Stockholders' Equity (Deficit) | 12 Months Ended |
Dec. 31, 2013 |
Stockholders' Equity (Deficit) [Abstract] | ' |
Stockholders' Equity (Deficit) | ' |
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12 |
Stockholders' Equity (Deficit) |
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Authorized Capital |
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Heat has authorized 112,500 shares of Series 1 Preferred Stock (par value $0.0001) as of December 31, 2013 and 2012. Of the Series 1 Preferred Stock, 112,500 were issued and outstanding as of December 31, 2012. No Series 1 Preferred Stock was outstanding at December 31, 2013. Heat has authorized 2,000,000 shares of Series A Preferred Stock (par value $0.0001) as of December 31, 2013 and 2012. Of the Series A Preferred Stock, 1,863,128 shares were issued and outstanding as of December 31, 2012. No Series A Preferred Stock was outstanding at December 31, 2013. In 2013, Heat authorized 4,100,000 shares of Series B Preferred Stock (par value $0.0002). In March 2013, the Company sold an aggregate of 1,891,419 shares of the Company's Series B-1 Preferred Stock for gross proceeds of approximately $5.0 million in our Series B Preferred Stock private placement. All shares of the Series B Preferred Stock, together with accrued dividends, automatically converted into shares of the Company's common stock upon the consummation of the Company's initial public offering on July 29, 2013. |
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Heat had 50,000,000 shares of common stock (par value $0.0002) authorized as of December 31, 2013 and 2012. Of the 50,000,000 common stock shares, 6,375,426 and 2,144,542 were issued and 6,375,426 and 1,858,971 were outstanding as December 31, 2013 and 2012, respectively. |
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Preferred Stock |
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Series 1, Series A, Series B-1, and Series B-2 |
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Automatic Conversion |
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Each share of Preferred Stock automatically converts to common stock upon the earlier to occur of (i) on the date of consummation of a sale of common stock in a firm commitment underwritten public offering resulting in aggregate net cash proceeds to the Company (after deducting applicable underwriting discounts and commissions) of at least $15 million net proceeds; (ii) with respect to the Series A Preferred Stock, if 2/3 of the Series A Preferred Stock holders (including one of the larger investors so long as they hold 40% of the Series A Preferred Stock) vote in favor of a conversion then the Series A will automatically convert to common stock; (iii) with respect to the Series 1 Preferred Stock, if 2/3 of the Series 1 Preferred Stock holders vote in favor of a conversion then the Series 1 will automatically convert to common stock; and (iv) with respect to the Series B Preferred Stock if 2/3 of the Series B Preferred Stock holders vote in favor of a conversion then the Series B will automatically convert to common stock. As a result of the IPO, all outstanding shares of preferred stock were automatically converted to common stock. |
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Optional Conversion |
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The preferred stock is convertible into common stock at the option of the holder at any time. The conversion ratio for each share of the Series 1 Preferred Stock and the Series A Preferred Stock was its Original Issue Price ($2.35 and $2.10 for each share of the Series 1 Preferred Stock and Series A Preferred Stock, respectively) divided by its Conversion Price, as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like, which Conversion Price initially was the Original Issue Price. The conversion ratio for each share of the Series B-1 Preferred Stock and the Series B-2 Preferred Stock was its Original Issue Price ($2.67 and $5.00 for each share of the Series B-1 Preferred Stock and Series B-2 Preferred Stock, respectively) plus accrued but unpaid dividends thereon divided by its conversion price, as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like, which conversion price initially was the Original Issue Price. As a result of the 1-for-2.3 reverse stock split, the conversion ratio for the Preferred Stock was 0.4348. |
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In the event the Company at any time or from time to time after the Initial Series B Issuance Date shall issue additional shares of common stock without consideration or for consideration per share less than the Series 1 Conversion Price, Series A Conversion Price, Series B-1 Conversion Price, or Series B-2 Conversion Price, in effect on the date of and immediately prior to such issue, then the Series 1 Conversion Price, Series A Conversion Price, the Series B-1 Conversion Price, Series B-2 Conversion Price, shall be reduced, to a price determined by multiplying the Series 1 Conversion Price, Series A Conversion Price, the Series B-1 Conversion Price, or the Series B-2 Conversion Price in effect by a fraction, (A) the numerator of which shall be the number of shares of common stock outstanding immediately prior to such issuance, on a fully-diluted basis, plus the number of shares of common stock which the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at the Series 1 Conversion Price, Series A Conversion Price, the Series B-1 Conversion Price, or the Series B-2 Conversion Price, as in effect immediately prior to such issuance, and (B) the denominator of which shall be the number of shares of common stock outstanding immediately prior to such issuance, on a fully-diluted basis, plus the number of such Additional Shares of common stock so issued. As a result of the IPO, all outstanding shares of preferred stock were automatically converted to common stock. |
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The preferred stock was determined to have characteristics more akin to equity than debt. Particularly, the preferred stock had no mandatory redemption provision nor was it redeemable at the option of the holder. As a result, the conversion option was determined to be clearly and closely related to the preferred stock and therefore did not need to be bifurcated and classified as a liability. |
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Dividends |
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The Series B Preferred Stock has a priority with respect to dividend distributions and distributions upon liquidation. The Series B Preferred Stock receive dividends when and as and if declared by the Board at a rate of 5% of their original issue price of such shares which is $6.14 per share for the Series B-1 Preferred Stock and $11.50 per share for the Series B-2 Preferred Stock. If the Company declares or pays a dividend upon the common stock, they must also pay to the holders of the Series A, 1 and B Preferred Stock the dividends that would have been declared with respect to common stock issuable upon conversion of the Series A, 1 and B Preferred Stock; provided, however that the Company cannot declare or pay a dividend unless and until all accrued dividends on the Series B Preferred Stock have been paid. |
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Liquidation |
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In the event of a liquidation, the holders of the Series B-1 and B-2 Preferred Stock are entitled to receive before any payment to any other Preferred Stockholder or common stock holder and pari passu with the holders of the Series 1 Preferred Stock an amount per share equal to the greater of $6.14 for the Series B-1 Preferred Stock and $11.50 for the Series B-2 Preferred Stock plus any dividends accrued and unpaid whether or not declared. After payment in full of the Series B Preferred Stockholders the holders of the Series A Preferred Stock are entitled to receive before any payment to the common stock holder and pari passu with the holders of the Series 1 Preferred Stock an amount per share equal to $4.83 plus any dividends declared but unpaid. In the event of a liquidation, the holders of the Series 1 Preferred Stock are entitled to receive before any payment to the common stock holder and pari passu with any distribution to the Series A Preferred Stock an amount per share equal to $5.41 plus any dividends declared but unpaid. After the payment in full of the amounts set forth above, the Company's assets will be distributed ratably to all holders of common stock and Series B Preferred Stock on an as converted basis except that the Series B Preferred Stockholders shall not continue to share in such distribution after each has received 3 times its Original Issue Price. |
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Voting Rights |
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Each holder of Preferred Stock is entitled to vote on all matters stockholders are entitled to vote and to cast the number of votes as shall equal the whole number of shares of common stock into which their shares of Preferred Stock are convertible. |
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Preferred Stock Dividend |
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In March 2013, the Company sold an aggregate of 1,891,419 shares of the Company's Series B-1 Preferred Stock for gross proceeds of approximately $5.0 million in our Series B Preferred Stock private placement. All shares of the Series B Preferred Stock, together with accrued dividends, automatically converted into shares of the Company's common stock upon the consummation of the Company's initial public offering on July 29, 2013. In addition, the investors in the Series B-1 Preferred Stock were issued shares of the Company's common stock having a value based upon the initial public offering price of $361,668 and the Company's obligation to issue, and the investors, obligation to purchase, Series B-2 Preferred Stock and warrants upon fulfillment of certain conditions specified in the Company's stock purchase agreement dated as of March 25, 2013 entered into in connection with such private placement (the "Stock Purchase Agreement") terminated. The issuance of common stock to the Series B-1 Preferred stockholders totaling $361,668 has been accounted for as a preferred stock dividend, and as a result, has been included as an expense attributable to common stockholders in the Company's condensed consolidated statements of operations. |
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Initial Public Offering |
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On July 29, 2013, the Company sold 2,500,000 shares of common stock at a public offering price of $10.00 per share upon the closing of the Company's initial public offering ("IPO") with gross proceeds of $25 million and net proceeds of $22.4 million. On August 15, 2013, the Company sold an additional 100,000 shares of common stock at a public offering price of $10.00 per share pursuant to the partial exercise of the over-allotment option granted to the underwriters resulting in additional gross proceeds to the Company of $1,000,000 and additional net proceeds of $930,000. On September 6, 2013, the Company sold an additional 100,000 shares of common stock at a public offering price of $10.00 per share pursuant to the partial exercise of the over-allotment option granted to the underwriters resulting in additional gross proceeds to the Company of $1,000,000 and additional net proceeds of $930,000. The total gross proceeds raised from the offering and over-allotment option were $27,000,000, before underwriting discounts, commissions and other offering expenses payable by the Company. The total net proceeds from the offering were approximately $24.3 million. Upon the closing of the IPO, all shares of the Company's then-outstanding preferred stock automatically converted into an aggregate of 1,696,683 shares of common stock. In addition, upon the closing of the IPO, the Company issued an additional 36,167 shares of common stock to the Series B Preferred Stockholders as a Preferred Stock dividend. This transaction is discussed above under "Preferred Stock Dividend". At that time, the Company's obligation to issue, and the Series B Preferred Stockholders' obligation to purchase Series B-2 Preferred Stock under the Stock Purchase Agreement terminated. |
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Restricted Stock |
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A summary of the Company's unvested restricted stock activity as of December 31, 2013 is as follows: |
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| | Shares | | | Weighted- | | | | | | | | | | | | | | | | | |
Average | | | | | | | | | | | | | | | | |
Fair Value | | | | | | | | | | | | | | | | |
Unvested at December 31, 2012 | | | 2,899 | | | $ | 2.23 | | | | | | | | | | | | | | | | | |
Vested | | | (2,899 | ) | | $ | 8.81 | | | | | | | | | | | | | | | | | |
Unvested at December 31, 2013 | | | - | | | $ | - | | | | | | | | | | | | | | | | | |
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As of December 31, 2013, all restricted stock has vested and accordingly all stock-based compensation expense related to vested restricted stock has been recognized. |
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Common Stock Warrants |
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There are 20,549 warrants outstanding that are convertible into common stock that have an exercise price of $4.83 per share and expire 10 years from the date of issuance. These warrants were issued to lenders and were originally exercisable into Series A Preferred stock. The warrants converted from preferred stock warrants into warrants to purchase common stock upon the completion of the initial public offering in July 2013. However, since the warrants still have an anti-dilution provision, they remain liabilities and are subject to re-measurement at each balance sheet date. Refer to Footnote 11. |
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On March 10, 2011, the Company issued warrants to purchase 32,610 shares of common stock to non-employee placement agents in consideration for a private equity placement transaction. The warrants have an exercise price of $0.48 per share and expire 10 years from the issuance date. These warrants do not meet the criteria required to be classified as liability awards and therefore they are treated as equity awards. |
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In connection with our initial public offering, the Company issued warrants to the underwriters for 125,000 shares of common stock issuable at $12.50 per share upon exercise. The warrants have a ten-year life and expire on July 29, 2023. These warrants do not meet the criteria required to be classified as liability awards and therefore they are treated as equity awards. |
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The following table summarizes the activity of the Company's common stock warrants, retro actively adjusted for the 1-for-2.3 reverse stock split. |
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| | Common Stock | | | | | | | | | | | | | | | | | | | | | |
Warrants | | | | | | | | | | | | | | | | | | | | |
Outstanding, January 1, 2012 | | | 45,550 | | | | | | | | | | | | | | | | | | | | | |
Granted | | | 7,609 | | | | | | | | | | | | | | | | | | | | | |
Exercised | | | - | | | | | | | | | | | | | | | | | | | | | |
Expired | | | - | | | | | | | | | | | | | | | | | | | | | |
Outstanding, December 31, 2012 | | | 53,159 | | | | | | | | | | | | | | | | | | | | | |
Granted to underwriters | | | 125,000 | | | | | | | | | | | | | | | | | | | | | |
Exercised | | | - | | | | | | | | | | | | | | | | | | | | | |
Expired | | | - | | | | | | | | | | | | | | | | | | | | | |
Outstanding, December 31, 2013 | | | 178,159 | | | | | | | | | | | | | | | | | | | | | |
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Equity Compensation Plan |
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2009 Stock Incentive Plan |
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In 2009, the Company adopted the 2009 Stock Option Plan of Heat Biologics, Inc. (the "2009 Plan"), under which stock options to acquire 500,000 common shares could be granted to key employees, directors, and independent contractors. Under the 2009 Plan, both incentive and non-qualified stock options could be granted under terms and conditions established by the Board of Directors. The exercise price for incentive stock options was the fair market value of the related common stock on the date the stock option was granted. Stock options granted under the 2009 Plan generally have terms of 10 years and have various vesting schedules. |
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The Company amended the 2009 Stock Option Plan and all related addendum agreements in April 2011. This second amendment increased the number of shares available for issuance from 500,000 to 1,500,000. As of December 31, 2013 and 2012, there were 633,482 and 590,047 and stock options outstanding under the 2009 Plan, respectively. |
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The following table summarizes the components of the Company's stock-based compensation included in net loss: |
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| | December 31, | | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | | | | | | | | | |
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Employee stock options | | $ | 131,178 | | | $ | 60,956 | | | | | | | | | | | | | | | | | |
Non-employee stock options | | | 415,212 | | | | 128,157 | | | | | | | | | | | | | | | | | |
Restricted stock awards | | | 25,534 | | | | 28,783 | | | | | | | | | | | | | | | | | |
| | $ | 571,924 | | | $ | 217,896 | | | | | | | | | | | | | | | | | |
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Stock Options |
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The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following assumptions for stock options granted during the years ended December 31, 2013 and 2012: |
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| | December 31, | | | | | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | | | | | | | | | |
Dividend yield | | | 0.00% | | | | 0.00% | | | | | | | | | | | | | | | | | |
Expected volatility | | | 90-112% | | | | 80-90% | | | | | | | | | | | | | | | | | |
Risk-free interest rate | | | 1.39-2.26% | | | | 0.72-0.97% | | | | | | | | | | | | | | | | | |
Expected lives (years) | | | 5.75-6.5 | | | | 5-6.25 | | | | | | | | | | | | | | | | | |
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The risk-free interest rate is based on U.S. Treasury interest rates at the time of the grant whose term is consistent with the expected life of the stock options. The Company used an average historical stock price volatility based on an analysis of reported data for a peer group of comparable companies that have issued stock options with substantially similar terms, as the Company did not have any trading history for its common stock. Expected term represents the period that the Company's stock option grants are expected to be outstanding. The Company elected to utilize the "simplified" method to value stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option. |
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Expected dividend yield was considered to be 0% in the option pricing formula since the Company had not paid any dividends and had no plans to do so in the future. The forfeiture rate was considered to be none insofar as the historical experience of the Company is very limited. As required by ASC 718, the Company will adjust the estimated forfeiture rate based upon actual experience. |
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The Company recognized $571,924 and $217,896 in stock-based compensation expense for the years ended December 31, 2013 and 2012, respectively for the Company's stock option awards. |
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The following tables summarize the stock option activity for the years ended December 31, 2012 and 2013: |
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| | Shares | | | Weighted | | | | | | | | | | | | | | | | | |
Average | | | | | | | | | | | | | | | | |
Exercise | | | | | | | | | | | | | | | | |
Price | | | | | | | | | | | | | | | | |
Outstanding, January 1, 2012 | | | 471,905 | | | $ | 0.64 | | | | | | | | | | | | | | | | | |
Granted | | | 178,742 | | | $ | 0.76 | | | | | | | | | | | | | | | | | |
Exercised | | | (22,827 | ) | | $ | 0.51 | | | | | | | | | | | | | | | | | |
Expired/Cancelled | | | (37,773 | ) | | $ | 0.02 | | | | | | | | | | | | | | | | | |
Outstanding, December 31, 2012 | | | 590,047 | | | $ | 0.71 | | | | | | | | | | | | | | | | | |
Granted | | | 186,736 | | | $ | 10.07 | | | | | | | | | | | | | | | | | |
Exercised | | | (80,706 | ) | | $ | 0.67 | | | | | | | | | | | | | | | | | |
Expired/Cancelled | | | (62,595 | ) | | $ | 1.96 | | | | | | | | | | | | | | | | | |
Outstanding, December 31, 2013 | | | 633,482 | | | $ | 3.36 | | | | | | | | | | | | | | | | | |
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The weighted average grant-date fair value of stock options granted during the years ended December 31, 2013 and 2012 was $8.51 and $1.31, respectively. |
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The total fair value of stock options that vested during the year ended December 31, 2013 was approximately $440,820. |
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The following table summarizes information about stock options outstanding at December 31, 2013: |
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Options Outstanding | | | Options Exercisable | | | Options Vested or Expected to Vest |
Balance | | | Weighted | | | Weighted | | | Balance | | | Weighted | | | Weighted | | | Balance | | | Weighted | | | Weighted |
as of | Average | Average | as of | Average | Average | as of | Average | Average |
12/31/13 | Remaining | Exercise | 12/312013 | Remaining | Exercise | 12/31/13 | Remaining | Exercise |
| Contractual | Price | | Contractual | Price | | Contractual | Price |
| Life | | | Life | | | Life | |
| (Years) | | | (Years) | | | (Years) | |
633,482 | | | 7.27 | | | $3.36 | | | 426,423 | | | 6.31 | | | $1.23 | | | 426,423 | | | 6.31 | | | $1.23 |
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As of December 31, 2013, the unrecognized stock-based compensation expense related to unvested stock options was approximately $1,604,200 that is expected to be recognized over a weighted average period of approximately 14 months. |
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A summary of the activity of the Company's unvested stock options is as follows: |
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| | Shares | | | Weighted | | | | | | | | | | | | | | | | | |
Average | | | | | | | | | | | | | | | | |
Exercise | | | | | | | | | | | | | | | | |
Price | | | | | | | | | | | | | | | | |
Balance, January 1, 2012 | | | 248,439 | | | $ | 0.64 | | | | | | | | | | | | | | | | | |
Granted | | | 178,742 | | | $ | 0.76 | | | | | | | | | | | | | | | | | |
Vested | | | (257,510 | ) | | $ | 0.51 | | | | | | | | | | | | | | | | | |
Forfeited | | | (11,594 | ) | | $ | 0.02 | | | | | | | | | | | | | | | | | |
Outstanding, December 31, 2012 | | | 158,077 | | | $ | 0.71 | | | | | | | | | | | | | | | | | |
Granted | | | 186,736 | | | $ | 10.07 | | | | | | | | | | | | | | | | | |
Vested | | | -91,020 | | | $ | 0.67 | | | | | | | | | | | | | | | | | |
Forfeited | | | (46,734 | ) | | $ | 1.96 | | | | | | | | | | | | | | | | | |
Outstanding, December 31, 2013 | | | 207,059 | | | $ | 3.36 | | | | | | | | | | | | | | | | | |