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Common Stock | 9 Months Ended
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Sep. 30, 2014
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
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:
|  | Common Stock |  |  | Series B Pre-funded Common Stock Warrants |  |  | Series A Common Stock Warrants |  |  | Series B Common Stock Warrants |
Units Issued |  |  | 5,559,866 |  |  |  | 1,340,538 |  |  |  | 2,779,933 |  |  |  | 670,269 |
Gross Proceeds (in thousands) |  | $ | 14,084 |  |  | $ | 3,387 |  |  | $ | 5,261 |  |  | $ | 1,268 |
Underwriting discount and offering expense (in thousands) |  | $ | 885 |  |  | $ | 213 |  |  | $ | 428 |  |  | $ | 103 |
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. “At the Market” Equity Offering Program From April 1, 2014 through September 30, 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. Equity Award Issuances and Settlements During the nine month period ended September 30, 2014, we issued 10,000 and 199,849 common shares to satisfy stock option exercises and restricted stock unit settlements, respectively, compared with the issuance of 3,475 and 45,869 common shares to satisfy stock option exercises and restricted stock unit settlements, respectively, during the nine month period ended September 30, 2013.
[c] | Stock options
2010 Performance Incentive Plan As of September 30, 2014, we had reserved, pursuant to various plans, 2,907,615 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 1,285,862 were reserved for options currently outstanding, 682,808 were reserved for restricted stock units currently outstanding and 938,945 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 Optioned Common Shares |  |  | Weighted Average Exercise Price |
|  | # |  |  | $ |
Balance, December 31, 2013 |  |  | 1,007,491 |  |  |  | 11.39 |
Option grants |  |  | 356,097 |  |  |  | 9.47 |
Option expired |  |  | (12,169 | ) |  |  | 18.93 |
Option exercises |  |  | (10,000 | ) |  |  | 3.00 |
Option forfeitures |  |  | (55,557 | ) |  |  | 11.71 |
Balance, September 30, 2014 |  |  | 1,285,862 |  |  |  | 10.77 |
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:
|  | Nine months ended September 30, |
|  | 2014 |  |  | 2013 |
Risk-free interest rates |  |  | 1.83 | % |  |  | 1.15 | %
Expected dividend yield |  |  | 0 | % |  |  | 0 | %
Expected life |  |  | 5.9 years |  |  |  | 5.8 years |
Expected volatility |  |  | 81.51 | % |  |  | 87.02 | %
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 Borealis-1 clinical data results we expect to receive by the end of the first quarter 2015, 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 September 30, |  |  | Nine Months Ended September 30, |
(In thousands) |  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
|  | $ |  |  | $ |  |  | $ |  |  | $ |
Research and development |  |  | 513 |  |  |  | 410 |  |  |  | 1,454 |  |  |  | 1,137 |
General and administrative |  |  | 439 |  |  |  | 477 |  |  |  | 1,514 |  |  |  | 1,353 |
Total share-based compensation |  |  | 952 |  |  |  | 887 |  |  |  | 2,968 |  |  |  | 2,490 |
As of September 30, 2014 and December 31, 2013, the total unrecognized compensation expense related to stock options granted was $3.2 million and $2.7 million respectively, which is expected to be recognized as expense over a period of approximately 2.6 years from September 30, 2014. For the three and nine months ended September 30, 2014, a total of 8.3 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 2013, a total of 2.9 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 and nine months ended September 30, 2014, $0.6 million and $1.7 million, respectively, of compensation expense was recognized related to these awards, compared to $0.5 million and $1.2 million for the three and nine months ended September 30, 2013, respectively. The following table summarizes our restricted stock unit award activity during the nine months ended September 30, 2014:
|  | Stock Awards |  |  | Weighted- Average Grant Date Fair Value |
|  | # |  |  | $ |
Outstanding January 1 |  |  | 356,589 |  |  |  | 12.06 |
Granted |  |  | 801,800 |  |  |  | 6.55 |
Vested |  |  | (199,849 | ) |  |  | 7.00 |
Forfeited or expired |  |  | (275,732 | ) |  |  | 11.22 |
Outstanding September 30 |  |  | 682,808 |  |  |  | 7.41 |
As of September 30, 2014, we had approximately $3.9 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 3.1 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 September 30, 2014:
|  | Total Outstanding and Exercisable |  |  | Exercise price per 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 |  |  | 2,779,933 |  |  | $ | 4.00 |  |  | July 2019
(3) Series B Warrants issued in July 2014 financing |  |  | 670,269 |  |  | $ | 4.00 |  |  | July 2019
(4) Pre-Funded Series B Warrants issued in July 2014 financing |  |  | 1,340,538 |  |  | $ | 0.01 |  |  | July 2019
No warrants were exercised during the nine month periods ended September 30, 2014 or 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: Warrants issued in October 2010 Financing
|  | Nine Months Ended September 30, |
|  | 2014 |  |  | 2013 |
Risk-free interest rates |  |  | 0.15 | % |  |  | 0.36 | %
Expected dividend yield |  |  | 0 | % |  |  | 0 | %
Expected life |  |  | 1.06 years |  |  |  | 2.06 years |
Expected volatility |  |  | 102.90 | % |  |  | 40.66 | %
Series A and Series B Warrants issued in July 2014 Financing
|  | Nine Months Ended September 30, |
|  | 2014 |  |  | 2013 |
Risk-free interest rates |  |  | 1.68 | % |  |  | — |
Expected dividend yield |  |  | 0 | % |  |  | — |
Expected life |  |  | 4.75 years |  |  |  | — |
Expected volatility |  |  | 61.81 | % |  |  | — |

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(d),(e)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SAB TOPIC 4.C) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187143-122770 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.29-31) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 4.E) -URI http://asc.fasb.org/extlink&oid=27010918&loc=d3e74512-122707 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section C Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Article 4 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Preferred Stock -URI http://asc.fasb.org/extlink&oid=6521494 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph d -Article 4 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 + Details
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