TYRATECH • ANNUAL REPORT 2014 • PAGE 34
N o t e s t o C o n s o l i d at e d F i n a n c i a l
S t at e m e n t s ( c o n t ' d )
During 2014, the Company issued equity method warrants to
certain service providers in consideration for expenses incurred
with the Company's stock issuances. Approximately 3.1 million
warrants were issued with a fair market value at the date of
issuance of approximately $0.2 million.
Valuation assumptions:
Expected volatility 65.29%
Expected term (years) 3.0
Risk-free interest rate 0.69%
(10) STOCK BASED COMPENSATION
Compensation Plan
On 23 May 2007, the Board of Directors approved the TyraTech,
Inc. 2007 Equity Compensation Plan (the Plan), as amended,
which authorises up to a maximum of ten percent of the
issued share capital of the Company (26,232,307 shares at 31
December 2014) to be made available for granting of awards to
all employees and non-employee directors. These share awards
can be in the form of options to purchase capital stock, stock
appreciation rights (SARs), restricted shares, and other option
stock based awards the Board of Directors' Remuneration
Committee shall determine. The Remuneration Committee,
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 the
Plan.
Stock Appreciation Rights
During the year ended 31 December 2014, the Company granted
4,355,000 (2013: 2,505,000) SARs. SARs 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 common stock to the employee upon exercise of the
SAR. The SARs have ten year terms and vest and become fully
exercisable over varying periods between one to four years from
the date of grant.
The fair value of each SAR was estimated on the grant date using
the Black-Scholes option pricing model that used the assumptions
in the following table. The fair value is amortised to compensation
expense on a straight-line basis over the expected term. The
Company estimated the expected term of the SARs using an
approach that approximated the "simplified approach." Using
this approach, the Company assigned an expected term for
grants with four year graded vesting. The expected stock price
volatility was determined by examining the historical volatilities
for 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 analyse 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 SARs. The expected dividend
assumption is based on the Company's history and expectation
of dividend payouts.
2014 2013
Valuation assumptions
Expected dividend yield 0.00% 0.00%
Expected volatility 79.80% 82.00%
Expected term (years) 5.5 – 6.3 5.5-6.3
Risk-free interest rate 0.7% -1.69% 1.30% - 2.20%
