Quarterly report pursuant to Section 13 or 15(d)

Share Based Compensation

v3.7.0.1
Share Based Compensation
3 Months Ended
Jan. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share Based Compensation

8. SHARE BASED COMPENSATION

 

Employment Agreements

 

Management voluntarily purchases restricted stock directly from the Company at market price. The respective stock purchases occur on the last trading day of each month. This voluntary election is outlined in each of Daniel J. O’Connor, Chief Executive Officer and President, Robert G. Petit, Executive Vice President, Chief Scientific Officer, and Sara M. Bonstein, Executive Vice President and Secretary, Chief Financial Officer, (each an “Executive”), employment agreements. The table below reflects the purchases of each Executive:

 

    ANNUALIZED                          
    Annual Amount     For the Three Months Ended January 31, 2017  
    to be Purchased     Gross Purchase     Net Purchase  
Executive   $     $     # of shares     $     # of shares  
Daniel J. O’Connor   $ 54,547     $ 13,627       1,713     $ 10,644       1,335  
Robert G. Petit   $ 33,061     $ 8,212       1,032     $ 6,699       842  
Sara M. Bonstein   $ 29,261     $ 7,333       922     $ 5,033       623  

 

For the three months ended January 31, 2017, the Company recorded stock compensation expense of $42,016 in the statement of operations for the portion of management salaries voluntarily paid in stock representing 5,316 shares of its Common Stock (4,071 shares on a net basis after employee payroll taxes). For the three months ended January 31, 2016, the Company recorded a similar stock compensation expense of $64,332 in the statement of operations representing 7,060 shares of its Common Stock (4,947 shares on a net basis after employee payroll taxes).

 

From 2013 to present, in addition to the purchases of Common Stock set forth in the above table, Mr. O’Connor has also purchased an additional 164,909 shares of Common Stock out of his personal funds at the then market price for an aggregate consideration of $689,004. These purchases consisted of the conversion of amounts due to Mr. O’Connor under a promissory note given by Mr. O’Connor to the Company in 2012 of approximately $66,500 for 21,091 shares, 2013 base salary which he elected to receive in Common Stock of approximately $186,555 for 34,752 shares (21,489 on a net basis after employee payroll taxes), 2013 and 2014 cash bonuses voluntarily requested to receive in equity of $214,359 for 62,064 shares (57,990 on a net basis after employee payroll taxes), fiscal 2014 voluntary request to purchase stock directly from the Company at market price purchases of $68,750 for 21,687 shares (15,950 on a net basis after employee payroll taxes), fiscal 2015 voluntary request to purchase stock directly from the Company at market price purchases of $88,840 for 8,482 shares (7,556 on a net basis after employee payroll taxes), and purchases of the Company’s Common Stock in the October 2013 and March 2014 public offerings of 13,500 shares for $54,000 and 3,333 shares for $10,000.

 

Restricted Stock Units (RSUs)

 

A summary of the Company’s RSU activity and related information for the three months ended January 31, 2017 is as follows:

 

    Number of     Weighted-Average  
    RSUs     Grant Date Fair Value  
             
Balance at October 31, 2016:     719,448     $ 10.77  
Granted     487,282     $ 8.35  
Vested     (87,235 )   $ 8.62  
Cancelled     (8,436 )   $ 8.31  
Balance at January 31, 2017     1,111,059     $ 9.89  

 

As of January 31, 2017, there was approximately $9,175,000 of unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a remaining weighted average vesting period of approximately 2.28 years.

 

As of January 31, 2017, the aggregate intrinsic value of non-vested RSUs was approximately $9,955,000.

 

Employee Stock Awards

 

During the three months ended January 31, 2017, 88,660 shares of Common Stock were issued to executives and employees related to vested incentive retention awards, employment inducements and employee excellence awards. Total stock compensation expense associated with these awards was $1,314,623.

 

During the three months ended January 31, 2016, 238,129 shares of Common Stock were issued to executives and employees related to vested incentive retention awards, employment inducements and employee excellence awards. Total stock compensation expense associated with these awards was $1,857,076.

 

Furthermore, non-executive employees were entitled to receive a performance-based year-end cash bonus. Several non-executive employees voluntarily requested to be paid all or a portion of their cash bonus in the Company’s Common Stock instead of cash. During the three months ended January 31, 2016, the Company recorded a liability on its balance sheet for $102,022 for bonuses that will be paid in Common Stock.

 

Director Stock Awards

 

During the three months ended January 31, 2017, total stock compensation expense to the Directors for amortization of unvested awards was $101,628.

 

During the three months ended January 31, 2016, 31,767 shares of Common Stock were issued to the Directors for compensation related to board and committee membership. Total stock compensation expense to the Directors was $311,205.

 

Stock Options

 

A summary of changes in the stock option plan for the three months ended January 31, 2017 is as follows:

 

    Number of     Weighted-Average  
    Options     Exercise Price  
Outstanding at October 31, 2016:     3,351,795     $ 13.31  
Granted     556,952     $ 7.71  
Exercised     -     $ -  
Expired     (11,189 )   $ 17.88  
Outstanding at January 31, 2017     3,897,558     $ 12.50  
Vested and Exercisable at January 31, 2017     1,800,252     $ 13.46  

 

Total compensation cost related to the Company’s outstanding stock options, recognized in the statement of operations for the three months ended January 31, 2017 was $3,183,458. For the three months ended January 31, 2016, compensation cost related to the Company’s outstanding stock options was $6,671,986.

 

During the three months ended January 31, 2017, 556,952 options were granted with a total grant date fair value of $3,542,215. During the three months ended January 31, 2016, 1,385,000 options were granted with a total grant date fair value of $14,837,970.

 

As of January 31, 2017, there was approximately $19,688,000 of unrecognized compensation cost related to non-vested stock option awards, which is expected to be recognized over a remaining weighted average vesting period of approximately 1.65 years.

 

As of January 31, 2017, the aggregate intrinsic value of vested and exercisable options was approximately $74,000.

 

In determining the fair value of the stock options granted during the three months ended January 31, 2017 and 2016, the Company used the following inputs in its BSM:

 

    Three Months Ended January 31,  
    2017     2016  
             
Expected Term     5.50-6.50 years       5.51-6.51 years  
Expected Volatility     107.07%-110.93 %     109.23%-115.25 %
Expected Dividends     0 %     0 %
Risk Free Interest Rate     1.26-1.58 %     1.65-2.00 %

 

Shares Issued to Consultants

 

During the three months ended January 31, 2017, 32,500 shares of Common Stock valued at $313,600 were issued to consultants for services, of which $75,000 represented shares issued for amounts previously accrued. The Company recorded a liability on its balance sheet for $230,100 for shares earned pursuant to consulting agreements but not delivered. The common stock share values were based on the dates the shares vested.

 

During the three months ended January 31, 2016, 23,124 shares of Common Stock valued at $275,087 were issued to consultants for services, of which $55,000 represented shares issued for amounts previously accrued. The Company recorded a liability on its balance sheet for $302,300 for shares earned pursuant to consulting agreements but not delivered. The common stock share values were based on the dates the shares vested.

 

The following table summarizes share-based compensation expense included in the Statement of Operations by expense category for the three months ended January 31, 2017 and 2016, respectively:

 

    Three Months Ended January 31,  
    2017     2016  
Research and development   $ 1,222,483     $ 5,106,640  
General and administrative     3,887,942       4,422,368  
Total   $ 5,110,425     $ 9,529,008