesting.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the three months ended March 31, 2017:

	Number of  Units			Weighted Average Grant-Date Fair Value Per Units
Outstanding as of December 31, 2016		455,430		$	0.76
Granted		40,000	(1)	$	8.35
Vested		(40,000	)	$	8.35
Forfeited		—		$	—
Outstanding as of March 31, 2017		455,430		$	0.76

(1) 40,000 restricted stock units were granted on March 27, 2017 with a weighted average grant date fair value of $8.35 and vested immediately.  The RSUs were settled for shares in April 2017.