Quarterly report pursuant to Section 13 or 15(d)

Common Stock

v2.3.0.15
Common Stock
 9 Months Ended
Sep. 30, 2011
Common Stock and Comprehensive Loss (Income) [Abstract]  
COMMON STOCK
5. COMMON STOCK
[a] Authorized
25,000,000 authorized common shares, par value of $0.001, and 5,000,000 preferred shares, par value of $0.001.
[b] Issued and Outstanding Shares
During the nine month period ended September 30, 2011 the Company issued 54,761 common shares (period ended September 30, 2010 — 156,472) to satisfy stock option exercises.
[c] Stock options
2010 Performance Incentive Plan
At the 2011 Annual Meeting of Stockholders of the Company held on May 26, 2011, stockholders of the Company approved an amendment to the Company’s 2010 Performance Incentive Plan. As a result of this amendment, the 2010 Plan was amended to provide for an increase in the total shares of common stock available for issuance under the 2010 Plan from 450,000 to 1,050,000. As at September 30, 2011 the Company has reserved, pursuant to various plans, 1,567,974 common shares for issuance upon exercise of stock options by employees, directors, officers and consultants of the Company, of which 762,441 are reserved for options currently outstanding, and 805,533 are available for future option grants.
Stock Option Summary
Options vest in accordance with terms as determined by the board of directors of the Company, or the Board, typically over four years for employee grants and one to three years for Board option grants. The expiry date for each option is set by the Board, which is typically seven to ten years. The exercise price of the options is determined by the Board, but generally will be at least equal to the fair value of the share at the grant date.
Stock option transactions and the number of stock options outstanding are summarized below:
                 
    Number        
    of     Weighted  
    Optioned     Average  
    Common     Exercise  
    Shares     Price  
    #     $  
Balance, December 31, 2010
    744,913       8.73  
Option grants
    95,600       15.15  
Option expirations/cancellations
    (6,320 )     13.93  
Option exercises
    (54,761 )     3.90  
Option forfeitures
    (16,991 )     17.82  
 
           
Balance, September 30, 2011
    762,441       9.64  
The fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model based on the weighted-average assumptions noted in the following table:
                 
    Nine months ended  
    September 30,  
    2011     2010  
Risk-free interest rates
    2.16 %     2.36 %
Expected dividend yield
    0 %     0 %
Expected life
    6  years     6  years
Expected volatility
    76 %     75 %
The expected life was calculated based on the simplified method as permitted by the SEC’s Staff Accounting Bulletin 110, Share-Based Payment. The computation of expected volatility was based on the historical volatility of comparable companies from a representative peer group selected based on industry and market capitalization. The Company considers the use of these methods of calculating expected term and volatility appropriate because of the lack of sufficient historical exercise data following the reverse takeover of Sonus Pharmaceuticals, Inc., or Sonus. The risk-free interest rate was based on a U.S. Treasury instrument whose term is consistent with the expected life of the stock options. In addition to the assumptions above, as required under ASC 718, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.
The results for the periods set forth below included share-based compensation expense in the following expense categories of the consolidated statements of loss:
                                 
    Three Months     Nine Months  
    Ended     Ended  
    September 30,     September 30,  
(In thousands)   2011     2010     2011     2010  
    $     $     $     $  
Research and development
    181       88       493       231  
General and administrative
    131       61       373       231  
 
                       
 
                               
Total share-based compensation
    312       149       866       462  
As of September 30, 2011 and December 31, 2010 the total unrecognized compensation expense related to stock options granted is $2,949,627 and $2,962,000 respectively, which is expected to be recognized into expense over a period of approximately four years.
As of September 30, 2011 and December 31, 2010 a total of 2,042,510 and 2,332,214 options and warrants, respectively, have not been included in the calculation of potential common shares as their effect on diluted per share amounts would have been anti-dilutive.
[d] Stock Warrants
As of September 30, 2011, there were exercisable warrants outstanding to purchase 1,587,301 shares of common stock at an exercise price of $20 per share, expiring in October 2015. No warrants were exercised during the nine months ended September 30, 2011 or nine months ended September 30, 2010.
The estimated fair value of warrants issued is reassessed at each balance sheet date using the Black-Scholes option pricing model. The following assumptions were used to value the warrants on the following balance sheet dates:
                 
    Nine months ended  
    September 30,  
    2011     2010  
Risk-free interest rates
    0.71 %     —  
Expected dividend yield
    0 %     —  
Expected life
    4.06  years     —  
Expected volatility
    76 %     —