8. Stock Compensation Plan

The Company originally adopted the Oragenics, Inc. 2002 Stock Option and Incentive Plan (the “Stock Incentive Plan”) in September 2002 which was subsequently amended on several occasions until it was amended and restated as the Company’s 2012 Equity Incentive Plan (the “2012 Incentive Plan”). In May 2017, the 2012 Incentive Plan was amended to increase the available number of shares authorized for issuance under the 2012 Incentive Plan by 1,500,000 shares of common stock from 4,000,000 shares of common stock to 5,500,000 shares of common stock. In December 2017, the 2012 Incentive Plan was amended to increase the available number of shares authorized for issuance under the 2012 Incentive Plan by 2,000,000 shares of common stock from 5,500,000 shares of common stock to 7,500,000 shares of common stock.

On January 8, 2018, the Company announced a reverse split of its common stock, $0.001 par value, at a ratio of 1 for 10, which became effective January 19, 2018 (See Note 14 - Subsequent Events). The reverse split also applied to common stock issuable upon the exercise of the Company’s outstanding stock options.

To date, and after giving effect to the reverse stock split, 224,750 shares have been issued under the 2012 Incentive Plan. As a result of such issuances, and after giving effect to the reverse stock split, as of December 31, 2017 there is currently an aggregate of 525,250 shares available for issuance under the 2012 Incentive Plan, of which 260,633 shares are covered by outstanding option awards and 264,617 shares are available for future awards under the 2012 Incentive Plan.

The purpose of the 2012 Incentive Plan is to advance the interests of the Company by affording certain employees and directors of the Company and key consultants and advisors an opportunity to acquire or increase their proprietary interests in the Company. The 2012 Incentive Plan authorizes the grant of stock options (incentive and non-statutory), stock appreciation rights and restricted stock. Options are granted at the fair market value of the Company’s stock on the date of grant. Options generally vest over a period of two to three years from their respective grant dates and expire 10 years from the date of grant. As of December 31, 2017 and 2016, the Company had not awarded any stock appreciation rights under the 2012 Incentive Plan.

Recipients of stock awards under our 2012 Incentive Plan become the owner of record of the stock immediately upon grant, which may be subject to certain restrictions. The balance of unvested restricted stock will be forfeited and automatically transferred back to us at no cost upon the termination of the recipient’s employment. Upon vesting of restricted stock that is made to recipients who are employees, the recipient has the option to settle minimum withholding taxes by electing to have us withhold otherwise deliverable shares having a fair market value equal to the required tax obligations (“net-settlement”). The net-settlement shares are then immediately cancelled and retired and reduce the shares available for issuance under the Company’s 2012 Incentive Plan.

 

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date of grant. The assumptions employed in the calculation of the fair value of share-based compensation expense were calculated as follows for all years presented:

 

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Expected dividend yield — based on the Company’s historical dividend yield.

 

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Expected volatility — based on the Company’s historical market price at consistent points in a period equal to the expected life of the options.

 

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Risk-free interest rate — based on the US Treasury yield curve in effect at the time of grant.

 

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Expected life of options — based on the Company’s historical life of options exercised, giving consideration to the contractual terms of the grants, vesting schedules and expectations of future employee behavior.

The following table summarizes the assumptions used to estimate the fair value of stock options granted during the years ended December 31, 2017 and 2016:

 

		2017		2016
Expected dividend yield		0%		0%
Weighted-average expected volatility		143%		142% - 147%
Weighted-average risk-free interest rate		2.15%		1.59% - 2.40%
Expected life of options		10 Years		10 Years

Total compensation cost related to stock options was $435,218 and $472,780 for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, there was $273,182 of unrecognized compensation costs related to stock options, which is expected to be recognized over a weighted average period of 1.0 years.

The following table represents stock option activity as of and for the two years ended December 31, 2017 and 2016, respectively:

 

		Number of Options				Option Price Per Share		Weighted Average Exercise Price
Outstanding at December 31, 2015			147,105			$7.80 – 104.00		$	20.00
Forfeited			(57,477	)		8.40 – 54.00			24.00
Granted			72,525			5.50 – 8.40			6.90
Outstanding at December 31, 2016			162,153			$5.50 – 104.00		$	12.80
Forfeited			(7,120	)		6.20 – 54.00			16.50
Granted			105,600			3.70			3.70
Outstanding at December 31, 2017			260,633			$3.70 – 104.00		$	9.00
Exercisable at December 31, 2017			105,821			$5.50 - 104.00		$	12.10

The total grant date fair value of options vested during the years ended December 31, 2017 and 2016 was $445,589 and $572,786, respectively.