For the three months ended March 31, 2017 and 2016, approximately $0.8 million and $1.3 million, respectively, of stock based compensation expense was included in research and development expenses in connection with equity grants made to employees and consultants and approximately $2.1 million and $1.6 million, respectively, was included in general and administrative expenses in connection with grants made to employees, members of the board of directors and consultants.

The following table summarizes Fortress stock option activities excluding activity related to Fortress Companies:

											Weighted
											average
					Weighted			Total weighted			remaining
					average			average intrinsic			contractual life
		Number of shares			exercise price			value			(years)
Options vested and expected to vest at December 31, 2016			1,130,501		$	3.73		$	602,451			4.93
No activity			-			-			-			-
Options vested and expected to vest at March 31, 2017			1,130,501		$	3.73		$	1,216,285			4.69
Options vested and exercisable			1,105,501		$	3.71		$	1,216,285			4.66

 

 

 

 

The following table summarizes Fortress warrant activities, excluding activities related to Fortress Companies:

 

											Weighted average
								Total weighted			remaining
					Weighted average			average intrinsic			contractual life
		Number of shares			exercise price			value			(years)
Outstanding as of December 31, 2016			2,263,453		$	3.62		$	79,800			4.74
Granted			167,946			3.37			-			4.96
Outstanding as of March 31, 2017			2,431,399		$	3.60		$	209,800			2.37
Exercisable as of March 31, 2017			471,399		$	6.08		$	139,800			1.98

 

Fortress Companies

 

Checkpoint has a long-term incentive plan under which it has issued grants to both employees and non-employees. For the three months ended March 31, 2017 and 2016, Checkpoint re-measured its non-employee grant and recorded expense of approximately $0.4 million and $0.8 million, respectively, in research and development expenses on the Condensed Consolidated Statements of Operations.

Checkpoint recorded approximately $0.1 million of option expense in general and administrative expenses on the Condensed Consolidated Statements of Operations, related to an award with a market condition for the three months ended March 31, 2017.

 

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. JMC does not expect to pay dividends in the foreseeable future. As a result, 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 SEC'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 2017 was estimated using the following assumptions:

 

For the three months ended March 31, 2017, Cellvation recorded expenses for non-employee grants of approximately $3,000, in research and development expenses on the Condensed Consolidated Statements of Operations. There was no expense during the same period in 2016.

 

For the three months ended March 31, 2017, Cellvation recorded approximately $5,000, in connection with a grant made to its Chief Executive Officer, as general and administrative expenses on the Condensed Consolidated Statements of Operations. There was no expense during the same period in 2016.

In September 2016, Mustang entered into a Placement Agent Agreement with NSC relating to Mustang’s offering of shares of common stock in a private placement. Pursuant to the Placement Agent Agreement, Mustang agreed to pay NSC a cash fee of 10.0% of the gross proceeds from the offering and grant NSC a warrant exercisable for shares of Mustang common stock equal to 10% of the aggregate number of shares of common stock sold in the offering (the “Placement Agent Warrants”). In addition, Mustang and the investors entered into a unit purchase agreement (the “Unit Purchase Agreement”). The common stock and Warrants were sold in units, with each unit consisting of 10,000 shares of Mustang’s common stock, and Warrants exercisable for 2,500 shares of common stock at an exercise price of $8.50 per share. The purchase price was $65,000 per Unit. The warrants have a five-year term and are only exercisable for cash.

 

On January 31, 2017, Mustang held a sixth closing of its private placement for gross proceeds of $55.5 million, before expenses. Mustang issued 8,536,774 unregistered shares of common stock and 2,134,193 warrants in connection with this closing. NSC received a placement agent fee of $5.5 million or approximately 10% of the gross proceeds. In addition, NSC  received 853,677 warrants or approximately 10% of the shares issued.

 

On March 31, 2017, Mustang closed an additional private placement with substantially similar terms as the offering described above resulting in gross proceeds of $0.4 million, before expenses. Mustang issued 64,000 unregistered shares of common stock and 16,000 warrants in connection with this transaction. NSC received a placement agent fee of approximately $42,000 or approximately 10% of the gross proceeds. In addition, NSC received 6,400 warrants or approximately 10% of the shares issued.