Stock-Based Compensation

9 Months Ended

Sep. 30, 2015

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

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

11. Stock-Based Compensation

Restricted Stock

For the service period of August 2010 through August 2014, the Company authorized 179,969 shares of restricted common stock to directors. As of the date hereof, in lieu of restricted common stock, the Company has authorized the issuance of 179,969 shares of common stock. As of September 30, 2015 the Company has issued 179,969 shares of the authorized common stock upon forfeiture of 179,969 restricted common stock shares.

The Company records compensation expense for the award of restricted stock based upon the awards’ fair value determined as the difference in the estimated fair value of the Company’s common stock and the price paid by the recipient, if any, generally on the date of grant. The fair value of restricted stock awards is recognized as compensation expense over the service period which is generally the same as the vesting period.

The following table summarizes activity related to restricted stock awards for the nine months ended September 30, 2015 and 2014. The weighted average fair values for the awards below are based on the fair value at the grant date of the respective awards, which is equal to the value of the Company’s common stock on such date.

Nine months ended September 30,	2015				2014
	Shares		Weighted Average Fair Value		Shares		Weighted Average Fair Value

Balance, January 1		179,969	$	3.36		134,278	$	3.91
Granted		845,031	$	3.90		-	$	-
Vested		-	$	-		-	$	-
Forfeitures		(179,969)	$	-		-	$	-

Balance, September 30		845,031	$	3.90		134,278	$	3.91

As of September 30, 2015 and 2014, total unrecognized compensation cost related to nonvested restricted stock awards to purchase 845,031 and 134,278 shares of common stock, respectively was approximately $2,870,931 and $429,979, respectively. The nonvested restricted stock awards have a weighted average remaining contractual term of 3.25 years and 6.71 years as of September 30, 2015 and 2014, respectively. During the three and nine months ended September 30, 2015, 23,483 and 179,969 share awards were issued as common stock, respectively. No awards vested during the three and nine months ended September 30, 2014.

On November 15, 2014, the BOD resolved to grant 179,969 common stock shares to former directors in lieu of restricted stock. The grant date is the date at which the former directors countersigned grant agreements, which as of September 30, 2015 ranged from April to July 2015. Total recognized value of the awards amounted to $69,994 and $605,200 for the three and nine months ended September 30, 2015, which was recorded as stock compensation expense, of which $69,991 and $605,182 was recorded as additional paid-in capital during the three and nine months ended September 30, 2015.

On April 20, 2015, the BOD awarded 716,291 restricted stock units (“RSUs”) to the Company’s president with an exercise price of $3.90 per unit. The Company valued the RSUs grant at $2,793,535 using the Black-Scholes-Merton option pricing model. The RSUs vest 25% on the second anniversary, 25% on the third anniversary and 50% on the fourth anniversary of the grant. For the three and nine months ended September 30, 2015, the Company recognized $174,596 and $312,333 as compensation expense of which $174,596 and $312,261 was recorded as additional paid-in capital.

On the same date, the BOD awarded RSUs to the Company’s president and Board Chairman Emeritus 61,432 and 67,308 RSUs respectively, with an exercise price of $3.90 per unit. The Company valued the RSUs at $502,086 using the Black-Scholes-Merton options pricing model. The RSUs vest 50% on the first anniversary and 50% on the second anniversary of the grant. For the three and nine months ended September 30, 2015, the Company recorded $62,761 and $112,272 as compensation expense of which $62,761 and $112,259 was recorded as additional paid-in capital.

Common Stock

On April 20, 2015, the BOD awarded 14,326 common shares to the Company’s directors in lieu of certain director compensation totaling $55,871. For the three and nine months ended September 30, 2015, the Company recorded compensation expense of $0 and $55,871 respectively, of which $0 and $55,870 was recorded as additional paid-in capital.

On September 23, 2015, the BOD awarded 145,000 common shares to third party consultants in lieu of compensation totaling $362,500. For the three and nine months ended September 30, 2015, the Company recorded expense of $362,500, of which $362,486 was recorded as additional paid-in capital.

Stock Option Pool

The Company recorded stock-based compensation expense in the amount of $36,576 and $115,054 for the three and nine months ended September 30, 2015, respectively. For the three and nine months ended September 30, 2015, $2,050 and $5,010 was allocated to General & Administrative expense and $34,526 and $110,044 was allocated to Research & Development, respectively.

The Company recorded stock-based compensation in the amount of $20,490 and $54,159 for the three and nine months ended September 30, 2014, respectively. For the three and nine months ended September 30, 2014, $4,777 and $14,331 was allocated to General & Administrative expense and $15,713 and $39,828 allocated to Research & Development, respectively.

Total compensation cost for unvested stock option awards outstanding at September 30, 2015 was approximately $418,056 to be recognized over approximately 2.2 years.

The Company uses the Black-Scholes-Merton option pricing model to calculate the fair value of options. The significant assumptions for options issued in 2015 used in this model include:

Annual Dividend		-
Expected life (in years)		6.25 – 10.00
Risk free interest rate		1.35% - 2.17%
Expected volatility		80% - 93%

On April 20, 2015, the BOD awarded stock options to the Company’s president and non-employee directors to purchase 1,493,374 and 145,000 of the Company’s stock with an exercise price of $5.50 and $3.90 per share, respectively. The Company valued the stock options at $4,940,000 and $493,243 using the Black-Scholes-Merton model, respectively. The option granted to the president is 100% vested upon issuance and the options granted to the directors vest over three years. These options are exercisable for a period of 10 years. For the three and nine months ended September 30, 2015, for the president’s stock options, the Company recorded $0 and $4,940,000 as compensation expense and additional paid-in capital, respectively. For the three and nine months ended September 30, 2015, for the non-employee directors’ stock options, the Company recorded $4,339 and $36,765 as both compensation expense and additional paid-in capital, respectively.

The following table summarizes the Stock Option pool activity for the nine months ended September 30, 2015 and 2014.

		2015					2014
		Weighted Average		Weighted Average			Weighted Average		Weighted Average
	Shares	Exercise Price		Remaining Life		Shares	Exercise Price		Remaining Life

Balance, January 1	177,000	$	6.44		8.72	77,000	$	7.00		9.45

Granted	1,698,374	$	5.31		9.39	60,000	$	3.81		9.98
Forfeited	(86,250)	$	4.03		-	-	$	-		-
Balance, September 30	1,789,124	$	5.48		9.31	137,000	$	5.60		9.26

Stock Purchase Warrants

From time to time the Company has issued stock purchase warrants to non-employees in exchange for services. As of September 30, 2015 and 2014, there are 1,230,575 and 820,575, respectively, warrants issued and outstanding with exercise prices ranging from $1.00 to $7.50 per share. To date, all such warrants have been issued with the exercise price at least equal to the then estimated fair value of the underlying security, and had contractual terms ranging from 5.0 to 7.75 years.

The following table summarizes the stock purchase warrant activity for the nine months ended September 30, 2015 and 2014.

	2015				2014
			Weighted				Weighted
			Average				Average
	Shares		Fair Value		Shares		Fair Value
Balance, January 1		820,575	$	1.60		785,575	$	2.99
Granted		410,000	$	1.65		35,000	$	4.51

Balance, September 30		1,230,575	$	1.62		820,575	$	1.72

The following table summarizes information on stock purchase warrants outstanding as of September 30, 2015:

			Weighted	Weighted
			Average	Average
Exercise price		Shares	Remaining Life	Exercise Price

$	1.00	705,575	0.30	$	1.00
$	5.50	80,000	2.99	$	5.50
$	6.05	410,000	4.82	$	6.05
$	7.50	35,000	3.59	$	7.50

Total		1,230,575	2.25	$	3.16

VACCINOGEN INC 10-Q