Note 8— Stock-Based Compensation

 

The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period, with the exception of options granted subject to a consulting agreement, whereby the option vesting period and the service period are defined pursuant to the terms of the consulting agreement. Share-based compensation expense for awards granted during the three- and nine-month periods ended April 30, 2015 and 2014, were based on the grant date fair value estimated using the Black-Scholes Option Pricing Model. Share-based compensation expense related to stock option grants to consultants, in which the grant was not entirely vested at the grant date, are marked-to-market each month. The Company’s expected volatility is derived from the historical daily change in the market price of its common stock since it exited shell status, as well as the historical daily changes in the market price for the peer group as determined by the Company. The Company uses the simplified method to calculate the expected term of options issued to employees and directors. The Company’s estimation of the expected term for stock options granted to parties other than employees or directors is the contractual term of the option award. The risk-free interest rate used in the Black-Scholes calculation is based on the prevailing U.S. Treasury yield in effect at the time of grant, commensurate with the expected term. Stock-based compensation expense recognized in the Company’s condensed statements of operations is based on awards ultimately expected to vest, reduced for estimated forfeitures. The Company has never paid any dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future.

 

During the three months ended April 30, 2015, the Company granted options to purchase 184,750 shares of the Company’s common stock to employees under the Company’s 2011 Stock Incentive Plan (the “2011 Plan”). The options issued under the 2011 Plan have a ten-year term, vest over three years, and have exercise prices ranging from $6.60 to $7.60.

 

During the nine months ended April 30, 2015, the Company granted options to purchase 338,500 and 30,000 shares of the Company’s common stock to employees and consultants under the 2011 Plan, respectively. The options issued to employees within the 2011 Plan have a ten-year term, vest over a range of one to three years, and have exercise prices ranging from $7.30 to $10.60. The options issued to consultants have one- to three-year terms, vest in accordance with the terms of the applicable consulting agreement, and have exercise prices ranging from $6.60 to $8.60.

 

During the three month period ended April 30, 2014, the Company granted options to purchase 111,000 shares of the Company’s common stock to employees and directors under the 2011 Plan. In addition, the Company granted options to purchase up to 200,000 shares of the Company’s common stock outside the terms of the 2011 Plan to certain key employees and consultants. While such grants were made outside of the 2011 Plan, the terms of such grants are substantially similar to comparable grants made pursuant to the 2011 Plan. All of the foregoing options are subject to a ten year term, vest over two to three years in accordance with the terms of the applicable stock option agreement, and have exercise prices ranging from $9.00 - $16.10.

 

The following assumptions were used to calculate the fair value of stock-based compensation during the three months ended April 30, 2015 and 2014:

 

 

The following assumptions were used to calculate the fair value of stock-based compensation during the nine months ended April 30, 2015 and 2014:

 

 

Stock-based compensation expense recorded in the Company’s condensed statement of operations for the three- and nine-month periods ended April 30, 2015 resulting from stock-based compensation awarded to the Company’s employees, directors and consultants was approximately $628,000 and $1,700,000, respectively.  Of this balance, $279,000 and $761,000 were recorded in research and development, respectively, and $349,000 and $949,000, respectively, were recorded in general and administrative in the Company’s condensed statement of operations for the periods ended April 30, 2015.

 

Stock-based compensation expense recorded in the Company’s condensed consolidated statements of operations for the three- and nine-month periods ended April 30, 2014 resulting from stock-based compensation awarded to the Company’s employees, directors and consultants was approximately $1,105,000 and $1,397,000, respectively.  Of this balance, $374,000 and $536,000 was recorded to research and development, and $731,000 and $861,000, was recorded in general and administrative in the Company’s condensed consolidated statements of operations for the three- and nine-month periods ended April 30, 2014, respectively.

 

The weighted-average grant date fair value of stock options granted during the three- and nine-month periods ended April 30, 2015 and 2014 were $6.20 and $6.60, respectively, and $11.40 and $9.60, respectively.