| Stockholders' Equity | 10. Stockholders’ equity:
Stock-based compensation
During the six months ended June 30, 2018, a total of
1,643,296 options to purchase Common Stock, with an aggregate fair
market value of approximately $2.4 million, were granted to
Company employees. Options granted to employees have a term of
10 years from the grant date and vest ratably over a
three-year period. The fair value of each option is amortized as
compensation expense evenly through the vesting period.
The Company’s stock-based compensation expense is allocated
between research and development and selling, general and
administrative as follows:
Three months ended, Six months ended,
Stock-based compensation expense June 30, June 30, June 30, June 30,
Research and Development $ 0.03 $ 0.4 $ 1.1 $ 0.8
Selling, General and Administrative $ 1.1 $ 2.5 $ 2.9 $ 5.2
The fair value of each option award is estimated on the grant date
using the Black-Scholes valuation model that uses assumptions for
expected volatility, expected dividends, expected term, and the
risk-free interest rate. Expected volatilities are based on implied
volatilities from historical volatility of the Common Stock, and
other factors estimated over the expected term of the options.
Expected term of options granted is derived using the
“simplified method” which computes expected term as the
average of the sum of the vesting term plus contract term. The
risk-free rate is based on the U.S. Treasury yield curve in effect
at the time of grant for the period of the expected term.
The key assumptions used in determining the fair value of options
granted during the six months ended June 30, 2018 follows:
Expected price volatility 60.34%-68.77%
Risk-free interest rate 2.05%-2.82%
Weighted average expected life in years 6 years
Dividend yield —
Option activity during the six months ended June 30, 2018 was
as follows:
Number of Weighted average Aggregate
Outstanding at January 1, 2018 2,712,954 $ 3.68 $ 1,190
Granted in 2018:
Officers and Directors 800,000 2.18
Employees 843,296 2.40
Exercised (196,541 ) 1.99
Forfeitures (327,428 ) 3.57
Outstanding at June 30, 2018 3,832,281 $ 3.18 $ 1,920
As of June 30, 2018, options exercisable totaled 1,767,831.
There was approximately $5.2 million of unrecognized
compensation cost related to non-vested
Restricted stock units
During the six months ended June 30, 2018, 1,410,611 RSUs were
granted to the Company’s executive officers, employees and
directors, with a fair market value of approximately
$3.1 million. The fair value of restricted units is determined
using quoted market prices of the Common Stock and the number of
shares expected to vest. These RSUs were issued under the
Company’s 2011 Equity Incentive Plan, as amended (the
“EIP”).
RSU grants are either time-based or performance-based, all of which
generally vest over a three-year period. Performance-based RSUs
vest if specified predetermined net revenue and operating income
goals are achieved. Actual performance relative to the
predetermined performance measures are evaluated independently at
the end of each fiscal year and the number of awards that will vest
will be based upon the percentage of the individual performance
measure achieved relative to the predetermined target. This allows
for partial vesting relative to separate performance measures.
Restricted stock activity during the six months ended June 30,
2018 was as follows:
Number of Weighted
Outstanding at January 1, 2018 4,706,895 $ 5.20
Granted:
Executive officers 1,038,434 2.23
Directors 55,000 1.95
Employees 317,177 2.10
Vested (1,266,433 ) 2.38
Forfeitures (319,691 ) 2.48
Conversions (2,119,925 ) 2.72
Outstanding at June 30, 2018 2,411,457 $ 8.02
Series B Preferred Stock Financing
On May 17, 2018, the Company entered into a placement agency
agreement with William Blair & Company, L.L.C., as
placement agent, relating to the Company’s registered direct
offering, issuance and sale of an aggregate of 5,000 shares of the
Company’s authorized preferred stock that the Board of
Directors of the Company has designated as Series B Non-Voting Convertible
Each share of Series B Preferred Stock is convertible into a
number of shares of the Company’s common stock, par value
$.001 per share determined by dividing $10,000 by a conversion
price of $1.80 per share (subject to adjustment for stock splits
and stock dividends as provided in the Certificate of Designation)
at any time following stockholder approval, which occurred at the
annual shareholder meeting on August 2, 2018. As of the
closing, the aggregate outstanding shares of Series B Preferred
Stock will be convertible (upon stockholder approval) into an
aggregate 27,777,778 shares of Common Stock. The Series B Preferred
Stock does not contain any price-based anti-dilution protection.
The Series B Preferred Stock is convertible at any time after
stockholder approval at the option of the holder, except that a
holder will be prohibited from converting shares of Series B
Preferred Stock into shares of Common Stock if, as a result of such
conversion, such holder, together with its affiliates, would
beneficially own more than 9.98% of the total number of shares of
Common Stock then issued and outstanding, which percentage may be
increased or decreased on sixty-one (61) days’
Within ten (10) days following the date of stockholder
approval, the Company has the right to deliver a notice to the
holders of the Series B Preferred Stock to require conversion of
the Series B Preferred Stock into Common Stock, provided that
certain conditions with respect to the Common Stock are satisfied.
Such forced conversion shall be subject to a holder’s
beneficial ownership limitation of 9.98% of the total number of
shares of Common Stock then issued and outstanding. Following an
initial forced conversion of the Series B Preferred Stock, every
ninety (90) days thereafter, the Company has the right to
require the forced conversion of the still outstanding shares of
Series B Preferred Stock up to the beneficial ownership limitation
of 9.98% of the total number of shares of Common Stock then issued
and outstanding.
Warrants
The Company has granted warrants to purchase shares of Common
Stock.
The fair value of each warrant grant is estimated on the grant date
using the Black-Scholes valuation model that uses assumptions for
expected volatility, expected dividends, expected term, and the
risk-free interest rate. Expected volatilities are based on implied
volatilities from historical volatility of the Common Stock, and
other factors estimated over the expected term of the warrants.
Expected term of warrants granted is derived using the
“simplified method” which computes expected term as the
average of the sum of the vesting term plus contract term. The
risk-free rate is based on the U.S. Treasury yield curve in effect
at the time of grant for the period of the expected term. A
cumulative total of 2,136,020 shares underlying warrants to
purchase Common Stock are outstanding as of June 30, 2018 with
a weighted average exercise price of $2.60 per share. |
