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STOCKHOLDERS' EQUITY | 12 Months Ended
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Dec. 31, 2016
STOCKHOLDERS' EQUITY |
STOCKHOLDERS' EQUITY | 8. STOCKHOLDERS' EQUITY Sales Agreement On August 28, 2015, we entered into an At Market Issuance Sales Agreement, or the 2015 Sales Agreement, with MLV & Co. LLC, or MLV, pursuant to which we may elect to issue and sell shares of our common stock having an aggregate offering price of up to $50,000,000 from time to time into the open market at prevailing prices through MLV as our sales agent. We will pay MLV an aggregate commission rate equal to up to 3.0% of the gross proceeds of the sales price per share for common stock sold through MLV under the 2015 Sales Agreement. Pursuant to the 2015 Sales Agreement, sales of common stock will be made in such quantities and on such minimum price terms as we may set from time to time. We are not obligated to make any sales of common stock under the 2015 Sales Agreement. As of December 31, 2016, we had not sold any common stock pursuant to the 2015 Sales Agreement. The 2015 Sales Agreement will expire in August 2018 unless extended by the parties. Public Offering On February 4, 2014, we completed an underwritten public offering of 25,875,000 shares of our common stock at a public offering price of $4.00 per share, resulting in net cash proceeds of approximately $96,805,000 after deducting the underwriting discount and offering expenses payable by us. Warrants In connection with each disbursement under a previous loan agreement with the California Institute for Regenerative Medicine, or CIRM, we were obligated to issue to CIRM a warrant to purchase Geron common stock. Such warrants and the underlying common stock were unregistered. We have no further obligations to issue any additional warrants to CIRM. As of December 31, 2016, a warrant to purchase 537,893 shares of our common stock remained outstanding. The warrant was issued to CIRM in August 2011 at an exercise price of $3.98 per share and expires in August 2021. In December 2014, CIRM exercised a warrant to purchase 461,382 shares of our common stock utilizing the net exercise provision in the warrant resulting in the issuance of 168,039 shares of our common stock. On March 31, 2015, a warrant to purchase 235,000 shares of our common stock was exercised at an exercise price of $3.75 per share. We received cash proceeds of approximately $881,000 from the exercise of this warrant. Equity Plans 2002 Equity Incentive Plan The 2002 Equity Incentive Plan, or 2002 Plan, expired in May 2012. Upon the adoption of the 2011 Incentive Award Plan in May 2011 (see below), no further grants of options or stock purchase rights were made from the 2002 Plan. Options granted under the 2002 Plan expire no later than ten years from the date of grant. Option exercise prices were equal to 100% of the fair market value of the underlying common stock on the date of grant. Service-based stock options under the 2002 Plan generally vested over a period of four years from the date of the option grant. Other stock awards (restricted stock awards and restricted stock units) had variable vesting schedules which were determined by our board of directors on the date of grant. All outstanding awards granted under the 2002 Plan remain subject to the terms of the 2002 Plan and the individual award agreements thereunder. 2011 Incentive Award Plan In May 2011, our stockholders approved the adoption of the 2011 Incentive Award Plan, or 2011 Plan. Our board of directors administers the 2011 Plan. The 2011 Plan provides for grants to employees (including officers and employee directors) of either incentive stock options or nonstatutory stock options and stock purchase rights to employees (including officers and employee directors) and consultants (including non-employee directors). As of December 31, 2016, an aggregate of 9,570,535 shares of our common stock were available for future grants of equity awards under the 2011 Plan. Pursuant to the terms of the 2011 Plan, any shares subject to outstanding stock options or outstanding unvested restricted stock awards originally granted under the 2002 Plan that expire or terminate for any reason prior to exercise or settlement or are forfeited because of the failure to meet a contingency or condition required to vest such shares shall become available for issuance under the 2011 Plan. Options granted under the 2011 Plan expire no later than ten years from the date of grant. Option exercise prices shall be equal the fair market value of the underlying common stock on the date of grant. If, at the time we grant an option, the optionee directly or by attribution owns stock possessing more than 10% of the total combined voting power of all classes of our stock, the option exercise price shall be at least 110% of the fair market value of the underlying common stock and shall not be exercisable more than five years after the date of grant. We grant service-based stock options to employees under our 2011 Plan that generally vest over a period of four years from the date of the option grant. Other stock awards (restricted stock awards and restricted stock units) have variable vesting schedules as determined by our board of directors on the date of grant. Under certain circumstances, options may be exercised prior to vesting, subject to our right to repurchase shares subject to such option at the exercise price paid per share. Our repurchase rights would generally terminate on a vesting schedule identical to the vesting schedule of the exercised option. During 2016, we have not repurchased any shares under the 2011 Plan. As of December 31, 2016, we have no shares outstanding subject to repurchase. As of December 31, 2016, our Non-Employee Director Compensation Policy adopted by our board of directors in March 2014 and amended by our board of directors in February 2016 provides for the automatic grant to non-employee directors of the following types of equity awards under the 2011 Plan: First Director Option. Each person who becomes a non-employee director, whether by election by our stockholders or by appointment by our board of directors to fill a vacancy, will automatically be granted an option to purchase 100,000 shares of common stock, or First Director Option, on the date such person first becomes a non-employee director. The First Director Option vests annually over three years upon each anniversary date of appointment to our board of directors. Subsequent Director Option. Each non-employee director (other than any director receiving a First Director Option on the date of the annual meeting) will automatically be granted a subsequent option to purchase 50,000 shares of common stock, a Subsequent Director Option, on the date of the annual meeting of stockholders in each year during such director's service on our board of directors. The Subsequent Director Option vests in full on the earlier of: (i) the date of the next annual meeting of our stockholders or (ii) the first anniversary of the date of grant. 2006 Directors' Stock Option Plan The 2006 Directors' Stock Option Plan, or 2006 Directors Plan, was terminated by our board of directors and replaced by the 2011 Plan in March 2014. No further grants of options were made from the 2006 Directors Plan upon the 2006 Directors Plan's termination. All outstanding awards granted under the 2006 Directors Plan remain subject to the terms of the 2006 Directors Plan and the individual award agreements made thereunder. The options granted to non-employee directors under the 2006 Directors Plan were nonstatutory stock options, and they expire no later than ten years from the date of grant. The option exercise price was equal to the fair market value of the underlying common stock on the date of grant. The First Director Option granted to non-employee directors under the 2006 Directors Plan vested annually over three years upon each anniversary date of appointment to the board of directors. The Subsequent Director Option granted to non-employee directors on the date of the annual meeting of stockholders in each year during such director's service on our board of directors under the 2006 Directors Plan vested one year from the date of grant. Aggregate option and award activity for the 2002 Plan, 2011 Plan and 2006 Directors Plan is as follows:
|  |  |  | Outstanding Options
|  | Shares Available For Grant |  | Number of Shares |  | Weighted Average Exercise Price Per Share |  | Weighted Average Remaining Contractual Life (In years) |  | Aggregate Intrinsic Value (In thousands)
Balance at December 31, 2015 |  |  | 12,054,916 |  |  | 17,205,683 |  | $3.29 |  |  |  |
Options granted |  |  | (2,834,000 | ) |  | 2,834,000 |  | $2.56 |  |  |  |
Awards granted |  |  | (21,541 | ) |  | — |  | $ — |  |  |  |
Options exercised |  |  | — |  |  | (328,486 | ) | $1.50 |  |  |  |
Options cancelled/forfeited |  |  | 371,160 |  |  | (585,910 | ) | $5.34 |  |  |  |
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Balance at December 31, 2016 |  |  | 9,570,535 |  |  | 19,125,287 |  | $3.15 |  | 6.65 |  | $3,816
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Options exercisable at December 31, 2016 |  |  |  |  |  | 14,074,457 |  | $2.99 |  | 6.05 |  | $3,718
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Options fully vested and expected to vest at December 31, 2016 |  |  |  |  |  | 18,694,300 |  | $3.14 |  | 6.60 |  | $3,815
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The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on Geron's closing stock price of $2.07 per share as of December 30, 2016, which would have been received by the option holders had all the option holders exercised their options as of that date. We have not granted any options with an exercise price below or greater than the fair market value of our common stock on the date of grant in 2016, 2015 or 2014. As of December 31, 2016, 2015 and 2014, there were 14,074,457, 11,356,232 and 9,129,576 exercisable options outstanding at weighted average exercise prices per share of $2.99, $2.98 and $3.12, respectively. The total pretax intrinsic value of stock options exercised during 2016, 2015 and 2014 was $595,000, $2,398,000 and $989,000, respectively. Cash received from the exercise of options in 2016, 2015 and 2014 totaled approximately $493,000, $2,205,000 and $1,286,000, respectively. Information about stock options outstanding as of December 31, 2016 is as follows:
|  | Options Outstanding
Exercise Price Range |  | Number of Shares |  | Weighted Average Exercise Price Per Share |  | Weighted Average Remaining Contractual Life (In years)
$1.10 - $1.51 |  |  | 5,668,162 |  | $1.45 |  | 5.89
$1.55 - $2.54 |  |  | 5,017,031 |  | $2.27 |  | 7.25
$2.74 - $5.01 |  |  | 6,347,008 |  | $4.55 |  | 7.28
$5.09 - $9.32 |  |  | 2,093,086 |  | $5.59 |  | 5.36
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$1.10 - $9.32 |  |  | 19,125,287 |  | $3.15 |  | 6.65
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Aggregate restricted stock activity for the 2011 Plan is as follows:
|  | Number of Shares |  | Weighted Average Grant Date Fair Value Per Share |  | Weighted Average Remaining Contractual Term (In years)
Non-vested restricted stock at December 31, 2015 |  |  | 500 |  | $4.65 |  | 0.10
Granted |  |  | 21,541 |  | $2.44 |  |
Vested |  |  | (22,041 | ) | $2.49 |  |
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Non-vested restricted stock at December 31, 2016 |  |  | — |  | $— |  | —
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The weighted average grant date fair value of restricted stock granted during the years ended December 31, 2016, 2015 and 2014 was $2.44, $3.75 and $2.67 per share, respectively. The total fair value of restricted stock that vested during 2016, 2015 and 2014 was $54,000, $275,000 and $782,000, respectively. Employee Stock Purchase Plan In March 2014, our board of directors adopted the 2014 Employee Stock Purchase Plan, or 2014 Purchase Plan. The 2014 Purchase Plan was approved by our stockholders in May 2014. The 2014 Purchase Plan replaced the 1996 Employee Stock Purchase Plan, or 1996 Purchase Plan, which was terminated effective as of the date the 2014 Purchase Plan was approved by our stockholders. Under the 2014 Purchase Plan, we are authorized to sell to eligible employees up to an aggregate of 1,000,000 shares of Geron common stock. As of December 31, 2016, an aggregate of 84,885 shares of our common stock have been issued under the 2014 Purchase Plan since its adoption. The 2014 Purchase Plan is comprised of a series of offering periods, each with a maximum duration (not to exceed 12 months) with new offering periods commencing on January 1st and July 1st of each year. The date an employee enters the offering period will be designated as the entry date for purposes of that offering period. An employee may participate only in one offering period at a time. Each offering period consists of two consecutive purchase periods of six months' duration, with the last day of such period designated a purchase date. Under the terms of the 2014 Purchase Plan, employees can choose to have up to 10% of their annual salary withheld to purchase our common stock. An employee may not make additional payments into such account or increase the withholding percentage during the offering period. The purchase price per share at which common stock is purchased by the employee on each purchase date within the offering period is equal to 85% of the lower of (i) the fair market value per share of Geron's common stock on the employee's entry date into that offering period or (ii) the fair market value per share of Geron's common stock on the purchase date. If the fair market value of Geron's common stock on the purchase date is less than the fair market value at the beginning of the offering period, a new 12 month offering period will automatically begin on the first business day following the purchase date with a new fair market value. Stock-Based Compensation for Employees and Directors We measure and recognize compensation expense for all share-based payment awards made to employees and directors, including employee stock options, restricted stock awards and employee stock purchases, based on grant-date fair values for these instruments. We use the Black Scholes option-pricing model to estimate the grant-date fair value of our stock options and employee stock purchases. The fair value for service-based restricted stock awards is determined using the fair value of our common stock on the date of grant. As stock-based compensation expense recognized in the statements of operations for the years ended December 31, 2016, 2015 and 2014 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures but at a minimum, reflects the grant-date fair value of those awards that actually vested in the period. Forfeitures have been estimated at the time of grant based on historical data and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We recognize stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period. The following table summarizes the stock-based compensation expense related to stock options, restricted stock awards and employee stock purchases for the years ended December 31, 2016, 2015 and 2014 which was allocated as follows:
|  | Year Ended December 31, |
(In thousands) |  | 2016 |  | 2015 |  | 2014 |
Research and development |  | $ | 1,275 |  | $ | 2,139 |  | $ | 2,545 |
Restructuring charges |  |  | — |  |  | 307 |  |  | — |
General and administrative |  |  | 6,970 |  |  | 5,951 |  |  | 5,113 |
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Stock-based compensation expense included in operating expenses |  | $ | 8,245 |  | $ | 8,397 |  | $ | 7,658 |
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Stock-based compensation expense also has been recognized for the modification of the post-termination exercise period for certain stock options previously granted to employees affected by the March 2015 restructuring, which has been included in restructuring charges in our statements of operations. See Note 6 on Restructuring for further discussion of the restructuring. The fair value of stock options granted in 2016, 2015 and 2014 has been estimated at the date of grant using the Black Scholes option-pricing model with the following assumptions:
|  | 2016 |  | 2015 |  | 2014
Dividend yield |  | 0% |  | 0% |  | 0%
Expected volatility range |  | 0.888 to 0.890 |  | 0.874 to 0.884 |  | 0.898 to 0.922
Risk-free interest rate range |  | 1.21% to 1.38% |  | 1.68% to 1.71% |  | 1.64% to 1.92%
Expected term |  | 5.5 yrs |  | 5.5 yrs |  | 5.5 yrs
The fair value of employee stock purchases in 2016, 2015 and 2014 has been estimated using the Black Scholes option-pricing model with the following assumptions:
|  | 2016 |  | 2015 |  | 2014
Dividend yield |  | 0% |  | 0% |  | 0%
Expected volatility range |  | 0.641 to 0.684 |  | 0.654 to 1.392 |  | 0.835 to 1.666
Risk-free interest rate range |  | 0.28% to 0.45% |  | 0.11% to 0.28% |  | 0.06% to 0.15%
Expected term range |  | 6 mos to 12 mos |  | 6 mos to 12 mos |  | 6 mos to 12 mos
Dividend yield is based on historical cash dividend payments and Geron has paid no cash dividends to date. The expected volatility range is based on historical volatilities of our stock since traded options on Geron common stock do not correspond to option terms and the trading volume of options is limited. The risk-free interest rate range is based on the U.S. Zero Coupon Treasury Strip Yields for the expected term in effect on the date of grant for an award. The expected term of options is derived from actual historical exercise and post-vesting cancellation data and represents the period of time that options granted are expected to be outstanding. The expected term of employees' purchase rights is equal to the purchase period. Based on the Black Scholes option-pricing model, the weighted average estimated fair value of stock options granted during the years ended December 31, 2016, 2015 and 2014 was $1.83, $3.06 and $3.57 per share, respectively. The weighted average estimated fair value of employees' purchase rights for the years ended December 31, 2016, 2015 and 2014 was $1.01, $1.64 and $2.10 per share, respectively. As of December 31, 2016, total compensation cost related to unvested share-based payment awards not yet recognized, net of estimated forfeitures, was $10,128,000, which is expected to be recognized over the next 24 months on a weighted-average basis. 401(k) Plan Matching Contributions We sponsor a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code covering all full-time U.S. employees, or the Geron 401K Plan. Participating employees may contribute up to the annual Internal Revenue Service contribution limit. The Geron 401K Plan also permits us to provide discretionary matching and profit sharing contributions. Prior to 2014, our board of directors approved matching contributions for the Geron 401K Plan in our common stock, which vested ratably over four years for each year of service completed by our employees, commencing from the date of hire. Stock-Based Compensation to Service Providers We grant stock options and restricted stock awards to consultants from time to time in exchange for services performed for us. In general, the stock options and restricted stock awards vest over the contractual period of the consulting arrangement. We granted stock options to purchase 75,000 shares of our common stock to consultants in 2014. The fair value of stock options and restricted stock awards held by consultants is recorded as operating expenses over the vesting term of the respective equity awards. In addition, we will record any increase in the fair value of the stock options and restricted stock awards as the respective equity award vests. We recorded stock-based compensation expense of $104,000, $311,000 and $94,000 for the vested portion of the fair value of stock options and restricted stock awards held by consultants in 2016, 2015 and 2014, respectively. We have also issued common stock to non-employee directors, consultants and vendors. For stock issuances where services are to be performed for us, we record a prepaid asset equal to the fair market value of the shares on the date of issuance and amortize the fair value of the shares to our operating expenses on a pro-rata basis as services are performed or goods are received. For stock issuances where services have been performed for us, we record the fair market value of the shares on the date of issuance to offset the amounts owed. In 2016, 2015 and 2014, we issued 21,541, 18,077 and 71,239 shares of common stock, respectively, in exchange for goods or services. In 2016, 2015 and 2014, we recognized approximately $52,000, $53,000 and $158,000, respectively, of expense in connection with stock grants to non-employee directors, consultants and vendors. Common Stock Reserved for Future Issuance Common stock reserved for future issuance as of December 31, 2016 is as follows:
Outstanding stock options |  |  | 19,125,287 |
Options and awards available for grant |  |  | 9,570,535 |
Employee stock purchase plan |  |  | 915,115 |
Warrant outstanding |  |  | 537,893 |
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Total |  |  | 30,148,830 |
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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details. + References No definition available. + Details
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