Annual report pursuant to Section 13 and 15(d)

Stock Plans

Stock Plans

12 Months Ended

Dec. 31, 2017

13. Stock Plans

In August 2015, our stockholders approved the 2015 Omnibus Equity Incentive Plan, or the 2015 Plan. The 2015 Plan, as amended in August 2016, authorized a total of 2,500,000 shares of our common stock for issuance to employees, directors, officers, consultants and advisors. On December 31, 2017, options to purchase 1,504,000 shares of our common stock were outstanding under the 2015 Plan.

In February 2014, our Board adopted the 2014 Incentive Plan, or the 2014 Plan, pursuant to which 454,546 shares of our common stock were authorized for issuance to employees, directors, officers, consultants and advisors. On December 31, 2017, options to purchase 278,925 shares of our common stock were outstanding under the 2014 Plan. Upon receipt of stockholder approval of the 2015 Plan, the 2014 Plan was terminated.

In May 2009, we granted 111,819 and 56,364 non-qualified stock options outside of our stock option plans to Dr. Rubin and Mr. Bhonsle, respectively, at an exercise price of $4.34 that vested over 48 months from the grant date.

In October 2007, we granted 79,546 non-qualified stock options outside of our stock option plans to Dr. Rubin, at an exercise price of $13.20 per share that vested over 48 months from the grant date. These options expired by their terms in October 2017.

In July 2002, we adopted the 2002 Stock Incentive Plan (“2002 Plan”). The 2002 Plan, as amended in 2005, authorized a total of approximately 1.3 million shares of our common stock for issuance to employees, officers, directors, consultants, and advisers. The exercise prices of options granted under the 2002 Plan were 100% of the fair market value of our common stock on the date of grant. The 2002 Plan expired by its terms in July 2012. On December 31, 2017, options to purchase an aggregate of 583,758 shares of our common stock were outstanding under the 2002 Plan.

In August 2001, we adopted the 2001 Employee Non-Qualified Stock Option Plan (“2001 NQ Plan”) pursuant to which 318,182 shares of common stock were authorized for issuance for option grants to employees and consultants who are not officers or directors of Titan. The exercise prices of options granted under the 2001 NQ Plan were 100% of the fair market value of our common stock on the date of grant. The 2001 Stock Option Plan expired by its terms in August 2011. On December 31, 2017, options to purchase an aggregate of 193,465 shares of our common stock were outstanding under the 2001 NQ Plan.

Activity under our stock plans, as well as non-plan activity, is summarized below (shares in thousands):

	Shares or Awards Available For Grant		Number of Options and Awards Outstanding		Weighted Average Exercise Price
Balance at December 31, 2014		282		1,269	$	6.40
Increase in shares reserved		1,364		—		—
Options granted		(700)		700	$	4.46
Options expired		—		(20)	$	13.27
Awards issued		—		(66)	$	—
Termination of option plan		(32)		—	$	—
Balance at December 31, 2015		914		1,883	$	5.83
Increase in shares reserved		1,136		—		—
Options granted		(168)		168	$	5.10
Options exercised		—		(8)	$	3.37
Options expired		—		(41)	$	10.85
Balance at December 31, 2016		1,882		2,002	$	5.67
Options granted		(946)		946	$	2.55
Options cancelled		60		(114)	$	5.27
Options expired		—		(106)	$	13.11
Balance at December 31, 2017		996		2,728	$	4.32

Options to purchase approximately 2.1 million and 1.7 million shares were exercisable at December 31, 2017 and 2016, respectively. The options outstanding at December 31, 2017 have been segregated into five ranges for additional disclosure as follows (options in thousands):

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$1.25 - $2.89		519		5.96	$	1.42		122	$	1.37
$2.90 - $3.95		666		8.28	$	3.67		458	$	3.57
$3.96 - $4.72		421		1.56	$	4.33		420	$	4.33
$4.73 - $5.41		588		7.99	$	5.10		574	$	5.10
$5.42 - $12.98		534		3.22	$	7.07		534	$	7.07
$1.25 - $12.98		2,728		5.75	$	4.32		2,108	$	4.90

We use the Black-Scholes-Merton option-pricing model with the following assumptions to estimate the stock-based compensation expense for the years ended December 31, 2017, 2016 and 2015:

	Years Ended December 31,
	2017			2016			2015
Weighted-average risk-free interest rate		2.13	%		1.53	%		1.88	%
Expected dividend payments		—			—			—
Expected holding period (years)(1)		5.90			6.53			6.48
Weighted-average volatility factor(2)		0.90			0.92			1.16
Estimated forfeiture rates for options granted		27	%		29	%		30	%

(1)

Expected holding period is based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and the expectations of future employee behavior.

(2)

Weighted average volatility is based on the historical volatility of our common stock.

(3)

Estimated forfeiture rates are based on historical data.

During the year ended December 31, 2017, options to purchase 946,000 shares were granted to employees, directors and consultants. Based upon the above methodology, the weighted-average fair value of options and awards granted during the years ended December 31, 2017, 2016 and 2015 was $1.91, $3.10 and $3.67, respectively.

The following table summarizes the stock-based compensation expense and impact on our basic and diluted loss per share for the years ended December 31, 2017, 2016 and 2015:

	Years Ended December 31,
(in thousands, except per share amounts)	2017		2016		2015
Research and development	$	519	$	386	$	341
General and administrative		1,168		653		685
Total stock-based compensation expenses	$	1,687	$	1,039	$	1,026
Increase in basic net income (loss) per share	$	(0.08)	$	(0.05)	$	(0.05)
Increase in diluted net income (loss) per share	$	(0.08)	$	(0.05)	$	(0.05)

The following table summarizes option activity for the year ended December 31, 2017:

(in thousands, except per share amounts)	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2017		2,002	$	5.67		5.68	$	203
Granted		946		2.55
Cancelled		(114)		5.27
Expired		(106)		13.11
Outstanding at December 31, 2017		2,728	$	4.32		5.75	$	30
Exercisable at December 31, 2017		2,108	$	4.90		5.34	$	8

As of December 31, 2017, there was approximately $710,000 of total unrecognized compensation expense related to non-vested stock options. This expense is expected to be recognized over a weighted-average period of 1.2 years.

There were no outstanding stock awards at December 31, 2017.