As of June 30, 2016, the Company had unrecognized stock-based compensation expense related to unvested option of $33,000 with a weighted average vesting period of 0.03 years.

As of June 30, 2016, the Company had unrecognized stock-based compensation expense related to restricted stock and restricted stock unit awards of approximately $6.4 million and $1.5 million, respectively, which is expected to be recognized over the remaining weighted-average vesting period of 2.4 years and 1.4 years, respectively.

Eligible employees can purchase the Company’s Common Stock at the end of a predetermined offering period at 85% of the lower of the fair market value at the beginning or end of the offering period. The ESPP is compensatory and results in stock-based compensation expense.

 

As of June 30, 2016, 125,150 shares have been purchased and 74,850 shares are available for future sale under the Company’s ESPP. The Company recognized share-based compensation expense of approximately $30,000 and $8,000 for the three months ended June 30, 2016 and 2015, respectively, and $56,000 and $16,000 for the six months ended June 30, 2016 and 2015, respectively. The Company issued 33,958 shares under the ESPP for $81,000 during the six months ended June 30, 2016.

On July 15, 2015, grants of 500,000 shares of common stock in each of Mustang, Checkpoint, Avenue, Coronado SO, Helocyte, JMC and Escala, were made to Dr. Rosenwald and Mr. Weiss for their services to the Company under the LTIP. The exercise price of each warrant, which approximates its fair value, was determined by the Company utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 44.8%, weighted average cost of capital of 30%, and net of debt utilized. The Company recorded a charge of approximately $2.2 million related to these grants.

 

On January 1, 2016, the Compensation Committee granted 510,434 shares each to Dr. Rosenwald and Mr. Weiss. These equity grants, made in accordance with the LTIP, represent one percent (1%) of total outstanding shares of the Company and were granted in recognition of their performance in 2015. The shares are subject to repurchase by the Company until both of the following conditions are met: (i) the Company’s market capitalization increases by a minimum of $100,000,000, and (ii) the employee is either in the service of the Company as an employee or as a Board member (or both) on the tenth anniversary of the LTIP, or the eligible employee has had an involuntary separation from service (as defined in the LTIP). The Company’s repurchase option on such shares will also lapse upon the occurrence of a corporate transaction (as defined in the LTIP) if the eligible employee is in service on the date of the corporate transaction. Since these awards contain a  market condition  as defined in ASC 718, Compensation - Stock Compensation, the Company valued the award using the Monte Carlo simulation model. The model generated the fair value of the award at the grant date of $2.4 million for both grants, which is amortized over the vesting period, subject to the above performance condition being probable of being met.

Checkpoint has a long-term incentive plan. In March 2015, Checkpoint issued a restricted stock grant to Dr. Marasco for services in connection with its Scientific Advisory Board. Dr. Marasco was issued a grant for 1.5 million shares of Checkpoint common stock, of which 25% vested on the first anniversary of the grant date and monthly thereafter for 48 months. Checkpoint valued the restricted stock utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 44.8% and a weighted average cost of capital of 30%, resulting in a value of $0.065 per share on grant date. At December 31, 2015, Checkpoint re-measured this non-employee restricted stock utilizing a market approach, based upon a third party financing. Such valuation resulted in a value of $4.39 per share utilizing a volatility of 83%, a risk free rate of return of 1.5% and a term of five years. At June 30, 2016, Checkpoint re-measured this non-employee restricted stock utilizing a market approach, based upon a third party financing. Such valuation resulted in a value of $4.42 per share utilizing a volatility of 83%, a risk free rate of return of 1.35% and a term of five years. For the three and six months ended June 30, 2016, the Company recorded expense of $0.5 million and $1.2 million, respectively, in research and development expenses on the Company’s Condensed Consolidated Statements of Operations.

 

Certain employees and directors of Checkpoint have been awarded restricted stock under Checkpoint’s 2015 Incentive Plan. For the three and six months ended June 30, 2016, Checkpoint recorded stock-based compensation expense of approximately $0.4 million and $0.7 million, respectively, related to stock grants, which is included in general and administrative expenses on the Condensed Consolidated Statements of Operations.

 

Avenue has a long term incentive program. During 2015, Avenue granted 1.0 million shares to its acting Chief Executive Officer, Dr. Lu, who is also Chief Financial Officer of Fortress, for services to be provided. The stock price was determined utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 44.8%, weighted average cost of capital of 30%, and net of debt utilized, resulting in a value of $0.146 per share. The grant issued to Dr. Lu vests 50% in four annual equal tranches of 12.5%, with the remaining 50% vesting upon the achievement of certain performance goals. In connection with these grants, for the three and six months ended June 30, 2016, the Company recorded approximately $4,000 and $9,000, respectively, as general and administrative expenses and $4,000 and $9,000, respectively, as research and development expenses on the Condensed Consolidated Statements of Operations.

 

 

In January 2016, JMC granted 290,000 of options to its employees. The fair value of stock options granted was determined on the grant date using assumptions for risk free interest rate, the expected term, expected volatility, and expected dividend yield. The stock price was determined utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 44.5%, weighted average cost of capital of 30%, and net of debt utilized, resulting in a value of $0.65 per share. JMC does not expect to pay dividends in the foreseeable future so therefore the expected dividend yield is 0%. The expected term for stock options granted with service conditions represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by the Securities and Exchange Commission's Staff Accounting Bulletin No. 110 for “plain vanilla” options. JMC obtained the risk-free interest rate from publicly available data published by the Federal Reserve. The volatility rate was computed based on a comparison of average volatility rates of similar companies. The fair value of options granted in 2016 was estimated using the following assumptions: