Shareholders' Equity | 12 Months Ended |
Dec. 31, 2014 |
Equity [Abstract] | |
Shareholders' Equity | 9. Shareholders’ Equity |
On May 20, 2013, the Company and Grifols and certain other investors (the “Investors”) entered into a Stock Purchase Agreement, pursuant to which the Company agreed, subject to the terms and conditions set forth in the Stock Purchase Agreement, to issue and sell a total of 5,244,363 shares of the Company’s Common Stock (209,774,558 shares prior to the 1-for-40 Reverse Split), to Grifols and an additional 3,104,838 shares of Common Stock (124,193,546 shares prior to the 1-for-40 Reverse Split) to the Investors, for a total sale of 8,349,201 shares of Common Stock (333,968,104 shares prior to the 1-for-40 Reverse Split), for a purchase price of $4.96 per share ($0.124 per share prior to the 1-for-40 Reverse Split). The aggregate gross consideration paid to the Company in August 2013 in the Company Stock Sale was approximately $41.4 million. |
Reserved Shares |
At December 31, 2014, the Company had 515,366 shares reserved for future issuance upon exercise of options under all stock option plans and 688,001 shares of common stock reserved for future issuance of new option grants. The Company had 35,184 shares available for future issuances under the ESPP. Additionally, the Company had 71,022 shares reserved for outstanding warrants and 12,500 shares reserved for issuance to an executive officer pursuant to a stand-alone non-statutory stock option agreement at December 31, 2014. |
Shareholder Rights Plan |
In September 2008, the Company adopted an amended and restated shareholder rights plan, which replaced the rights plan originally adopted in August 1998. Pursuant to the rights plan, as amended and restated, the Company distributes rights to purchase shares of Series A Junior Participating Preferred Stock as a dividend at the rate of one right for each share of common stock outstanding. Until the rights are distributed, the rights trade with, and are not separable from, the Company’s common stock and are not exercisable. The rights are designed to guard against partial tender offers and other abusive and coercive tactics that might be used in an attempt to gain control of the Company or to deprive the Company’s shareholders of their interest in the Company’s long-term value. The shareholder rights plan seeks to achieve these goals by encouraging a potential acquirer to negotiate with the Company’s Board of Directors. The rights will expire at the close of business on September 8, 2018. |
Stock Option Plans: 1996 Equity Incentive Plan, 2005 Equity Incentive Plan and 1996 Non-Employee Directors’ Plan |
The 1996 Equity Incentive Plan (the “1996 Plan”) and the 2005 Equity Incentive Plan (the “2005 Plan”), which amended, restated and retitled the 1996 Plan, were adopted to provide a means by which officers, non-employee directors, scientific advisory board members and employees of and consultants to the Company and its affiliates could be given an opportunity to acquire an equity interest in the Company. All officers, non-employee directors, scientific advisory board members and employees of and consultants to the Company are eligible to participate in the 2005 Plan. |
In April 1996, the Company’s Board of Directors adopted and the Company’s shareholders approved the 1996 Plan, which amended and restated an earlier stock option plan. The 1996 Plan reserved 24,000 shares for future grants. During May 2001, the Company’s shareholders approved an amendment to the Plan to include an evergreen provision. In 2003, the 1996 Plan was amended to increase the maximum number of shares available for issuance under the evergreen feature of the 1996 Plan by 10,000 shares to 50,000 shares. The evergreen provision automatically increased the number of shares reserved under the 1996 Plan, subject to certain limitations, by 6% of the issued and outstanding shares of common stock of the Company or such lesser number of shares as determined by the Board of Directors on the date of the annual meeting of shareholders of each fiscal year beginning in 2001 and ending 2005. As of December 31, 2014, the Company had 944 options outstanding and no shares were available for future grants under the 1996 Plan. |
In March 2005, the Company’s Board of Directors adopted and in May 2005 the Company’s shareholders approved the 2005 Plan, which amended, restated and retitled the 1996 Plan. All outstanding awards granted under the 1996 Plan remain subject to the terms of the 1996 Plan. All stock awards granted on or after the adoption date are subject to the terms of the 2005 Plan. No shares were added to the share reserve under the 2005 Plan other than the shares available for future issuance under the 1996 Plan. Pursuant to the 2005 Plan, the Company had 72,965 shares of common stock authorized for issuance. Options (net of canceled or expired options) covering an aggregate of 49,981 shares of the Company’s common stock had been granted under the 1996 Plan, and 22,984 shares became available for future grant under the 2005 Plan. In March 2006, the Company’s Board of Directors amended, and in May 2006 the Company’s shareholders approved, the amendment to the 2005 Plan, increasing the shares of common stock authorized for issuance by 50,000. In April 2007, the Company’s Board of Directors amended, and in June 2007, the Company’s shareholders approved the amendment to the 2005 Plan, increasing the shares of common stock authorized for issuance by 40,000 shares. In March 2008, the Company’s Board of Directors amended, and in May 2008 the Company shareholder’s approved, the amendment to the 2005 Plan, increasing the shares of common stock authorized by 67,500. In March 2010, the Company’s Board of Directors amended, and in May 2010, the Company shareholder’s approved the amendment to the 2005 Plan, increasing the shares of common stock authorized by 100,000. In March 2012, the Company’s Board of Directors amended, and in May 2012, the Company shareholder’s approved the amendment to the 2005 Plan, increasing the shares of common stock authorized by 100,000. In May 2013, the Company’s Board of Directors amended, and in July 2013, the Company’s shareholder’s approved the amendment to the 2005 Plan, increasing the shares of common stock authorized by 1,000,000. Shares available for future grants totaled 688,001 as of December 31, 2014 for the 2005 Plan. |
On March 13, 2015, the Board of Directors adopted the 2015 Equity Incentive Plan (“2015” Plan”), subject to the approval of the Company’s shareholders at the 2015 Annual Meeting. The 2015 Plan would replace the existing 2005 Equity Incentive Plan (“2005 Plan”) which expires by its terms in March 2015. The Company is submitting the 2015 Plan to its shareholders for approval. The Company is not requesting that shareholders authorize any new shares of Common Stock in connection with the approval of the 2015 Plan; rather, the remaining shares authorized under the 2005 Plan will be available for issuance under the 2015 Plan. |
Options granted under the 2005 Plan expire no later than 10 years from the date of grant. Options granted under the 2005 Plan may be either incentive or non-statutory stock options. For incentive and non-statutory stock option grants, the option price shall be at least 100% and 85%, respectively, of the fair value on the date of grant, as determined by the Company’s Board of Directors. If at any time the Company grants an option, and the optionee directly or by attribution owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, the option price shall be at least 110% of the fair value and shall not be exercisable more than five years after the date of grant. |
Options granted under the 2005 Plan may be immediately exercisable if permitted in the specific grant approved by the Board of Directors and, if exercised early may be subject to repurchase provisions. The shares acquired generally vest over a period of four years from the date of grant. The 2005 Plan also provides for a transition from employee to consultant status without termination of the vesting period as a result of such transition. Under the 2005 Plan, employees may exercise options in exchange for a note payable to the Company, if permitted under the applicable grant. As of December 31, 2014 and 2013, there were no outstanding notes receivable from shareholders. Any unvested stock issued is subject to repurchase agreements whereby the Company has the option to repurchase unvested shares upon termination of employment at the original issue price. The common stock subject to repurchase has voting rights, but cannot be resold prior to vesting. No grants with early exercise provisions have been made under the 2005 Plan and no shares have been repurchased. The Company granted options to purchase 338,121 shares and 29,250 shares during the years ended December 31, 2014 and 2013, respectively, under the 2005 Plan, which included option grants to the Company’s non-employee directors in the amount of 21,875 shares and 14,000 shares during 2014 and 2013, respectively. The 2005 Plan had 514,422 option shares outstanding as of December 31, 2014. |
The 1996 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”) had 1,125 shares of common stock authorized for issuance. Options granted under the Directors’ Plan expire no later than 10 years from date of grant. The option price shall be at 100% of the fair value on the date of grant as determined by the Board of Directors. The options generally vest quarterly over a period of one year. During 2000, the Board of Directors approved the termination of the Directors’ Plan. No more options can be granted under the plan after its termination. The termination of the Directors’ Plan had no effect on the options already outstanding. As of December 31, 2014, there were no outstanding options in this plan and there were no additional shares available for grant. |
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The following is a summary of activity under the 1996 Plan, the 2005 Plan and the Directors’ Plan as of December 31, 2014: |
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Stock Options | | Number of | | | Weighted | | | Weighted | | | Aggregate | |
Shares | Average | Average | Intrinsic |
| Exercise | Remaining | Value |
| Price | Contractual | |
| | Term | |
Outstanding at December 31, 2013 | | | 194,147 | | | $ | 28.46 | | | | | | | | | |
Options granted | | | 338,121 | | | $ | 9.34 | | | | | | | | | |
Options cancelled | | | (15,627 | ) | | $ | 42.21 | | | | | | | | | |
Options exercised | | | (1,275 | ) | | $ | 5.63 | | | | | | | | | |
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Outstanding at December 31, 2014 | | | 515,366 | | | $ | 15.55 | | | | 7.69 | | | $ | 101,580 | |
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Ending Vested + Expected To Vest | | | 495,347 | | | $ | 15.8 | | | | 7.63 | | | $ | 101,272 | |
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Ending Exercisable | | | 199,661 | | | $ | 25.5 | | | | 5.27 | | | $ | 94,288 | |
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The weighted-average grant-date fair value of options granted during the years 2014 and 2013 was $7.57 and $5.28 respectively. The intrinsic value of exercised stock options is calculated based on the difference between the exercise price and the quoted market price of our common stock as the of close of the exercise date. The total intrinsic value of stock options exercised in fiscal years 2014 and 2013 was $3,500 and $200. |
A summary of the activity of the Company’s unvested restricted stock and performance bonus stock award activities for the year ending December 31, 2014 is presented below. The ending balance represents the maximum number of shares that could be earned or vested under the 2005 Plan: |
Restricted Stock Awards |
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| | Number of | | | Weighted Average | | | | | | | | | |
Shares | Grant Date Fair Value | | | | | | | | |
Outstanding at December 31, 2013 | | | 19,217 | | | | 7.33 | | | | | | | | | |
Restricted stock awards granted | | | 11,250 | | | | 9.6 | | | | | | | | | |
Restricted share awards vested | | | (30,167 | ) | | | 7.67 | | | | | | | | | |
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Outstanding at December 31, 2014 | | | 300 | | | | 57.6 | | | | | | | | | |
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As of December 31, 2014, there was $0 of total unrecognized compensation cost related to restricted stock award arrangements granted under the Plan. Recipients of restricted stock do not pay cash consideration for the shares and have the right to vote all shares subject to the grant. Stock compensation expense for the awards has been recognized in the appropriate period. The total fair value of restricted stock awards vested during the years ended December 31, 2014 and 2013 was $247,000 and $246,000 respectively. |
The Company retained purchase rights to 300 and 19,217 shares of unvested restricted stock awards issued pursuant to stock purchase agreements at no cost per share as of December 31, 2014 and 2013, respectively. |
Restricted Stock Units |
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| | Number of | | | Weighted Average | | | | | | | | | |
Shares | Grant Date Fair Value | | | | | | | | |
Outstanding at December 31, 2013 | | | 10,306 | | | | 5.34 | | | | | | | | | |
Restricted stock units granted | | | 0 | | | | 0 | | | | | | | | | |
Restricted share units vested | | | 0 | | | | 0 | | | | | | | | | |
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Outstanding at December 31, 2014 | | | 10,306 | | | | 5.34 | | | | | | | | | |
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As of December 31, 2014, there was zero of total unrecognized compensation cost related to restricted stock unit arrangements granted under the Plan. The total fair value of shares vested during the years ended December 31, 2014 and 2013 was $0 for both years. |
Employee Stock Purchase Plan |
Employees generally are eligible to participate in the ESPP if they have been continuously employed by the Company for at least 10 days prior to the first day of the offering period and are customarily employed at least 20 hours per week and at least five months per calendar year and are not a 5% or greater shareholder. Shares may be purchased under the ESPP at 85% of the lesser of the fair market value of the common stock on the grant date or purchase date. Employee contributions, through payroll deductions, are limited to the lesser of 15% of earnings or $25,000. |
As of December 31, 2014, a total of 141,066 shares had been issued under the ESPP. In April 2008, the Company’s Board of Directors amended, and in May 2008 the Company’s shareholder approved, the amendment to the ESPP increasing the shares of common stock authorized by 25,000. In April 2009, the Company’s Board of Directors amended, and in May 2009 the Company’s shareholders approved, the amendment to the ESPP increasing the number of shares of common stock authorized by 62,500. In March 2013, the Company’s Board of Directors amended, and in May 2013 the Company’s shareholders approved, the amendment to the ESPP increasing the number of shares of common stock authorized by 62,500. As of December 31, 2014, there was a balance of 35,184 available authorized shares. Compensation expense was $67,000 and $106,000 for the years ended December 31, 2014 and 2013, respectively. The fair value of employee stock purchase rights under the ESPP is determined using the Black-Scholes option pricing model and the following weighted average assumptions: |
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| | Years Ended December 31, | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | |
Employee Stock Purchase Plan | | | | | | | | | | | | | | | | |
Dividend yield | | | 0 | % | | | 0 | % | | | | | | | | |
Volatility factor | | | 65.1 | % | | | 107.1 | % | | | | | | | | |
Risk-free interest rate | | | 0.07 | % | | | 0.2 | % | | | | | | | | |
Expected life (years) | | | 0.5 | | | | 2 | | | | | | | | | |
Weighted-average fair value of purchase rights granted during the period | | $ | 3.2 | | | $ | 3.65 | | | | | | | | | |
Stock-Based Compensation Expense |
The Company recognizes stock-based compensation expense based on the fair value of that portion of stock options and restricted stock awards that are ultimately expected to vest during the period. Stock-based compensation expense recognized in the Consolidated Statement of Operations and Comprehensive Loss includes compensation expense for stock-based awards based on the estimated grant date fair value over the requisite service period. |
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The following table shows stock-based compensation expense included in the consolidated statement of operations and comprehensive income (loss) for the years ended December 31, 2014 and 2013, (in thousands, except per share amounts): |
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| | 2014 | | | 2013 | | | | | | | | | |
Costs and Expenses | | | | | | | | | | | | | | | | |
Research and development | | $ | 197 | | | $ | 138 | | | | | | | | | |
General and administrative | | | 419 | | | | 283 | | | | | | | | | |
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Total employee stock-based compensation expense | | $ | 616 | | | $ | 421 | | | | | | | | | |
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Impact on basic and diluted net income (loss) per common share | | $ | 0.04 | | | $ | (0.05 | ) | | | | | | | | |
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There was no capitalized stock-based compensation cost as of December 31, 2014. Since the Company has cumulative net losses through December 31, 2014, there was no tax benefit associated with stock-based compensation expense. |
The total amount of unrecognized compensation cost related to unvested stock options and stock purchases net of forfeitures was $1,030,000 as of December 31, 2014. This amount will be recognized over a weighted average period of 2.93 years. As of December 31, 2014, there is no total unrecognized compensation costs, net of forfeitures, related to unvested awards that is expected to be recognized. |
Valuation Assumptions |
The fair value of options was estimated at the date of grant using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company’s common stock for similar terms. The expected term was estimated using a lattice model prior to 2010, and the simplified method was used starting in 2010 as permitted under SAB No. 110, since the Company’s recent exercise and forfeiture history was not representative of the expected term of options granted during the year. The expected term represents the estimated period of time that stock options are expected to be outstanding, which is less than the contractual term which is generally ten years. The risk-free interest rate is based on the U.S. Treasury yield. The expected dividend yield is zero, as the Company does not anticipate paying dividends in the near future. The weighted average assumptions for employee options (which for purposes of this table includes members of the board of directors) are as follows: |
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| | Years Ended December 31 | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | |
Dividend yield | | | 0 | % | | | 0 | % | | | | | | | | |
Volatility factor | | | 110 | % | | | 112.7 | % | | | | | | | | |
Risk-free interest rate | | | 1.8 | % | | | 1.4 | % | | | | | | | | |
Expected term (years) | | | 6 | | | | 5.7 | | | | | | | | | |
Weighted-average fair value of options granted during the periods | | $ | 7.57 | | | $ | 5.28 | | | | | | | | | |
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The weighted average assumptions for non-employee options, except for members of the board of directors which are reflected above, are as follows: |
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| | Years Ended December 31 | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | |
Dividend yield | | | N/A | | | | 0 | % | | | | | | | | |
Volatility factor | | | N/A | | | | 116 | % | | | | | | | | |
Risk-free interest rate | | | N/A | | | | 9.8 | % | | | | | | | | |
Expected term (years) | | | N/A | | | | 9.84 | | | | | | | | | |
Weighted-average fair value of options granted during the periods | | | N/A | | | $ | 5.92 | | | | | | | | | |
Except for grants to members of the board of directors no options were granted to non-employees in the year ended December 31, 2014. |
Stock-Based Compensation for Non-Employees |
The Company accounts for options issued to non-employees under ASC 505-50, Equity – Equity Based Payments to Non-Employees, using the Black-Scholes option-pricing model. The value of such non-employee options are periodically re-measured over their vesting terms. |