Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

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Stock-Based Compensation
9 Months Ended
Dec. 31, 2012
Text Block [Abstract]  
NOTE 10 - Stock-Based Compensation

During the quarter ended December 31, 2012, when the quoted market price of the Company’s common stock was $0.71 per share, the Company cancelled outstanding options to purchase an aggregate of 870,550 shares of its common stock at exercise prices between $1.13 per share and $2.58 per share held by certain employees, excluding the Company’s Chief Executive Officer and President and Chief Scientific Officer, and consultants and granted those persons new options to purchase an aggregate of 920,550 shares at an exercise price of $0.75 per share. Options granted during the third quarter have a contractual term of 10 years and options to purchase 604,699 shares were granted as immediately vested, with the remaining option shares vesting over a period of two years. During the first quarter of fiscal 2013, when the quoted market price of the Company’s common stock was $0.51, the Company granted options to purchase an aggregate of 155,000 shares of its common stock at an exercise price of $0.51 per share to certain of its employees, excluding the Company’s Chief Executive Officer and President and Chief Scientific Officer, and certain scientific consultants. Options granted during the first quarter have a contractual term of 10 years and vest over a period of 4 years. During the nine months ended December 31, 2011, the Company granted options to purchase an aggregate of 1,020,000 shares of its common stock at exercise prices ranging from $1.75 per share to $2.99 per share to certain of its employees and scientific and business consultants, including members of the Company's Board of Directors and Scientific Advisory Board, and one of the Company’s officers exercised options to purchase 113,636 shares of its common stock at an exercise price of $0.88 per share. As a result of the modification of the option grants during the quarter ended December 31, 2012 described above, the Company recorded share-based compensation costs of $813,700 and $962,000 for the three and nine month periods ended December 31, 2012, respectively compared with $468,100 and $1,447,400 for the three and nine month periods ended December 31, 2011, respectively.

 

The Company used the Black-Scholes option valuation model with the following assumptions to determine share-based compensation expense related to option grants during the nine months ended December 31, 2012:

 

Expected dividend yield   0%  
Exercise price   $0.51 and $0.75  
Market price on date of grant   $0.51 and $0.71  
Risk-free interest rate   0.895% to 1.74%  
Expected (years)   6.25 to 10.0  
Volatility   82.9% to 85.4%  
Fair value per share at grant date   $0.36 to $0.59  

 

The expected dividend yield is zero, as the Company has not paid any dividends and does not anticipate paying dividends in the near future. The risk-free interest rate for periods related to the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the historical volatilities of a peer group of public companies’ stock over the expected term of the option. The expected term of options represents the period that the Company’s share-based compensation awards are expected to be outstanding. The Company used the simplified method provided in SEC Staff Accounting Bulletin 107 to estimate the expected term. The Company calculated the forfeiture rate based on an analysis of historical data as it reasonably approximates the currently anticipated rate of forfeitures for granted and outstanding options that have not vested.

 

The following table summarizes activity for the nine months ended December 31, 2012 under the Company’s stock option plans:

 

    Nine Months Ended  
    December 31, 2012  
    Number of     Weighted Average  
    Shares     Exercise Price  
             
 Options outstanding at beginning of period     4,805,771     $ 1.53  
 Options granted     1,075,550     $ 0.72  
 Options exercised     -     $ -  
 Options cancelled     (870,550 )   $ 1.72  
 Options expired     (44,000 )   $ 0.79  
                 
 Options outstanding at end of period     4,966,771     $ 1.33  
 Options exercisable at end of period     4,169,822     $ 1.36  
                 
 Weighted average grant-date fair value of                
 options granted during the period           $ 0.52  

 

The following table summarizes information on stock options outstanding and exercisable under the Company’s option plans as of December 31, 2012:

 

      Options Outstanding           Options Exercisable  
            Weighted              
            Average     Weighted           Weighted  
            Remaining     Average           Average  
Exercise     Number     Years until     Exercise     Number     Exercise  
Price     Outstanding   Expiration     Price     Exercisable   Price  
$ 0.51 - $0.72       267,540       7.30     $ 0.60       112,540     $ 0.72  
$ 0.75       920,550       9.84     $ 0.75       631,010     $ 0.75  
$ 0.80 - $1.13       455,776       4.08     $ 1.00       445,458     $ 0.99  
$ 1.50       2,413,250       6.93     $ 1.50       2,413,250     $ 1.50  
$ 1.65 - $1.925       725,000       6.32     $ 1.76       382,909     $ 1.73  
$ 2.10 - $2.99       184,655       4.62     $ 2.18       184,655     $ 2.18  
                                             
          4,966,771       7.05     $ 1.33       4,169,822     $ 1.36  

 

       At December 31, 2012, there were 228,700 shares of the Company’s common stock remaining available for grant under its stock option plans.