Preferred Stock and Stockholders' Equity | 12 Months Ended |
Dec. 31, 2014 |
Preferred Stock and Stockholders' Equity [Abstract] | |
Preferred Stock and Stockholders' Equity | 8. Preferred Stock and Stockholders’ Equity |
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Preferred Stock |
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The board of directors is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue up to an aggregate of 10,000,000 shares of preferred stock at $0.001 par value in one or more series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon the preferred stock, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences. The rights of the holders of common stock will be subject to the rights of holders of any preferred stock that may be issued in the future. |
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As of December 31, 2014 and 2013, we had no outstanding shares of preferred stock. |
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Common Stock |
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Significant stock transactions |
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There were no transactions relating to the sale and issuance of common stock or the exercise and issuance of warrants during the two years ended December 31, 2014 and 2013, other than the exercise of a warrant in May 2014 that had been issued in a private placement in March 2008 (the March 2008 Financing). This warrant was exercised on a cashless net-exercise basis, wherein the investor surrendered a warrant for 529,567 shares in exchange for the issuance of 164,666 shares of common stock. The following paragraphs describe significant transactions relating to the sale and issuance of common stock and the exercise and issuance of warrants during the year ended December 31, 2012. Information regarding the issuance of common stock upon the exercise of stock options is discussed below under the caption, Stock Option Plans. |
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Transactions during 2012 |
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On March 29, 2012, we issued 4.2 million shares of our common stock upon the exercise of warrants that we had issued in a private placement transaction in April 2010 at an exercise price of $2.96 per share and sold new warrants to the same investors to purchase 4.2 million shares of common stock at an exercise price of $4.05 per share. The new warrants are exercisable through March 29, 2015. We generated net proceeds in these transactions of $12.8 million, after the deduction of issuance costs. Venture capital funds, trusts and other entities affiliated with members of our Board of Directors purchased 40 percent of the securities sold in this transaction, with the remainder being purchased by other qualified investors. |
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On July 6, 2012, we sold 11.0 million shares of our common stock in an underwritten public offering at a price to the public of $4.49 per share, generating net proceeds of $46.1 million after deducting expenses of the offering. |
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During the year ended December 31, 2012, investors exercised additional warrants for the purchase of our common stock with exercise prices ranging from $1.66 to $2.96 per share. As a result, we issued an aggregate of 216,000 shares of common stock and generated aggregate proceeds of $470,000. |
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Registration Rights related to March 2008 Financing |
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In March 2008, we sold 8.9 million shares of our common stock and warrants to purchase 4.5 million shares of our common stock in the March 2008 Financing. The registration rights agreement covering securities issued in the March 2008 Financing provides that if we do not fulfill certain of our obligations under the registration rights agreement, we will be required to pay liquidated damages to the holders of the shares and warrants. We filed the registration statement covering the resale of the shares sold and shares underlying the warrants sold in this transaction with the Securities and Exchange Commission (SEC) on April 11, 2008, and it was declared effective by the SEC on November 10, 2008. During 2008, we recorded $1.3 million in liquidated damages to other non-operating expense because of the delay in the effectiveness of the registration statement, which represented 5% of the purchase price. No separate contingent obligation has been recorded since that time as no additional liquidated damages have become probable of payment. |
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No dividends have been declared or paid by us. |
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Shares of common stock reserved for future issuance as of December 31, 2014 are as follows: |
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Common stock: | (in thousands) | | | | | | | | | | | | | | | | | |
Exercise of outstanding options | 14,704 | | | | | | | | | | | | | | | | | |
Exercise of warrants | 8,044 | | | | | | | | | | | | | | | | | |
Shares available for grant under stock option plans | 7,546 | | | | | | | | | | | | | | | | | |
| 30,294 | | | | | | | | | | | | | | | | | |
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On February 18, 2015, our Board of Directors authorized an increase of 4.1 million shares in the number of shares available under the 2012 Incentive Award Plan (the 2012 Plan), which was equivalent to 4% of the shares of our common stock outstanding as of December 31, 2014, pursuant to the terms of the 2012 Plan. |
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Stock Option Plans |
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We have three stock option plans – the 2000 Stock Option Plan (the 2000 Plan), the 2004 Equity Incentive Plan (the 2004 Plan) and the 2012 Plan. As of December 31, 2014, all option grants under the 2000 Plan were fully vested and have either been exercised or expired at the end of their contractual life. |
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In 2004, our board of directors and stockholders approved the 2004 Plan, which became effective upon the completion of our Initial Public Offering (IPO), after which time, no additional options have been or will be issued under the 2000 Plan. Under the 2004 Plan, options, stock purchase and stock appreciation rights and restricted stock awards can be issued to our employees, officers, directors and consultants. The 2004 Plan provided that the exercise price for incentive stock options will be no less than 100% of the fair value of the Company’s common stock, as of the date of grant. Options granted under the 2004 Plan vest over periods ranging from one to five years. The vesting period of the options is generally equivalent to the requisite service period. |
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In 2012, our board of directors and stockholders approved the 2012 Plan. As of the effective date of the 2012 Plan, 5.3 million shares that remained available for issuance of new grants under the 2004 Plan were transferred to the 2012 Plan. After that date, no additional options were or will be issued under the 2004 Plan. Vested options under the 2000 Plan and the 2004 Plan that are not exercised within the remaining contractual life and any options under the 2004 Plan that do not vest because of terminations after the effective date of the 2012 Plan will be added to the pool of shares available for future grants under the 2012 Plan. |
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Under the 2012 Plan, we can issue options, stock purchase and stock appreciation rights and restricted stock awards to our employees, officers, directors and consultants. The 2012 Plan provides that the exercise price for incentive stock options will be no less than 100 percent of the fair value of our common stock, as of the date of grant. Options granted under the 2012 Plan are expected to vest over periods ranging from one to four years. We expect the vesting period of the options that we grant under the 2012 Plan to be generally equivalent to the requisite service period. |
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Upon exercise of options, new shares are issued. |
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On February 6, 2014, our board of directors authorized an increase of 4.0 million shares in the number of shares available under the 2012 Plan, which was equivalent to 4% of the shares of our common stock outstanding as of December 31, 2013, pursuant to the terms of the 2012 Plan. As of December 31, 2014, 7.5 million shares remained available for future grants under the 2012 Plan. See the discussion above under Common Stock regarding an additional increase to the shares available for grant under the 2012 Plan that was authorized by the Board of Directors in February 2015. |
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Option activity during 2012, 2013 and 2014 |
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The following table summarizes all stock plan activity: |
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| | | Outstanding Options | | | | | | | | | |
| Shares Available For Future Grant | | Options Shares Subject to Options Outstanding | | | Weighted- Average Exercise Price | Weighted Average Remaining Contractual Life | | Aggregate Intrinsic Value | | | | | | | | | |
| (in thousands) | | (in thousands) | | | | (in years) | | (in thousands) | | | | | | | | | |
Balance at December 31, 2011 | 2,251 | | 10,308 | | $ | 2.86 | | | | | | | | | | | | |
Increase in shares authorized for grant | 3,369 | | — | | | — | | | | | | | | | | | | |
Shares granted | -1,695 | | 1,695 | | $ | 3.26 | | | | | | | | | | | | |
Shares exercised | — | | -165 | | $ | 1.91 | | | | | | | | | | | | |
Shares expired under 2000 Plan | 11 | | -93 | | $ | 7 | | | | | | | | | | | | |
Shares cancelled and forfeited under 2004 and 2012 Plans | 119 | | -119 | | $ | 3.26 | | | | | | | | | | | | |
Balance at December 31, 2012 | 4,055 | | 11,626 | | $ | 2.9 | | | | | | | | | | | | |
Increase in shares authorized for grant | 3,992 | | — | | | — | | | | | | | | | | | | |
Shares granted | -3,565 | | 3,565 | | $ | 1.98 | | | | | | | | | | | | |
Shares exercised | — | | -35 | | $ | 1.58 | | | | | | | | | | | | |
Shares cancelled and forfeited | 444 | | -444 | | $ | 4.58 | | | | | | | | | | | | |
Balance at December 31, 2013 | 4,926 | | 14,712 | | $ | 2.63 | | | | | | | | | | | | |
Increase in shares authorized for grant | 3,993 | | — | | | — | | | | | | | | | | | | |
Shares granted | -2,140 | | 2,140 | | $ | 2.62 | | | | | | | | | | | | |
Shares exercised | — | | -1,381 | | $ | 1.34 | | | | | | | | | | | | |
Shares cancelled and forfeited | 767 | | -767 | | $ | 5.03 | | | | | | | | | | | | |
Balance at December 31, 2014 | 7,546 | | 14,704 | | $ | 2.62 | 6.22 | $ | 10,424 | | | | | | | | | |
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Options exercisable at December 31, 2014 | | | 10,489 | | $ | 2.67 | 5.29 | $ | 7,866 | | | | | | | | | |
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Options fully vested and expected to vest at December 31, 2014 | | | 14,704 | | $ | 2.62 | 6.22 | $ | 10,424 | | | | | | | | | |
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The total intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $3.0 million, $55,000 and $303,000, respectively, based on the difference between the closing price of our common stock on the date of exercise of the options and the exercise price. |
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The total grant date fair value of options to employees and directors that vested during the years ended December 31, 2014, 2013 and 2012 was $4.6 million, $5.0 million and $5.0 million, respectively. |
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The following is a summary of options outstanding and options exercisable at December 31, 2014. |
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| | | | | Options Outstanding | | Options Exercisable |
Exercise Prices Of Options | Number of Shares | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Aggregate Intrinsic Value | | Number of Shares | | Weighted Average Exercise Price | Aggregate Intrinsic Value |
| | | | | (in thousands) | (in years) | | | | (in thousands) | | (in thousands) | | | | (in thousands) |
$ | 0.96 | - | $ | 2 | 4,885 | 5 | | $ | 1.49 | $ | 7,355 | | 3,907 | | $ | 1.42 | $ | 6,156 |
$ | 2.01 | - | $ | 3 | 4,779 | 7.4 | | $ | 2.36 | | 3,069 | | 2,678 | | $ | 2.36 | | 1,710 |
$ | 3.01 | - | $ | 4.5 | 4,844 | 6.5 | | $ | 3.92 | | — | | 3,709 | | $ | 4.08 | | — |
$ | 4.51 | - | $ | 5.7 | 196 | 0.5 | | $ | 5.02 | | — | | 195 | | $ | 5.02 | | — |
| | | | | 14,704 | 6.2 | | $ | 2.62 | $ | 10,424 | | 10,489 | | $ | 2.67 | $ | 7,866 |
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The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that option holders would have received had all option holders exercised their options on December 31, 2014. The aggregate intrinsic value is the difference between our closing stock price on December 31, 2014 and the exercise price, multiplied by the number of in-the-money options. |
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Stock-Based Compensation related to Employee and Director Options |
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Assumptions used in determining fair value-based measurements for options to employees and directors |
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The following table summarizes the weighted-average assumptions and resultant fair value-based measurements for options granted to employees and directors. |
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| Year Ended December 31, | | | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | | | | |
Weighted-average assumptions for stock options granted: | | | | | | | | | | | | | | | | | | |
Risk-free interest rate | 1.80% | | 1.76% | | 1.06% | | | | | | | | | | |
Expected term | 6 | years | | 8.3 | years | | 6.7 | years | | | | | | | | | | |
Expected volatility of stock price | 79.00% | | 83.90% | | 86.60% | | | | | | | | | | |
Dividend rate | 0% | | 0% | | 0% | | | | | | | | | | |
Weighted average grant date fair value-based measurement | $ | 1.77 | | $ | 1.54 | | $ | 2.41 | | | | | | | | | | |
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The expected term of options reflected in the table above has been based on a formula that considers the expected service period and expected post-vesting termination behavior differentiated by whether the grantee is an employee, an officer or a director. |
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The expected volatility of our stock used in determining the fair value-based measurement of option grants to employees, officers and directors is based on a weighted-average combination of the volatility of our own stock price and that of a group of peer companies for those grants with expected terms longer than the period of time that we have been a public company. For stock options granted to employees with expected terms of less than the period of time that we have been a public company, the volatility is based on historical data of the price for our common stock for periods of time equivalent to the expected term of these grants. |
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We apply a forfeiture rate of zero in our stock option expense calculations as we have a limited employee base and have experienced minimal turnover. When an employee terminates, we will record a change in accounting estimate that represents the difference between the expense recorded in the financial statements and the expense that would have been recorded based upon the rights to options that vested during the individual’s service as an employee. |
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Summary of compensation expense related to options to employees and directors |
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We recognized compensation expense of $4.7 million, $5.1 million and $5.1 million, related to options to employees and directors during the years ended December 31, 2014, 2013, and 2012, respectively. The data for the year ended December 31, 2012 include $1.3 million of expense related to performance-based option awards to officers that vested upon the FDA approval of Korlym in February 2012, which is classified as selling, general and administrative expense. |
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As of December 31, 2014, we had $7.1 million of unrecognized compensation expense for employee and director options outstanding as of that date, which had a remaining weighted-average vesting period of 2.5 years. |
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Stock Options to Non-Employees |
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We expense stock-based compensation related to service-based option grants to non-employees on a straight line basis over the vesting period of the options, which approximates the period over which the related services are rendered, based on the fair value-based measurement of the options using the Black-Scholes option pricing model. The assumptions used in these calculations are similar to those used for the determination of fair value-based measurement for options granted to employees and directors, with the exception that, for non-employee options, the remaining contractual term is utilized as the expected term of the option and the fair value-based measurement related to unvested non-employee options is re-measured quarterly, based on the then current stock price as reflected on the NASDAQ Capital Market. For options with performance-based vesting criteria, we recognize expense based on the minimum number of shares that will vest over time as the criteria are met based on the Black-Scholes valuation of the vested shares. |
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We recorded charges to expense for non-employee stock options of $470,000, $127,000 and $208,000 for the years ended December 31, 2014, 2013 and 2012, respectively. |
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As of December 31, 2014, there are three awards outstanding to non-employees with an aggregate total of 149,000 shares unvested as of that date. |
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Summary of Stock-based Compensation Expense |
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The following table presents a summary of non-cash stock-based compensation by financial statement classification. |
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| Year ended December 31, | | | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | | | | |
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Research and development expense | $ | 723 | | $ | 618 | | $ | 546 | | | | | | | | | | |
Selling, general and administrative expense | | 4,478 | | | 4,578 | | | 4,764 | | | | | | | | | | |
Total | $ | 5,201 | | $ | 5,196 | | $ | 5,310 | | | | | | | | | | |
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Warrants |
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Outstanding warrants at December 31, 2014 were as follows: |
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| Number of | | Exercise | | Expiration | | | | | | | | | | | | |
| Shares | | Price | | Date | | | | | | | | | | | | |
| (in thousands) | | | | | | | | | | | | | | | | | |
March 2008 Financing | 3,842 | | $ | 2.77 | | 3/24/15 | | | | | | | | | | | | |
March 2012 Warrant Exchange | 4,202 | | $ | 4.05 | | 3/29/15 | | | | | | | | | | | | |
Total warrants outstanding | 8,044 | | | | | | | | | | | | | | | | | |
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All of our warrants may be exercised for cash at any time up to the expiration dates noted in the table above. In these instances, the number of shares issued will be equal to the number of warrant shares shown on each respective warrant. |
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The warrants issued under the March 2008 Financing may be exercised pursuant to a cashless net-exercise, whereby the exercise cost is satisfied through a reduction in the number of shares to be issued. In a net-exercise, the number of shares to be issued would be based on the differential between the market value of our common stock at the time of the exercise and the exercise price of the shares underlying the original warrant. The warrants issued under the March 2012 Warrant Exchange do not contain a net-exercise provision. |
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