Quarterly report pursuant to Section 13 or 15(d)

Common Stock

v2.4.1.9
Common Stock
3 Months Ended
Mar. 31, 2015
Equity [Abstract]  
Common Stock

5. COMMON STOCK

[a]

Authorized

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

[b]

Issued and outstanding shares

Equity Award Issuances and Settlements

During the three month period ended March 31, 2015, we issued no common shares to satisfy stock option exercises and 82,410 common shares to satisfy restricted stock unit settlements, respectively, compared with the issuance of 10,000 and 35,309 common shares to satisfy stock option exercises and restricted stock unit settlements, respectively, during the three month period ended March 31, 2014.

[c]

Stock options

2010 Performance Incentive Plan

As of March 31, 2015, we had reserved, pursuant to various plans, 2,824,367 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 1,270,817 were reserved for options currently outstanding, 590,536 were reserved for restricted stock units currently outstanding and 963,014 were available for future equity grants.

Stock Option Summary

Options vest in accordance with terms as determined by our Board of Directors, or the Board, which terms are typically four years for employee and consultant 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 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, 2014

 

 

1,283,419

 

 

$

10.55

 

Granted

 

 

 

 

 

 

Expired

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

Forfeited

 

 

(12,602

)

 

 

12.74

 

Balance,  March 31, 2015

 

 

1,270,817

 

 

$

10.53

 

 

The fair value of each stock award for employees and directors is estimated on the grant date and for consultants at each reporting period, using the Black-Scholes option-pricing model based on the weighted-average assumptions noted in the following table:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

 

2014

 

Risk-free interest rates

 

 

 

 

 

1.82

%

Expected dividend yield

 

 

 

 

 

0

%

Expected life

 

 

 

 

5.9 years

 

Expected volatility

 

 

 

 

 

81

%

 

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 based upon 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 results for the periods set forth below included share-based compensation expense for stock options and restricted stock units in the following expense categories of the consolidated statements of loss (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

 

2014

 

Research and development

 

$

252

 

 

$

447

 

General and administrative

 

 

264

 

 

 

553

 

Total stock-based compensation

 

$

516

 

 

$

1,000

 

 

As of March 31, 2015 and December 31, 2014, the total unrecognized compensation expense related to stock options granted was $2.2 million and $2.7 million respectively, which is expected to be recognized as expense over a period of approximately 2.3 years from March 31, 2015.

For the three months ended March 31, 2015, a total of 6.9 million shares underlying options, restricted stock units and warrants have not been included in the loss per share computation, as their effect on diluted per share amounts would have been anti-dilutive. For the same periods in 2014, a total of 3.4 million shares underlying options, restricted stock units and warrants have not been included in the loss per share computation.

[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, key employees and consultants. 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 condition. For the three months ended March 31, 2015, $0.2 million of compensation expense was recognized related to these awards, compared to $0.5 million for the three months March 31, 2014.

The following table summarizes our restricted stock unit award activity during the three months ended March 31, 2015:

 

 

 

 

 

 

 

Weighted

 

 

 

Number

 

 

Average

 

 

 

of

 

 

Grant Date

 

 

 

Shares

 

 

Fair Value

 

Balance,  December 31, 2014

 

 

680,201

 

 

$

7.34

 

Granted

 

 

 

 

 

 

Settled

 

 

(82,410

)

 

 

11.95

 

Forfeited or expired

 

 

(7,255

)

 

 

4.99

 

Balance,  March 31, 2015

 

 

590,536

 

 

$

6.73

 

 

As of March 31, 2015, we had approximately $2.7 million in total unrecognized compensation expense related to our restricted stock unit awards that is to be recognized over a weighted-average period of approximately 2.6 years.

[e]

Non-employee options and restricted stock units

We recognize non-employee stock-based compensation expense over the period of expected service by the non-employee. As the service is performed, we are required to update our valuation assumptions, re-measure unvested options and restricted stock units and record the stock-based compensation using the valuation as of the vesting date. This differs from the accounting for employee awards where the fair value is determined at the grant date and is not subsequently adjusted. This re-measurement may result in higher or lower stock-based compensation expense in the Consolidated Statements of Loss and Comprehensive Loss. As such, changes in the market price of our stock could materially change the value of an option or restricted stock unit and the resulting stock-based compensation expense.

[f]

Common Stock Warrants

The following is a summary of outstanding warrants to purchase common stock at March 31, 2015:

 

 

 

Total

 

 

 

 

 

 

 

 

 

Outstanding

 

 

Exercise

 

 

 

 

 

and

 

 

price per

 

 

 

 

 

Exercisable

 

 

Share

 

 

Expiration Date

(1) Warrants issued in October 2010 financing

 

 

1,587,301

 

 

$

20.00

 

 

October 2015

(2) Series A Warrants issued in July 2014 financing

 

 

2,779,932

 

 

 

4.00

 

 

July 2019

(3) Series B Warrants issued in July 2014 financing

 

 

670,269

 

 

 

4.00

 

 

July 2019

 

No warrants were exercised during the three months ended March 31, 2015 or 2014.  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.

 

 

 

As of

 

 

 

March 31,

 

October 2010 Warrant Valuation Assumptions

 

2015

 

 

2014

 

Risk-free interest rates

 

 

0.26

%

 

 

0.30

%

Expected dividend yield

 

 

0

%

 

 

0

%

Expected life

 

0.56 years

 

 

1.6 years

 

Expected volatility

 

 

49.87

%

 

 

41.00

%

 

 

 

As of

 

 

 

March 31,

 

Series A and Series B Warrant Valuation Assumptions

 

2015

 

 

2014

 

Risk-free interest rates

 

 

1.19

%

 

 

 

Expected dividend yield

 

 

0

%

 

 

 

Expected life

 

4.25 years

 

 

 

 

Expected volatility

 

 

63.35

%