Equity Incentive Plans and Stock Based Compensation
|12 Months Ended|
Dec. 31, 2017
|Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]|
|Equity Incentive Plans and Stock Based Compensation||
NOTE 13—EQUITY INCENTIVE PLANS AND STOCK BASED COMPENSATION
2009 Equity Incentive Plan
The 2009 Stock Plan (the “2009 Plan”) provides for the issuance of incentive stock options, nonqualified stock options and restricted stock to employees, directors and consultants of the Company. In August 2017, the Company assumed the 2009 Stock Plan as part of the Merger. The maximum number of shares of common stock that may be issued over the term of the 2009 Plan may not exceed 1,452,268 shares. The Company has reserved a sufficient number of shares of common stock to permit exercise of options in accordance with the terms of the 2009 Plan. The form of the options to be granted under the 2009 Plan will be determined by the Company’s Board of Directors at the time of grant. Options generally vest according to a five-year vesting schedule, with 20% of the shares vesting on the one-year anniversary and equal monthly vesting installments thereafter. As of December 31, 2017, options to purchase 101,667 shares of common stock were available for future grants under the 2009 Plan.
2014 Equity Incentive Plan
The terms of the 2014 Equity Incentive Plan (“2014 Plan”) provide for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, other stock awards, and performance awards that may be settled in cash, stock, or other property. Stock options may be granted under the 2014 Plan with an exercise price not less than 100% of the fair market value of the common stock on the date of grant. Stock options under the 2014 Plan may be granted with terms of up to ten years and generally vest over a period of four years, with the exception of grants to non-employee directors and consultants where the vesting period is or may be shorter. As of December 31, 2017, options to purchase 637,029 shares of common stock were available for future grants under the 2014 Plan.
2004 Equity Incentive Plan
The 2004 Equity Incentive Plan (“2004 Plan”) provided for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, stock awards and cash awards to employees and consultants. Stock options were granted under the 2004 Plan with an exercise price not less than 100% of the fair market value of the common stock on the date of grant. Stock options under the 2004 Plan were granted with terms of up to ten years and generally vested over a period of four years. The 2004 Plan expired pursuant to its terms on April 7, 2014. No additional awards have been or will be made after April 7, 2014 under the 2004 Plan.
2004 Employee Stock Purchase Plan
On January 1, 2017 and 2016 an additional 9,091 shares were authorized for issuance under the 2004 Employee Stock Purchase Plan (“2004 Purchase Plan”) pursuant to the annual automatic increase to the authorized shares under the 2004 Purchase Plan. The 2004 Purchase Plan contains consecutive, overlapping 24 month offering periods. Each offering period includes four six-month purchase periods. The price of the common stock purchased will be the lower of 85% of the fair market value of the common stock at the beginning of an offering period or at the end of the purchase period. For the year ended December 31, 2017, employees had purchased 2,868 shares of common stock under the 2004 Purchase Plan at an average purchase price of $2.80. At December 31, 2017, 18,917 shares were authorized and available for issuance under the 2004 Purchase Plan. For the year ended December 31, 2016, employees had purchased 8,368 shares of common stock under the 2004 Purchase Plan at an average price of $2.75.
Threshold equity awards issued and outstanding at the time of the Merger pursuant to the 2004 Plan and the 2014 Plan remain issued and outstanding. However, for accounting purposes, Threshold equity awards are assumed to have been exchanged for equity awards of Private Molecular, the accounting acquirer.
The following table summarizes information about stock option activity assuming Threshold equity award plans were assumed by Private Molecular for years ended December 31, 2017 and 2016:
At December 31, 2017, stock options outstanding and exercisable by exercise price were as follows:
The total intrinsic value of stock options exercised during the years ended December 31, 2017 and 2016 were $78,000 and $0, respectively, determined at the date of the option exercise. Cash received from stock option exercises were $61,000 and $2,000 for the years ended December 31, 2017 and 2016, respectively. The Company issues new shares of common stock upon exercise of options. In connection with these exercises, there was no tax benefit realized by the Company due to its current loss position.
The Company recognizes stock-based compensation in accordance with ASC 718, “Compensation—Stock Compensation.” Under this guidance, stock-based compensation cost is based on the recognition of the grant date fair value estimated in accordance with the provisions of ASC 815 over the service period, which is generally the vesting period. The Company accounts for forfeitures as they occur. Stock-based compensation expense, which consists of the compensation cost for employee stock options and the value of options issued to non-employees for services rendered, was allocated to research and development and general and administrative in the consolidated statements of operations as follows (in thousands):
Employee Stock-based Compensation Expense
The Company estimated the fair value of stock options granted using the Black-Scholes option-pricing formula and a single option award approach. This fair value is being amortized ratably over the requisite service periods of the awards, which is generally the vesting period. The Company accounts for forfeitures as they occur. The fair value of employee stock options was estimated using the following weighted-average assumptions for the years ended December 31, 2017 and 2016:
To determine the expected term of the Company’s employee stock options granted, the Company utilized the simplified approach as defined by SEC Staff Accounting Bulletin No. 107, “Share-Based Payment”. To determine the risk-free interest rate, the Company utilized an average interest rate based on U.S. Treasury instruments with a term consistent with the expected term of the Company’s stock based awards. To determine the expected stock price volatility for the Company’s stock based awards, the Company considers its historical volatility and its industry peers. The fair value of all the Company’s stock based awards assumes no dividends as the Company does not anticipate paying cash dividends on its common stock.
The Company recognized $1.8 million and $0.1 million of stock-based compensation expense related to stock options granted under the Company’s equity compensation plans, for the years ended December 31, 2017 and 2016, respectively. Additionally, pursuant to the terms of the Merger Agreement, the participants in the 2014 Equity Incentive Plan received accelerated vesting for all or a portion of their pre-merger awards as well as a modification of the exercise period. The Company recorded $1.2 million in stock compensation associated with the transaction.
As of December 31, 2017, the total unrecognized compensation cost related to unvested stock-based awards granted to employees under the Company’s equity compensation plans was approximately $7.1 million. This cost will be recorded as compensation expense ratably over the remaining weighted average requisite service period of approximately 3.5 years.
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.
Reference 1: http://www.xbrl.org/2003/role/presentationRef