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Condensed Consolidated Financial Statement Detail | 9 Months Ended
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Sep. 30, 2014
Condensed Consolidated Financial Statement Detail [Abstract] |
Condensed Consolidated Financial Statement Detail |
3. | Condensed Consolidated Financial Statement Detail
Net Loss Per Share of Common Stock Basic net loss per share of common stock is based on the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock is based on the weighted average number of shares outstanding during the period, adjusted to include the assumed conversion of certain stock options, restricted stock units (“RSUs”), and warrants for common stock. The calculation of diluted loss per share requires that, to the extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the warrants and the presumed exercise of such securities are dilutive to loss per share for the period, adjustments to net income or net loss used in the calculation are required to remove the change in fair value of the warrants for the period. Likewise, adjustments to the denominator are required to reflect the related dilutive shares. Potentially dilutive securities are excluded from the calculation of loss per share if their inclusion is anti-dilutive. The following table shows the total outstanding securities considered anti-dilutive and therefore excluded from the computation of diluted net loss per share (in thousands):
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Common stock options and restricted stock units |  |  | 8,037 |  |  |  | 6,825 |  |  |  | 6,601 |  |  |  | 6,017 |
Warrants for common stock |  |  | 1,910 |  |  |  | 15,970 |  |  |  | 1,910 |  |  |  | 16,106 |
Total |  |  | 9,948 |  |  |  | 22,795 |  |  |  | 8,511 |  |  |  | 22,123 |
For the three and nine months ended September 30, 2014, the following is a reconciliation of the numerators and denominators of the basic and diluted net loss per share of common stock (in thousands):
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2014 |  |  | 2014 |
Numerator |  |  |  |  |  |
Net loss before taxes |  |  |  |  |  |
Basic |  | $ | (14,399 | ) |  | $ | (30,983 | )
Adjustment for revaluation of contingent warrant liabilities |  |  | 5,360 |  |  |  | 32,510 |
Diluted |  | $ | (19,759 | ) |  | $ | (63,493 | )
Denominator |  |  |  |  |  |  |  |
Weighted average shares outstanding used for basic net loss per share |  |  | 107,208 |  |  |  | 106,768 |
Effect of dilutive warrants |  |  | 7,115 |  |  |  | 8,108 |
Weighted average shares outstanding and dilutive securities used for diluted net income per share |  |  | 114,323 |  |  |  | 114,876 |
For the three and nine months ended September 30, 2013, all potentially dilutive securities outstanding were considered anti-dilutive, and therefore the calculation of basic and diluted net loss per share was the same. Cash and Cash Equivalents At September 30, 2014, cash and cash equivalents consisted of demand deposits of $19.5 million and money market funds of $34.6 million with maturities of less than 90 days at the date of purchase. At December 31, 2013, cash and cash equivalents consisted of demand deposits of $18.9 million and money market funds of $82.8 million with maturities of less than 90 days at the date of purchase. Short-term Investments At September 30, 2014 and December 31, 2013, short-term investments consisted of U.S. treasury securities of $5.0 million and $20.0 million, respectively, with maturities of greater than 90 days and less than one year from the date of purchase. Foreign Exchange Options The Company holds debt and may incur revenue and expenses denominated in foreign currencies, which exposes it to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and the Euro. The Company is required in the future to make principal and accrued interest payments in Euros on its €15.0 million loan from Servier (See Note 5: Long-Term Debt and Other Financings). In order to manage its foreign currency exposure related to these payments, in May 2011, the Company entered into two foreign exchange option contracts to buy €1.5 million and €15.0 million in January 2014 and January 2016, respectively. By having these option contracts in place, the Company’s foreign exchange rate risk is reduced if the U.S. dollar weakens against the Euro. However, if the U.S. dollar strengthens against the Euro, the Company is not required to exercise these options, but will not receive any refund on premiums paid. Upfront premiums paid on these foreign exchange option contracts totaled $1.5 million. The fair values of these option contracts are revalued at each reporting period and are estimated based on pricing models using readily observable inputs from actively quoted markets. The fair values of these option contracts are included in other assets on the accompanying condensed consolidated balance sheet and changes in fair value on these contracts are included in other income (expense) on the condensed consolidated statements of comprehensive loss. The January 2014 foreign exchange option expired in January 2014 without being exercised. The January 2016 foreign exchange option was revalued at September 30, 2014 and had a fair value of less than $0.1 million. The Company recognized losses for the three and nine months ended September 30, 2014 of $0.1 million and $0.3 million, respectively, related to the revaluation. The Company recognized a gain for the three months ended September 30, 2013, and a loss for the nine months ended September 30, 2013 of $7,000 and $0.2 million, respectively, related to the revaluation. Accrued Liabilities Accrued liabilities consisted of the following at September 30, 2014 and December 31, 2013 (in thousands):
|  | September 30, 2014 |  |  | December 31, 2013 |
Accrued payroll and other benefits |  | $ | 2,928 |  |  | $ | 3,009 |
Accrued management incentive compensation |  |  | 3,187 |  |  |  | 4,386 |
Other |  |  | 1,388 |  |  |  | 2,539 |
Total |  | $ | 7,503 |  |  | $ | 9,934 |
Contingent Warrant Liabilities In March 2012, in connection with an underwritten offering, the Company issued five-year warrants to purchase 14,834,577 shares of XOMA’s common stock at an exercise price of $1.76 per share. These warrants contain provisions that are contingent on the occurrence of a change in control, which would conditionally obligate the Company to repurchase the warrants for cash in an amount equal to their fair value using the Black-Scholes Option Pricing Model (the “Black-Scholes Model”) on the date of such change in control. Due to these provisions, the Company is required to account for the warrants issued in March 2012 as a liability at fair value. In addition, the estimated liability related to the warrants is required to be revalued at each reporting period until the earlier of the exercise of the warrants, at which time the liability will be reclassified to stockholders' deficit, or expiration of the warrants. At December 31, 2013, the fair value of the warrant liability was estimated to be $68.7 million using the Black-Scholes Model. The Company revalued the warrant liability at September 30, 2014 using the Black-Scholes Model and recorded the $32.5 million decrease in the fair value as a gain in the revaluation of contingent warrant liabilities line of its condensed consolidated statements of comprehensive loss. The Company also reclassified $2.5 million from contingent warrant liabilities to stockholders’ deficit on its condensed consolidated balance sheets due to the exercise of warrants. As of September 30, 2014, 12,109,418 of these warrants were outstanding and had a fair value of $33.7 million. This decrease in liability is due primarily to the decrease in the market price of XOMA’s common stock at September 30, 2014 compared to December 31, 2013. In February 2010, in connection with an underwritten offering, the Company issued five-year warrants to purchase 1,260,000 shares of XOMA’s common stock at an exercise price of $10.50 per share. In June 2009, the Company issued warrants to certain institutional investors as part of a registered direct offering. These warrants represent the right to acquire an aggregate of up to 347,826 shares of XOMA’s common stock over a five year period beginning December 11, 2009 at an exercise price of $19.50 per share. These warrants contain provisions that are contingent on the occurrence of a change in control, which would conditionally obligate the Company to repurchase the warrants for cash in an amount equal to their fair value using the Black-Scholes Model on the date of such change in control. Due to these provisions, the Company is required to account for the warrants issued in February 2010 and June 2009 as liabilities at fair value. At December 31, 2013, the fair value of the warrant liability was estimated to be $1.2 million using the Black-Scholes Model. The Company revalued the warrant liability at September 30, 2014 using the Black-Scholes Model and recorded the $1.2 million decrease in the fair value as a gain in the revaluation of contingent warrant liabilities line of our condensed consolidated statements of comprehensive loss. As of September 30, 2014, all of these warrants were outstanding and had an aggregate fair value of less than $1,000.

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