This excerpt taken from the ASTM 10-K filed Sep 13, 2007.
Performance-Based Stock Options
During the year ended June 30, 2007, the Board of Directors granted 2,800,400 performance-based stock options to certain key employees in three equal tranches of 933,467 options. The weighted average grant-date fair value of performance-based options granted under the Companys Option Plans during the year ended June 30, 2007 was $0.95. These performance options have a 10 year life and exercise prices equal to the fair value of the Companys stock at the grant date. Vesting of these performance options is dependent on (i) the passage of time subsequent to the grant date and (ii) meeting certain performance conditions, which relate to our progress in our clinical trial programs, which were established by the Board of Directors. The Board of Directors will determine if the performance conditions have been met. Stock-based compensation expense for these options will be recorded when the Company believes that the vesting of these options is probable based on the progress of its clinical trial programs and other relevant factors. The aggregate estimated fair value of these awards that are outstanding as of June 30, 2007 is approximately $2,400,000.
There are three tranches of performance-based options that vest upon the satisfaction of performance conditions, all of which vest based on progress toward clinical trial or product successes within a certain timeframe.
AASTROM BIOSCIENCES, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The first tranche would vest if performance conditions are met by March 2008; the second tranche would vest if performance conditions are met by June 2011; and, the third tranche would vest if performance conditions are met by June 2012. None of these tranches can vest in less than one year from the date of the performance-based option grant. Each tranche of options is forfeited if its performance conditions are not met by the required timeframe, and vesting for any tranche of options is not dependent on the vesting of the other tranches of options.
For the year ended June 30, 2007, management reviewed the progress toward the performance conditions necessary for these options to vest and concluded that it was not yet probable that the performance conditions of any of the tranches of options would be met and, accordingly, no compensation expense has been recorded
The fair value of the performance-based stock option grants for the reported periods is estimated on the date of the grant using the Black-Scholes option-pricing model using the assumptions noted in the following table.
The following table summarizes the activity for performance-based stock options for the indicated period: