Notes to Consolidated Financial Statements (continued)
Notes to Consolidated Financial Statements
(continued)
38
Summary Unit Grant Information
The Company determined the estimated unit price of the Company at the measurement date by using a combination of an independent valuation of the Company´s units and internal analysis of milestones of the Company throughout the year.
E
ffective with the recapitalization from a limited liability company to a corporation on May 23, 2007 and the IPOPO the units granted to employees and nonemployees were converted to shares based upon the IPOPO conversion of 1 unit to 0.8606 shares.
A
summary of unit grant activity under the unit grant plan is summarized as follows:
N
umber of shares
*
O
utstanding at December 31, 2006
1,187,628
Granted
626,517
Forfeited
(55,939
)
O
utstanding at December 31, 2007
1,758,206
Granted
—
Forfeited
(242,315
)
O
utstanding at December 31, 2008
1,515,891
*Units granted under the plan converted to shares
The total shares granted under unit grant agreements included in the statement of shareholders´ equity include both vested and non-vested shares.
(b) 2007 Equity Compensation Plan
O
n May 23, 2007, the Board of Directors approved the TyraTech, Inc. 2007 Equity Compensation Plan which authorizes up to a maximum of 10% of the shares outstanding after the IPOPO (2,200,002 shares based upon the IPOPO) be made available for granting of awards to all employees and nonemployee directors. These share awards can be in the form of options to purchase capital stock, stock appreciation rights (SARARs), restricted shares, and other option stock-based awards the Board of Directors Remuneration Committee shall determine. The Remuneration Committee of our Board of Directors, which is comprised of all independent Directors, determines the number of shares, the term, the frequency and date, the type, the exercise periods, any performance criteria pursuant to which awards may be granted and the restrictions and other terms of each grant of restricted shares in accordance with terms of our Plan.
Stock Appreciation Rights
During the year, the Company granted 415,000 (2007: 737,000) stock appreciation rights (SARARs) to employees and zero (2007: 40,000) SARARs to consultants of the Company. SARARs can be granted with an exercise price less than, equal to or greater than the stock´s fair market value at the date of grant and require the Company to issue stock to the employee upon exercise of the SARAR. The SARARs have ten-year terms and vest and become fully exercisable four years from the date of grant.
The fair value of each SARAR was estimated on the date of grant using the Black-Scholes option-pricing model that used the weighted average assumption in the following table. The fair value is amortised to compensation expense on a straight line basis over the vesting period. The Company estimated the expected term of the SARARs using an approach that approximated the "simplified approach", as outlined in Staff Accounting Bulletin (SAB) No. 107, Share-Based Payments. Using this approach, the Company assigned an expected term of 7 years for grants with four-year graded vesting. The expected stock price volatility was determined by examining the historical volatilities for industry peers and using the Company´s common stock. Industry peers consist of several public companies in the biotechnology industry similar in size, stage of life cycle and financial leverage. The Company will continue to analyze the historical stock price volatility and expected term assumption 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 at grant date whose term was consistent with the expected term of the Company´s SARARs. The expected dividend assumption is based on the Company´s history and expectation of dividend payouts.
2008
2007
Valuation assumptions
Expected dividend yield
0
%
0
%
Expected volatility
78%–83
%
86
%
Expected term (years)
7
7
Risk-free interest rate
2.4%–4.3
%
4.6%–4.8
%
