11. COMMON STOCK

[a] Authorized

50,000,000 authorized common voting share, par value of $0.001, and 5,000,000 preferred shares, par value of $0.001.

[b] Issued and outstanding shares

October 2010 Public Offering

On October 22, 2010, we completed a public offering of 3,174,602 units, with each unit consisting of one share of our common stock and one-half (1/2) of one warrant, at a purchase price of $15.75 per unit for an aggregate offering amount of $50 million.

Each whole warrant is exercisable at any time on or after the date of issuance until the fifth anniversary of the date of issuance at an exercise price of $20, and includes a cashless exercise feature. We account for warrants issued in October 2010 under the authoritative guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, on the understanding that in compliance with applicable securities laws, the registered warrants require the issuance of registered securities upon exercise and do not sufficiently preclude an implied right to net cash settlement. We classify warrants on the accompanying consolidated balance sheet as a liability which is revalued at each balance sheet date subsequent to the initial issuance. We use the Black-Scholes pricing model to value the warrants. Determining the appropriate fair-value model and calculating the fair value of registered warrants requires considerable judgment. On the date of issuance, the Black-Scholes value of the warrant was based on an assumed risk-free rate of 1.17%, volatility of 75% and an expected life of 5 years. Changes in the fair market value of the warrants are reflected in the consolidated statement of loss as gain (loss) on warrants.

The net proceeds to us, after underwriting discounts and commissions and other offering expenses, from the sale of the units were $46.7 million, of which $32.3 million was allocated to common shares and included in additional paid-in capital and $15.4 million was allocated to warrant liability. $1 million of underwriting discounts and commissions and other offering expenses allocated to the value of warrants was expensed in warrant issuance expense on our consolidated statement of loss.

March 2012 Public Offering

On March 21, 2012, we completed a public offering of 4,165,000 shares of our common stock at a purchase price of $12.00 per share. Pursuant to an overallotment option exercised on March 27, 2012 by the underwriters in the offering, an additional offering of 624,750 shares of our common stock were issued at a price of $12.00 per share. The total gross offering amount from the public offering and exercise of the overallotment option was approximately $57.5 million. The total net proceeds to us from the public offering and exercise of the overallotment option, after deducting underwriting discounts and commissions and other offering expenses from the sale of the shares were approximately $53.8 million.

At-The-Market Issuance Sales Agreement

In June 2013, we entered into an At-the-Market Issuance Sales Agreement, or Sales Agreement, with MLV & Co. LLC, or MLV, under which we may offer and sell shares of our common stock having aggregate sales proceeds of up to $25 million from time to time through MLV as our sales agent. Sales of our common stock through MLV, if any, will be made by any method permitted that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, including by means of ordinary brokers’ transactions on The NASDAQ Capital Market or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise agreed upon by us and MLV. MLV will use commercially reasonable efforts to sell our common stock from time to time, based upon instructions from us (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay MLV a commission of up to 3.0% of the gross sales proceeds of any shares of common stock sold through MLV under the Sales Agreement. We are not obligated to make any sales of common stock under the Sales Agreement. The offering of our shares of common stock pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms.

As of December 31, 2014, we have offered and sold 809,214 shares of our common stock pursuant to our At-the-Market Issuance Sales Agreement with MLV & Co. LLC. These sales resulted in gross proceeds to us of approximately $3.0 million and offering expenses of $0.1 million. As of September 30, 2014, shares of our common stock having an aggregate value of approximately $22.0 million remained available for sale under this offering program.

July 2014 Registered Offering

On July 2, 2014, we completed an underwritten registered offering pursuant to which we sold 5,559,866 Series A units at a price per unit of $3.48 and 1,340,538 Series B units at a price per unit of $3.47.

Each Series A unit consisted of one share of common stock and a Series A warrant to purchase up to one-half of one share of common stock at an initial exercise price of $4.00 per share. Each Series A warrant is exercisable at any time on or after the date of issuance until the fifth anniversary of the issuance of the Series A warrants.

Each Series B unit consisted of a Pre-Funded Series B warrant to purchase up to one share of common stock at an initial exercise price of $0.01 per share and a Series B warrant to purchase up to one-half of one share of common stock at an initial exercise price of $4.00 per share. Each Pre-Funded Series B warrant and Series B warrant is exercisable at any time on or after the date of issuance until the fifth anniversary of the issuance of the Pre-Funded Series B warrants and Series B warrants, respectively.

We received net proceeds of approximately $22.4 million, after deducting underwriting discounts and commissions and offering expenses. Gross proceeds of $24.0 million and underwriting discounts and commissions and offering expenses of $1.6 million were allocated as follows:

The Series A and Series B common stock warrants are classified as liabilities. The underwriting discount and offering expenses allocated to the Series A and Series B common stock warrants have been expensed in the Consolidated Statement of Loss.

The common stock and Series B prefunded common stock warrants are classified as equity. The underwriting discount and offering expenses allocated to the common stock and Series B prefunded common stock warrants have been charged against the allocated gross proceeds.

Stock Option Exercises

During the year ended December 31, 2014, we issued 10,000 and 203,148 shares of common stock to satisfy stock option exercises and restricted stock unit settlements, respectively, compared with the issuance of 3,475 and 47,495 shares of common to satisfy stock option exercises and restricted stock unit settlements, respectively, for the years ended December 31, 2013. For the year ended December 31, 2012 we issued 117,347 shares of common stock to satisfy stock option exercises. There were no restricted stock unit settlements in 2012.

[c] Stock options

As at December 31, 2014 we had reserved, pursuant to our 2010 Performance Incentive Plan, 2,906,777 common shares for issuance upon exercise of stock options and settlement of restricted stock units by employees, directors, officers and consultants of ours, of which 1,283,419 are reserved for options currently outstanding, 680,201 are reserved for restricted stock units currently outstanding and 943,157 are available for future equity award grants under our 2010 Performance Incentive Plan. As of December 31, 2013 1,016,553 shares were available for equity award grants under our 2010 Performance Incentive Plan.

2010 Performance Incentive Plan

At our 2010 Annual Meeting of Stockholders held on May 26, 2011, our stockholders approved an amendment to our 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. At our 2013 Annual Meeting of Stockholders held on May 24, 2013, our stockholders approved an amendment to our 2010 Performance Incentive Plan. As a result of this amendment, the 2010 Plan was further amended to provide for an increase in the total shares of common stock available for issuance under the 2010 Plan from 1,050,000 to 2,050,000.

Under the plan, we may grant options to purchase common shares or restricted stock units to our employees, directors, officers and consultants. The exercise price of the options is determined by our board of directors but will be at least equal to the fair value of the common shares at the grant date. The options vest in accordance with terms as determined by our board of directors, typically over three to four years for options issued to employees and consultants, and over one to three years for members of our board of directors. The expiry date for each option is set by our board of directors with a maximum expiry date of ten years from the date of grant.

Options remain outstanding under a number of share option plans that had been approved by shareholders prior to the approval of the 2010 Performance Incentive Plan: (a) the Incentive Stock Option, Nonqualified Stock Option and Restricted Stock Purchase Plan – 1991 (1991 Plan), (b) the 1999 Nonqualified Stock Incentive Plan (1999 Plan), (c) the 2000 Stock Incentive Plan (2000 Plan), (d) the 2007 Performance Incentive Plan (2007 Plan) and (e) the OncoGenex Technologies Inc. Stock Option Plan (OncoGenex Technologies Plan).

ASC 718 Compensation – Stock Compensation

We recognize expense related to the fair value of our stock-based compensation awards using the provisions of ASC 718. We use the Black-Scholes option pricing model as the most appropriate fair value method for our stock options and recognize compensation expense for stock options on a straight-line basis over the requisite service period. In valuing our stock options using the Black-Scholes option pricing model, we make assumptions about risk-free interest rates, dividend yields, volatility and weighted average expected lives, including estimated forfeiture rates of the options.

The expected life was calculated based on the simplified method as permitted by the SEC’s Staff Accounting Bulletin 110, Share-Based Payment. We consider the use of the simplified method appropriate because we believe our historical stock option exercise activity may not be indicative of future stock option exercise activity because of the AFFINITY clinical data results we expect to receive by late 2015 or early 2016, the structural changes to our business that may result and the potential impact of that data on our business operations and future stock option exercise activity. The expected volatility of options granted was calculated based on the historical volatility of the shares of our common stock. The risk-free interest rate is 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. Forfeiture rates are estimated using historical actual forfeiture rates. These rates are adjusted on a quarterly basis and any change in compensation expense is recognized in the period of the change. We have never paid or declared cash dividends on our common stock and do not expect to pay cash dividends in the foreseeable future.

The estimated fair value of stock options granted in the respective periods was determined using the Black-Scholes option pricing model using the following weighted average assumptions:

The weighted average fair value of stock options granted during the year ended December 31, 2014, 2013 and 2012 was $6.52, $8.07 and $9.86 per share, respectively.

The results for the periods set forth below included stock-based compensation expense in the following expense categories of the consolidated statements of loss (in thousands):

Options vest in accordance with terms as determined by our board of directors, typically over three or four years for employee and consultant grants and over one or three years for board of director option grants. The expiry date for each option is set by our board of directors with, which is typically seven to ten years. The exercise price of the options is determined by our board of directors but is 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:

The following table summarizes information about stock options outstanding at December 31, 2014 regarding the number of ordinary shares issuable upon: (1) outstanding options and (2) vested options.

(1) Number of common shares issuable upon exercise of outstanding options:

(2) Number common shares issuable upon exercise of vested options:

As at December 31, 2014 the total unrecognized compensation expense related to stock options granted was $2.7 million, which is expected to be recognized into expense over a period of approximately 2.5 years.

The estimated grant date fair value of stock options vested during the years ended December 31, 2014, 2013 and 2012 was $1.9 million, $1.8 million and $1.6 million, respectively.

The aggregate intrinsic value of options exercised was calculated as the difference between the exercise price of the stock options and the fair value of the underlying common stock as of the date of exercise. The aggregate intrinsic value of options exercised for the years ended December 31, 2014, 2013 and 2012 was $51,100, $34,000 and $1.2 million, respectively. At December 31, 2014, the aggregate intrinsic value of the outstanding options was $4,680 and the aggregate intrinsic value of the exercisable options was zero.

[d] Restricted Stock Unit Awards

We grant restricted stock unit awards that generally vest and are expensed over a four year period. We also grant restricted stock unit awards that vest in conjunction with certain performance conditions to certain executive officers and key employees. At each reporting date, we are required to evaluate whether achievement of the performance conditions is probable. Compensation expense is recorded over the appropriate service period based upon our assessment of accomplishing each performance provision. For the years ended December 31, 2014, 2013 and 2011, $2.2 million, $1.1 million and $0.6 million, respectively, of stock based compensation expense was recognized related to these awards.

The following table summarizes our restricted stock unit award activity during the years ended December 31, 2014, 2013 and 2012:

As of December 31, 2014, we had approximately $3.5 million in total unrecognized compensation expense related to our restricted stock unit awards which is to be recognized over a weighted-average period of approximately 2.8 years.

[e] Stock Warrants

The following is a summary of outstanding warrants to purchase common stock at December 31, 2014:

For the year ended December 31, 2014, all the Pre-Funded Series B warrants were exercised at a per unit price of $0.01, a total of 1,340,538 shares of common stock were issued for proceeds of $13,405. No warrants from the October 2010 financing and Series A and Series B warrants from the July 2014 financing were exercised in 2014. No warrants were exercised for the year ended December 31, 2013.

The warrants issued in the October 2010 financing and the Series A and Series B warrants issued in the July 2014 financing are classified as liabilities. The estimated fair value of warrants issued and classified as liabilities is reassessed at each reporting date using the Black-Scholes option pricing model. The Pre-Funded Series B warrants are classified as equity and are not reassessed for their fair value at the end of each reporting date. The following assumptions were used to value the warrants that are classified as liabilities on the following reporting dates:

[f] Shareholder Rights Plan

We have a Shareholder Rights Plan which was adopted in July 1996 and subsequently amended in July 2002, October 2005, August 2006, and May 2008 (the “Rights Plan”). Under the Plan our Board of Directors declared a dividend of one Preferred Stock Purchase Right (Right) for each outstanding common share of OncoGenex. Subject to the Rights Plan, each Right entitles the registered holder to purchase from us one one-hundredth of a share of Series A Junior Participating Preferred Stock at an exercise price of $140, subject to adjustment. These Rights provide the holders with the right to purchase, in the event a person or group acquires 15% or more of our common stock, additional shares of our common stock having a market value equal to two times the exercise price of the Right. Pursuant to the Rights Plan, the one-for-eighteen reverse stock split caused a proportionate adjustment of the number of Rights associated with each share of common stock. Currently, eighteen Rights are associated with each share of common stock.

[g] 401(k) Plan

We maintain a 401(k) plan. Following the Arrangement, the Board of Directors of OncoGenex amended and restated the 401(k) plan whereas our securities are no longer offered as an investment option. This amendment prohibits the inclusion of our shares in the 401(k) plan, as well as any match of our shares to employee contributions.

[h] Loss per common share

The following table presents the computation of basic and diluted net loss attributable to common stockholders per share (in thousands, except per share and share amounts):

As of December 31, 2014, 2013 and 2012 a total of 7.0 million, 3.0 million and 2.6million options, restricted stock units 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.