Stock-Based Compensation Arrangements

12 Months Ended

Dec. 31, 2016

Stock-Based Compensation Arrangements [Abstract]

Note 11—Stock-Based Compensation Arrangements

On August 9, 2013, the Company’s shareholders’ approved the 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan”). The 2013 Plan allows for the issuance of up to 8,860,000 additional shares of our common stock pursuant to awards granted under the 2013 Plan. Additionally, the 2013 plan allows for the issuance of up to a maximum of 2,435,500 additional shares of our common stock, pursuant to the cancellation, forfeiture, or expiry, of awards granted under the 2004 Plan and terminated on or after the 2013 plan approval on August 9, 2013. On July 21, 2015, the Company’s stockholders approved an amendment to the 2013 Plan to increase the number of shares of common stock available for issuance thereunder by 30,000,000 shares. During the year ended December 31, 2016, the Company granted 10,622,392 stock options under the 2013 Plan. At December 31, 2016, the Company had an aggregate of 20,729,144 shares of common stock available for grant under the 2013 Plan.

Stock Option Grants

Per his employment agreement, Mark Carbeau was entitled to receive a grant of options to purchase shares of the Company’s common stock equal to 5% of the number of shares of the Company’s stock issued in the 2016 Private Placement, assuming the conversion of all convertible securities issued in the 2016 Private Placement, which equals 5,626,257 shares, at a per share exercise price equal to the fair market value of the Company’s common stock on the date of the grant. Pursuant to the terms of the 2013 Plan, the Company cannot issue options or other grants for more than 5,000,000 shares to any one person in a calendar year. Consequently, on October 20, 2016, the Company granted Mr. Carbeau options to purchase 5,000,000 shares of the Company’s common stock at an exercise price of $0.17544 per share and expects to grant the remaining options to which Mr. Carbeau is entitled in 2017. These options will vest as to 25% of the shares on July 29, 2017 and as to an additional 2.083% of the shares on the last day of each successive month thereafter, provided that Mr. Carbeau remains employed by the Company on the vesting date.

Per his employment agreement, Stephan Toutain was entitled to receive a grant of options to purchase shares of the Company’s common stock equal to 1% of the Company’s fully diluted shares as of his start date at an exercise price equal to fair market value of the Company’s common stock on the grant date of the option. Consequently, on October 20, 2016, the Company granted Mr. Toutain options to purchase 3,738,933 shares of the Company’s common stock at an exercise price of $0.17544 per share. These options will vest as to 25% of the shares on August 15, 2017, and as to an additional 2.083% of the shares monthly thereafter.

It is the Company’s policy to grant stock options with an exercise price equal to the fair market value of the Company’s common stock at the grant date, and stock options to employees generally vest over four years based upon continuous service. Historically, the majority of the Company’s stock options have been granted in connection with the employee’s start date with the Company. In addition, the Company may grant stock options in recognition of promotion and/or performance.

For purposes of determining the stock-based compensation expense for stock option awards in 2016 and 2015, the Black-Scholes option-pricing model was used with the following weighted-average assumptions:

	2016			2015
Risk-free interest rate		1.24	%		1.54	%
Expected life		5.73 years			5.73 years
Expected volatility		146.3	%		138.8	%
Dividend yield		0	%		0	%

Using these assumptions, the weighted average grant date fair value of options granted in 2016 and 2015 was $0.15 and $0.16, respectively.

Restricted Stock Awards

Holders of restricted stock awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. Recipients of restricted stock awards are generally not required to pay any consideration to the Company for these restricted stock awards. The Company measures the fair value of the shares based on the last reported price at which the Company’s common stock traded on the date of the grant and compensation cost is recognized over the remaining service period. During each of the years ended December 31, 2016 and 2015, the Company granted no restricted stock awards.

Employee Stock Purchase Plan

Purchases made under the Company’s Employee Stock Purchase Plan are deemed to be compensatory because employees may purchase stock at a price equal to 85% of the fair market value of the Company’s common stock on either the first day or the last day of a calendar quarter, whichever is lower. During the years ended December 31, 2016 and 2015, employees purchased 229,951 and 203,879 shares, respectively, of common stock at a weighted-average purchase price of $0.08 and $0.10, respectively, while the weighted-average market value was $0.09 and $0.12 per share, respectively, resulting in compensation expense of $2,921 and $4,053, respectively.

The following table details stock option and restricted stock activity for the years ended December 31, 2016 and 2015.

	2016				2015
			Weighted Avg.				Weighted Avg.
			Exercise				Exercise
	Shares		Price		Shares		Price
Outstanding, beginning of period		21,657,776	$	0.21		4,523,900	$	0.39
Granted		10,622,392		0.16		18,193,027		0.17
Stock options exercised		(1,316)		.05		––		0.00
Restricted stock exercised		––		0.00		––		0.00
Forfeited/Expired		(915,533)		0.33		(1,059,151)		0.17
Outstanding, end of period		31,363,319	$	0.19		21,657,776	$	0.21
Exercisable, end of period		10,860,050	$	0.23		3,665,124	$	0.32

The following table details further information regarding stock options and restricted stock outstanding and exercisable at December 31, 2016:

Stock Options/Restricted Stock

Stock Options/Restricted Stock Outstanding

Exercisable

Weighted Avg.

remaining

Weighted Avg.

contractual life

Exercise

Range of Exercise Price:

(years)

Price

$0.01–$1.00

31,318,319

8.55

0.19

10,815,050

0.23

$1.01–$2.00

45,000

1.25

1.40

45,000

1.40

$2.01–$3.00

––

$3.01–$4.00

––

$4.01–$5.00

––

31,363,319

8.54

0.19

10,860,050

0.23

Aggregate intrinsic value

69,547

The aggregate intrinsic value in the preceding table is based on the last reported price at which the Company’s common stock traded on December 31, 2016, of $0.11.

The following table summarizes the status of the Company’s non-vested options for the years ended December 31, 2016 and 2015:

	2016					2015
			Weighted Avg.					Weighted Avg.
			Exercise					Exercise
	Shares		Price		Shares			Price

Non-vested options, beginning of year		17,992,652	$	0.18			2,878,739	$	0.37
Granted		10,622,392		0.16			18,193,027		0.17
Vested		(8,035,609)		0.15			(2,038,435)		0.33
Forfeited		(76,166)		0.25			(1,040,679)		0.17
Non-vested options, end of year		20,503,269	$	0.17			17,992,652	$	0.18

Total cost for stock-based compensation arrangements is as follows:

	Year Ended December 31,
	2016		2015
Stock option grants beginning of period	$	846,347	$	730,102
Stock-based arrangements during the period:
Stock option grants		122,420		157,932
Restricted stock issued:
Employee stock purchase plan		2,921		4,053
Director agreements		––		––
	$	971,688	$	892,087

As of December 31, 2016 and 2015, there was approximately $2,705,027 and $2,248,591 respectively, of total unrecognized compensation related to non-vested share-based compensation arrangements granted under the Company’s stock plans. That cost is expected to be recognized over a weighted average period of approximately 2.8 and 3.11 years, respectively.

- Definition

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.

+ References + Details

INTERLEUKIN GENETICS INC 10-K/A