Stockholders’ Equity

Reverse Stock Split

On June 5, 2014, the Company implemented a 4-for-1 reverse stock split. All share information contained within this report, including the accompanying consolidated financial statements and footnotes, have been retroactively adjusted to reflect the effects of the reverse stock split.

Preferred Stock



			Outstanding as of December 31,
	Authorized	Issued	2014	2013
Series A Preferred Stock, par $0.001	1,000	817	—	—
Series B Preferred Stock, par $0.001	1,000	750	—	—
Series C Preferred Stock, par $0.001	1,091	1,091	23	26
Series D Preferred Stock, par $0.001	1,966,292	1,966,292	—	—

During the year ended December 31, 2014, 3 shares of the Company's Series C preferred stock were converted into 1,103 shares of the Company's common stock. There were no changes in the number of outstanding shares of our preferred stock for the years ended December 31, 2013 or 2012.

The shares of the Company’s outstanding Series C Preferred Stock have the following pertinent rights and privileges, as set forth in the Company’s Amended and Restated Certificate of Incorporation and its Certificates of Designations, Rights and Preferences related to the various series of preferred stock.

Rights on Liquidation

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company (a “liquidation event”), before any distribution of assets of the Company shall be made to or set apart for the holders of common stock, the holders of Series C Preferred Stock, pari passu, are entitled to receive payment of such assets of the Company in an amount equal to $10,000 per share of such series of preferred stock, plus any accumulated and unpaid dividends thereon (whether or not earned or declared).

If the assets of the Company available for distribution to stockholders exceed the aggregate amount of the liquidation preferences payable with respect to all shares of each series of preferred stock then outstanding, then, after the payment of such preferences is made or irrevocably set aside, the holders of the Company’s common stock are entitled to receive a pro rata portion of such assets based on the aggregate number of shares of common stock held by each such holder. The holders of the Company’s outstanding preferred stock shall participate in such a distribution on a pro-rata basis, computed based on the number of shares of common stock which would be held by such preferred holders if immediately prior to the liquidation event all of the outstanding shares of the preferred stock had been converted into shares of common stock at the then current conversion value applicable to each series.

A Change of Control of the Company (as defined in the Certificates of Designations, Rights and Preferences) is not a liquidation event triggering the preferences described above, and is instead addressed by separate terms in the Series C Certificates of Designations, Rights, and Preferences.

Although the liquidation preferences are in excess of the par value of $0.001 per share of the Company’s preferred stock, these preferences are equal to or less than the stated value of such shares based on their original purchase price.

Voting Rights

The holders of all series of the Company’s preferred stock outstanding have full voting rights and powers equal to the voting rights and powers of holders of the Company’s common stock and are entitled to notice of any stockholders’ meeting in accordance with the Company’s Bylaws. Holders of the Company’s preferred stock are entitled to vote on any matter upon which holders of the Company’s common stock have the right to vote, including, without limitation, the right to vote for the election of directors together with the holders of common stock as one class.

Conversion Rights

The Series C Preferred Stock each provide the holder of such shares an optional conversion right and provide a mandatory conversion upon certain triggering events.

Right to Convert The holder of any share or shares of Series C Preferred Stock has the right at any time, at such holder’s option, to convert all or any lesser portion of such holder’s shares of the Preferred Stock into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (i) the aggregate Liquidation Preference applicable to the particular series of preferred shares, plus accrued and unpaid dividends thereon by (ii) the applicable Conversion Value (as defined in the relevant series’ Certificate of Designations, Rights and Preferences) then in effect for such series of preferred shares. The Company is not obligated to issue any fractional shares or scrip representing fractional shares upon such conversion and instead shall pay the holder an amount in cash equal to such fraction multiplied by the current market price per share of the Company’s common stock.

Mandatory Conversion The Company has the option upon thirty (30) days prior written notice, to convert all of the outstanding shares of the Series C Preferred Stock into such number of fully paid and non-assessable shares of common stock as is determined by dividing (i) the aggregate Liquidation Preference of the shares of the relevant series of preferred stock to be converted plus accrued and unpaid dividends thereon by (ii) the applicable Conversion Value (as defined in the relevant series’ Certificate of Designations, Rights and Preferences) then in effect, if at any time after twelve months following the Original Issue Date of each such series of preferred stock all of the following triggering events occur:

(i) The registration statement covering all of the shares of common stock into which the particular series of preferred stock is convertible is effective (or all of the shares of common stock into which the preferred stock is convertible may be sold without restriction pursuant to Rule 144 under the Securities Act of 1933, as amended);

(ii) the Daily Market Price (as defined in the applicable Certificates of Designations, Rights and Preferences) of the common stock crosses a specified pricing threshold for twenty of the thirty consecutive trading days prior to the date the Company provides notice of conversion to the holders; and

(iii) the average daily trading volume (subject to adjustment for stock dividends, subdivisions and combinations) of the common stock for at least twenty of the thirty consecutive trading days prior to the date the Company provides notice of conversion to the holders exceeds 6,250 shares.

As of December 31, 2014, outstanding shares of the Series C Preferred Stock were convertible into 8,456 shares of our common stock at a conversion price of $27.20 per share, and the applicable Daily Market Price of the common stock for triggering mandatory conversion equaled $72.00 per share.

Common Stock

In March 2014, the Company closed an underwritten public offering of 5,452,725 shares of the Company’s common stock, including 711,225 shares of common stock issued pursuant to the underwriter’s exercise of its overallotment option, at the public offering price of $11.60 per share. The net proceeds, after deducting the underwriter’s discounts and commission and other estimated offering expenses, were approximately $59.2 million.

In May 2013, the Company filed a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State. The Certificate of Amendment increased the number of shares of common stock the Company has the authority to issue from 300,000,000 shares to 600,000,000 shares.

In March 2013, the Company completed an underwritten offering of 6,844,317 shares of common stock and warrants to purchase an aggregate of up to 3,422,158 shares of common stock. The shares and warrants were sold in units at a price of $2.20 per unit, with each unit consisting of one share of common stock and a warrant to purchase 0.50 share of common stock at an exercise price of $3.1744 per share. The warrants have a term of five and one-half years. The net proceeds, after deducting the underwriters' discounts and other offering expenses, were approximately $14.0 million. The Company valued the registered warrants issued in connection with the March 2013 financing as of the issuance date using the Black Scholes pricing model and recorded a current liability on the consolidated balance sheet. As of December 31, 2014, 3,138,067 of these warrants had been exercised. Transaction costs associated with the issuance of the warrants were allocated by using the relative fair value approach. These transaction costs of $315,970 were immediately expensed and included as part of general and administrative expense in the Company's consolidated statement of operations for the year ended December 31, 2013.

In June 2012, the Company entered into a sales agreement (the “Sales Agreement”) with an outside placement agent (the “Placement Agent”) to sell shares of its common stock with aggregate gross proceeds of up to $25.0 million from time to time, through an “at-the-market” equity offering program under which the Placement Agent will act as sales agent. Under the Sales Agreement, the Company will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made. The Sales Agreement provides that the Placement Agent will be entitled to compensation for its services in an amount equal to 3.0% of the gross proceeds from the sales of shares sold through the Placement Agent under the Sales Agreement. The Company has no obligation to sell any shares under the Sales Agreement, and may at any time suspend solicitation and offers under the Sales Agreement.

During the year ended December 31, 2013, the Company sold a total of 3,925,167 shares of common stock under the Sales Agreement. The sales were made at a weighted average price of $4.96 per share with net proceeds to the Company of $18.9 million. As of December 31, 2013, the Company has exhausted all available proceeds under this Sales Agreement.

The Company accounts for registered common stock warrants issued in March 2013 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. The Company classifies registered warrants on the consolidated balance sheet as a current liability which is revalued at each balance sheet date subsequent to the initial issuance. Determining the appropriate fair-value model and calculating the fair value of registered warrants requires considerable judgment, including estimating stock price volatility and expected warrant life. The Company develops its estimates based on historical data. A small change in the estimates used may have a relatively large change in the estimated valuation. The Company uses the Black-Scholes pricing model to value the registered warrants. Changes in the fair market value of the warrants are reflected in the consolidated statement of operations as “Change in fair value of common stock warrants.”

Warrants

The following table summarizes the warrants outstanding as of December 31, 2014 and 2013:



				As of December 31, 2014			As of December 31, 2013
Issued in Connection With:	Exercise Price		Expiration Date	Number of Warrants	Common Stock Warrant Liability		Number of Warrants	Common Stock Warrant Liability
March 2013 financing	$	3.17	September 12, 2018	284,091	$	2,022,729	755,681	$	7,859,085
January 2011 financing	$	5.60	January 27, 2016	—	—		1,673,750	11,381,498
July 2009 financing	$	13.52	July 1, 2014	—	—		83,334	300,000
Warrants assumed in June 2009 Merger	$ 4.08 - 5.12		August 1, 2015- April 28, 2016	727,969	—		1,002,052	—
Total				1,012,060	$	2,022,729	3,514,817	$	19,540,583

During the year ended December 31, 2014 and 2013, warrants to purchase 471,590 and 2,666,477 shares of the Company's common stock which were issued in connection with the March 2013 financing were exercised, with proceeds to the Company of $1.5 million and $8.5 million, respectively.

During the year ended December 31, 2014 and 2013, warrants to purchase 1,673,750 and 967,550 shares of the Company's common stock which were issued in connection with the January 2011 financing were exercised, with proceeds to the Company of $9.4 million and $5.4 million, respectively.

During the year ended December 31, 2014, warrants to purchase 274,083 shares of the Company's common stock which were assumed in the June 2009 Merger were exercised, with proceeds to the Company of $1.0 million.

In July 2014, warrants expired to purchase 83,334 shares of the Company's common stock issued in connection with the July 2009 financing.

During the year ended December 31, 2013, warrants to purchase 1,443,696 shares of the Company's common stock which were issued in connection with the December 2011 financing were exercised, with proceeds to the Company of $3.8 million.

During the year ended December 31, 2013, warrants expired to purchase 14,555 shares of the Company's common stock, which were assumed in the June 2009 Merger.

Stock Options

The Company has one active stock-based incentive plan, the Amended and Restated 2007 Omnibus Incentive Plan (the “Incentive Plan”), pursuant to which the Company has granted stock options and restricted stock awards to executive officers, directors and employees. The Incentive Plan was adopted on March 31, 2007, approved by the stockholders on May 4, 2007, approved by the stockholders as amended on May 2, 2008, and approved by the stockholders as amended and restated on August 25, 2009, May 14, 2010 and May 22, 2014. On May 14, 2010 the stockholders approved to increase the aggregate number of shares available for grant under the Incentive Plan by 500,000 and to provide that the aggregate number of shares available for grant under the Incentive Plan will be increased on January 1 of each year beginning in 2011 by a number of shares equal to the lesser of (1) 513,833 or (2) such lesser number of shares as may be determined by the Board. On May 22, 2014 the stockholders approved to increase the aggregate number of shares available for grant under the Incentive Plan by 1,250,000. At December 31, 2014, the Incentive Plan reserves 4,742,831 shares of common stock for issuance as or upon exercise of incentive awards granted and to be granted at future dates. At December 31, 2014, the Company had 967,598 shares of common stock available for future grant under the Incentive Plan, and 60,000 shares of vested restricted stock and options to purchase 3,288,761 shares of common stock outstanding under the Incentive Plan. The awards granted and available for future grant under the Incentive Plan generally vest over three years and have a maximum contractual term of ten years. The Incentive Plan terminates by its terms on March 31, 2017.

The Incentive Plan supersedes all of the Company’s previous stock option plans, which include the Amended 2000 Stock Option Plan and the VGX Equity Compensation Plan, under which the Company had options to purchase 197,629 and 1,354,124 shares of common stock outstanding at December 31, 2014, respectively. The terms and conditions of the options outstanding under these plans remain unchanged.

Total compensation cost for our stock plans recognized in the consolidated statement of operations for the years ended December 31, 2014, 2013 and 2012 was $4.8 million, $1.2 million, and $1.2 million, respectively, of which $2.8 million, $550,000, and $555,000 was included in research and development expenses and $2.0 million, $605,000, and $638,000 was included in general and administrative expenses, respectively.

At December 31, 2014 and 2013, there was $5.3 million and $956,000 of total unrecognized compensation cost, respectively, related to unvested stock options, which is expected to be recognized over a weighted-average period of 2 years and 1.8 years respectively.

The fair value of options granted to non-employees at the measurement dates were estimated using the Black-Scholes pricing model. Total stock-based compensation for options granted to non-employees for the years ended December 31, 2014, 2013 and 2012 was $585,000, $714,000 and $153,000, respectively. As of December 31, 2014, 937,517 non-employee options remained outstanding.

The following table summarizes total stock options outstanding at December 31, 2014:



	Options Outstanding				Options Exercisable
Exercise Price	Options Outstanding	Weighted-Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Options Exercisable	Weighted-Average Exercise Price
$0.00-$3.00	1,334,335	7.5	$	2.21	846,872	2.24
$3.01-$6.00	1,625,862	3.2	$	4.85	1,625,550	4.85
$6.01-$9.00	826,765	5.7	$	7.08	641,781	6.58
$9.01-$12.00	184,839	6.5	$	10.41	101,521	10.34
$12.01-$17.84	868,713	7.9	$	13.08	330,124	13.29
	4,840,514	5.8	$	6.19	3,545,848	5.48

At December 31, 2014, the aggregate intrinsic value of options outstanding was $18.1 million, the aggregate intrinsic value of options exercisable was $14.6 million, and the weighted average remaining contractual term of options exercisable was 4.7 years.

At December 31, 2014, 1,191,093 stock options are expected to vest.

Stock option activity under our stock option plans was as follows:



	Number of Shares		Weighted-Average Exercise Price
Balance, December 31, 2013	4,134,591		$	4.84
Granted	1,140,859		11.52
Exercised	(294,442	)	4.63
Cancelled	(140,494	)	12.95
Balance, December 31, 2014	4,840,514		$	6.19

The weighted average exercise price was $15.95 for the 70,517 options which expired during the year ended December 31, 2014, $5.32 for the 124,003 options which expired during the year ended December 31, 2013 and $7.32 for the 51,875 options which expired during the year ended December 31, 2012.

The weighted average grant date fair value per share was $11.52, $1.76 and $1.88 for options granted during the years ended December 31, 2014, 2013 and 2012, respectively.

The Company received $1.4 million, $1.6 million and $0 in proceeds from the exercise of stock options during the years ended December 31, 2014, 2013 and 2012, respectively. The aggregate intrinsic value of options exercised was $2.0 million, $2.5 million and $0 during the years ended December 31, 2014, 2013 and 2012, respectively.