Matinas BioPharma Holdings, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock Based Compensation

Stock Based Compensation

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE H - Stock Based Compensation

In August 2013, the Company adopted the 2013 Equity Compensation Plan (the “Plan”), which provides for the granting of incentive stock options, nonqualified stock options, restricted stock units, performance units, and stock purchase rights. Options under the Plan may be granted at prices not less than 100% of the fair value of the shares on the date of grant as determined by the Board Committee. The Board Committee determines the period over which the options become exercisable subject to certain restrictions as defined in the Plan, with the current outstanding options generally vesting over three years. The term of the options is no longer than ten years. The Company currently has reserved 11,828,912 shares of common stock for issuance under the plan.

With the approval of the Board of Directors and majority Shareholders, effective May 8, 2014, the Plan was amended and restated. The amendment provides for an automatic increase in the number of shares of common stock available for issuance under the Plan each January (with Board approval), commencing January 1, 2015 in an amount up to four percent (4%) of the total number of shares of common stock outstanding on the preceding December 31st.

The Company recognized stock-based compensation expense (options, and restricted share grants) in its consolidated statements of operations as follows ($ in thousands):

	Quarter Ended
	March 31,
	2016		2015

Research and Development	$	131	$	202
General and Administrative		262		131
Total	$	393	$	333

Stock Incentive Plans:

The following table contains information about the Company’s stock plan at March 31, 2016:

	Awards
	Reserved					Awards
	for		Awards			Available
	Issuance		Issued			for Grant
2013 Equity Compensation Plan		11,828,912		9,265,393	*		2,563,519

* includes both stock grants and option grants

The following table summarizes the Company’ stock option activity and related information for the period from December 31, 2015 to March 31, 2016 (number of options in thousands):

			Weighted
	Number of		average
	Options		Exercise Price
Outstanding at December 31, 2015		6,904	$	0.93
Granted		1,377		0.43
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at March 31, 2016		8,281	$	0.85

As of March 31, 2016, the number of vested shares underlying outstanding options was 4,819,075 at a weighted average exercise price of $1.33. The aggregate intrinsic value of in the-money options outstanding as of March 31, 2016 was $0.8 million. The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price of $0.71 on March 31, 2016, and the exercise price of options, multiplied by the number of options. As of March 31, 2016, there was $2.4 million of total unrecognized share-based compensation. Such costs are expected to be recognized over a weighted average period of approximately 1.3 years.

All options expire ten years from date of grant. Except for options granted to consultants, all remaining options vest entirely and evenly over three years. A portion of options granted to consultants vests over four years, with the remaining vesting being based upon the achievement of certain performance milestones, which are tied to either financing or drug development initiatives.

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 defined pursuant to the terms of the consulting agreement may be different. Stock options issued to consultants are revalued quarterly until fully vested, with any change in fair value expensed. The following weighted-average assumptions were used to calculate share based compensation:

	For the Three Months Ended
	March 31,
	2016			2015
Volatility		87.24 % - 89.15	%		94.69	%
Risk-free interest rate		1.22 % - 1.375	%		1.65% - 1.93	%
Dividend yield		0.0	%		0.0	%
Expected life		6.0 years			4.75 - 5.5 years

The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Hence, the Company uses the “simplified method” described in Staff Accounting Bulletin (SAB) 107 to estimated expected term of share option grants.

The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company has limited history for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available.

The risk-free interest rate assumption is based on the U.S treasury instruments whose term was consistent with the expected term of the Company’s stock options.

The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Accordingly, the Company has assumed no dividend yield for purposes of estimating the fair value of the Company share-based compensation.

The Company estimates the forfeiture rate at the time of grant and revisions, if necessary, were estimated based on management’s expectation through industry knowledge and historical data.