9.Stock Options

 

AxoGen, Inc. has a AxoGen 2010 Stock Incentive Plan (the “AxoGen Plan”), which allows for issuance of incentive stock options and non-qualified stock options to employees, directors and consultants at an exercise price equal to or greater than fair market value. On September 27, 2011, AxoGen, Inc., formerly LecTec Corporation, amended and restated the AxoGen Plan to, among other things, increase the number of shares of common stock authorized for issuance under the plan by 2,300,000 shares. At the 2014 Annual Meeting of Shareholders the AxoGen Plan was amended and restated to, among other things, increase the number of shares of common stock authorized for issuance under the plan by 750,000 shares so that the total number of shares authorized for issuance under the AxoGen Plan is 3,500,000 shares. As a result of the Merger, options granted under the AC Plan were assumed by the Company so that each stock option pursuant to the AC Plan so assumed continued to have, and be subject to, the same terms and conditions of such stock option immediately prior to the Merger, except that (i) each AC Plan stock option is exercisable for that number of shares of Company common stock equal to the product of the number of shares of AC common stock that were issuable upon exercise of such stock option immediately prior to the Merger multiplied by the Closing Ratio (“as defined in the Merger Agreement”) and (ii) the per share exercise price for the shares of Company common stock issuable upon the exercise of such assumed stock option will be equal to the quotient determined by dividing the exercise price per share of AC common stock at which such stock option was exercisable immediately prior to the Merger by the Closing Ratio. The options to employees typically vest 12.5% every six months over a four-year period and those to directors and certain executive officers have vested 25% per quarter over one year or had no vesting period. Options issued to consultants vest over the service period ranging from three to ten years. Options have terms ranging from seven to ten years.

 

Stock-based compensation expense was $956,449 and $671,887 for 2014 and 2013, respectively.

 

The following is a summary of stock option activity:

 

 

The average fair value of options granted at market during 2014 and 2013 was $3.57 and $3.72 per option, respectively.

 

The intrinsic value of options exercised during the years ended December 31, 2014 and 2013 was approximately $266,000 and $48,000, respectively. The intrinsic value of options outstanding at December 31, 2014 and 2013 was approximately $1,535,000 and $3,571,000, respectively. The intrinsic value of options exercisable at December 31, 2014 and 2013 was approximately $1,278,000 and $2,487,000, respectively.

 

Total future compensation expense related to nonvested awards is expected to be approximately $2,120,000 at December 31, 2014 which is expected to be recognized over a weighted average period of 2.19 years. The following table represents non-vested share-based payment activity with employees for the years ended December 31, 2014 and 2013: