Stockholders' Equity | 12 Months Ended |
Mar. 31, 2014 |
Equity [Abstract] | ' |
Stockholders' Equity | ' |
7. Stockholders’ Equity |
Common stock |
In October 2011, the Company issued 7,676,828 shares of common stock to note holders for the conversion of Convertible Notes with a principal balance totaling $3,030,000 and accrued interest totaling approximately $459,800. |
During February and March 2012, the Company issued 21,247,987 shares of common stock related to the Merger. See Note 2. During the year ended December 31, 2012, the Company issued 13,423,622 shares of common stock upon exercise of 13,532,487 warrants. |
During the year ended December 31, 2012, a total of 224,064 stock options were exercised for 224,064 shares of common stock. |
During the three months ended March 31, 2013, the Company issued 6,131,198 shares of common stock upon exercise of 7,090,556 warrants. |
A shelf registration statement on Form S-3 (File No. 333-189995), or shelf, was filed with the SEC on July 17, 2013 authorizing the offer and sale in one or more offerings of up to $100,000,000 in aggregate of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or any combination of the foregoing, either individually or as units comprised of one or more of the other securities. This shelf was declared effective by the SEC on July 26, 2013. |
On August 2, 2013, the Company, entered into an Underwriting Agreement (the “Underwriting Agreement”) with Lazard Capital Markets LLC, acting as representative of the underwriters named in the Underwriting Agreement (the “Underwriters”) and joint book-runner with Oppenheimer & Co. Inc., relating to the issuance and sale of 10,350,000 shares of the Company’s common stock, which includes the issuance and sale of 1,350,000 shares pursuant to an overallotment option exercised by the Underwriters on August 5, 2013. JMP Securities LLC and Maxim Group LLC each acted as co-managers for the offering. The price to the public in the Offering was $4.50 per share, and the Underwriters purchased the shares from the Company pursuant to the Underwriting Agreement at a price of $4.23 per share. The net proceeds to the Company from the Offering were approximately $43.4 million, after deducting underwriting discounts and commissions and other offering expenses of $3.2 million payable by the Company, including the Underwriters’ exercise of the overallotment option. The transactions contemplated by the Underwriting Agreement closed on August 7, 2013. |
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The Underwriting Agreement contained customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriters, including for liabilities under the Securities Act, other obligations of the parties and termination provisions. |
The representations, warranties and covenants contained in the Underwriting Agreement were made only for purposes of the Underwriting Agreement as of specific dates indicated therein, were solely for the benefit of the parties to the Underwriting Agreement, and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Underwriting Agreement. |
In November 2013, the Company entered into an equity distribution agreement with an investment banking firm. Under the terms of the distribution agreement, the Company may offer and sell up to 4,000,000 shares of its common stock, from time to time, through the investment bank in “at the market” offerings, as defined by the SEC, and pursuant to the Company’s effective shelf registration statement previously filed with the SEC. During the year ended March 31, 2014, the Company issued 334,412 shares of common stock in at-the-market offerings under the distribution agreement with net proceeds of $3.5 million. |
In addition, during the year ended March 31, 2014, the Company issued 2,713,207 shares of common stock upon exercise of 3,201,633 warrants. |
During the year ended March 31, 2014, the Company issued 183,796 shares of common stock upon exercise of 183,796 options. |
Restricted stock awards |
In February 2008, four founders, including the Chief Executive Officer (“CEO”) and three directors of the Company received 11,779,960 shares of restricted common stock, 25% vesting after the first year and the remaining 75% vesting in equal quarterly portions over the following three years. These shares are fully vested as of March 31, 2014. |
In May of 2008, the Board of Directors of the Company approved the 2008 Equity Incentive Plan (the “2008 Plan”). The 2008 Plan authorized the issuance of up to 1,521,584 common shares for awards of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock award units, and stock appreciation rights. The 2008 Plan terminates on July 1, 2018. No shares were issued under the 2008 Plan during the year ended December 31, 2012, the three months ended March 31, 2013, or the year ended March 31, 2014, and the Company does not intend to issue any additional shares from the 2008 Plan in the future. |
From 2008 through December 31, 2011, the Company issued a total of 1,258,934 shares of restricted common stock to various employees, advisors, and consultants of the Company. Of those shares, 1,086,662 were issued under the 2008 Plan and the remaining 172,272 shares were issued outside the plan. |
In January of 2012, the Board of Directors of the Company approved the 2012 Equity Incentive Plan (the “2012 Plan). The 2012 Plan authorized the issuance of up to 6,553,986 shares of common stock for awards of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, and other stock or cash awards. In August 2013, the Board of Directors of the Company approved an amendment to the 2012 Plan to increase the number of shares of common stock that may be issued under the 2012 Plan by 5,000,000 shares, for an aggregate of 11,553,986 shares issuable under the 2012 Plan. The 2012 Plan terminates ten years after its adoption. |
During the year ended December 31, 2012, the Company issued an aggregate 950,000 of restricted stock awards to certain members of senior management and 130,000 restricted stock awards to non-executive employees. The vesting schedule is 25% on each anniversary of the vesting start date over four years. Additionally, the Company issued 100,000 restricted stock awards to a consultant. The vesting schedule is 100% after 6 months. |
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During the year ended December 31, 2012, the Company issued an aggregate 200,000 restricted stock awards to a member of senior management, the vesting of which is performance based. As of March 31, 2014, the Company believed the financial targets would be met, and accordingly is recognizing the related stock based compensation expense over the requisite service period. |
During the year ended December 31, 2012, there were 95,842 restricted stock awards forfeited by staff members upon termination of their employment with the Company. Additionally, 89,674 restricted stock awards were surrendered related to shares of common stock returned to the Company, at the option of the holders, to cover the tax liability related to the vesting of 211,250 restricted stock awards. Upon the return of the common stock, 89,674 stock option grants with immediate vesting were granted to the individuals at the vesting date market value strike price. |
During the three months ended March 31, 2013, the Company issued an aggregate of 55,000 restricted stock awards with immediate vesting to a consultant. |
During the three months ended March 31, 2013, there were 10,000 restricted stock awards forfeited by one staff member upon termination of their employment with the Company. Additionally, 24,690 restricted stock awards were surrendered related to shares of common stock returned to the Company, at the option of the holder, to cover the tax liability related to the vesting of 50,000 restricted stock awards. Upon the return of the common stock, 24,690 stock option grants with immediate vesting were granted to the individual at the vesting date market value strike price. |
During the year ended March 31, 2014, 218,655 restricted stock awards were surrendered related to shares of common stock returned to the Company, at the option of the holder, to cover the tax liability related to the vesting of 405,000 restricted stock awards. Upon the return of the common stock, 218,655 stock option grants with immediate vesting were granted to the individual at the vesting date market value strike price. |
During the year ended March 31, 2014, the Company issued an aggregate of 60,000 restricted stock units with immediate vesting to a consultant. |
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A summary of the Company’s restricted stock award activity is as follows: |
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| | | | | | | | | | | | |
| | Number of | | | | | | | | | |
Shares | | | | | | | | |
Unvested at December 31, 2007 | | | — | | | | | | | | | |
Granted | | | 12,627,697 | | | | | | | | | |
Vested | | | (65,211 | ) | | | | | | | | |
Canceled / forfeited | | | — | | | | | | | | | |
| | | | | | | | | | | | |
Unvested at December 31, 2008 | | | 12,562,486 | | | | | | | | | |
Granted | | | 130,422 | | | | | | | | | |
Vested | | | (5,373,004 | ) | | | | | | | | |
Canceled / forfeited | | | — | | | | | | | | | |
| | | | | | | | | | | | |
Unvested at December 31, 2009 | | | 7,319,904 | | | | | | | | | |
Granted | | | 219,369 | | | | | | | | | |
Vested | | | (3,256,191 | ) | | | | | | | | |
Canceled / forfeited | | | — | | | | | | | | | |
| | | | | | | | | | | | |
Unvested at December 31, 2010 | | | 4,283,082 | | | | | | | | | |
Granted | | | 61,406 | | | | | | | | | |
Vested | | | (3,233,193 | ) | | | | | | | | |
Canceled / forfeited | | | — | | | | | | | | | |
| | | | | | | | | | | | |
Unvested at December 31, 2011 | | | 1,111,295 | | | | | | | | | |
Granted | | | 1,380,000 | | | | | | | | | |
Vested | | | (1,233,409 | ) | | | | | | | | |
Canceled / forfeited | | | (95,842 | ) | | | | | | | | |
| | | | | | | | | | | | |
Unvested at December 31, 2012 | | | 1,162,044 | | | | | | | | | |
Granted | | | 55,000 | | | | | | | | | |
Vested | | | (221,302 | ) | | | | | | | | |
Canceled / forfeited | | | (10,000 | ) | | | | | | | | |
| | | | | | | | | | | | |
Unvested at March 31, 2013 | | | 985,742 | | | | | | | | | |
Granted | | | 60,000 | | | | | | | | | |
Vested | | | (472,247 | ) | | | | | | | | |
Canceled / forfeited | | | — | | | | | | | | | |
| | | | | | | | | | | | |
Unvested at March 31, 2014 | | | 573,495 | | | | | | | | | |
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The fair value of each restricted common stock award is recognized as stock-based expense over the vesting term of the award. The Company recorded restricted stock-based compensation expense in operating expenses for employees and non-employees of approximately $817,000, $478,000, $0, $835,000, and $3,000 during the year ended March 31, 2014, the three months ended March 31, 2013 and March 31, 2012, and the years ended December 31, 2012, and 2011, respectively. The Company recorded restricted stock-based compensation expense of approximately $2,141,000 for the period from April 19, 2007 (inception) through March 31, 2014. Expense for each of the periods included approximately $16,000, $4,000, $0, $23,000, and $0 for research and development during the year ended March 31, 2014, the three months ended March 31, 2013 and March 31, 2012, and the years ended December 31, 2012, and 2011, respectively. General and administrative expense for the year ended March 31, 2014, the three months ended March 31, 2013 and March 31, 2012, and the years ended December 31, 2012, and 2011 were approximately $801,000, $474,000, $0, $812,000, and $3,000, respectively. |
As of March 31, 2014, total unrecognized restricted stock-based compensation expense was approximately $747,000, which will be recognized over a weighted average period of 1.46 years. |
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Stock options |
Under the 2008 Equity Incentive Plan, on October 12, 2011, the Company granted an officer incentive stock options to purchase 896,256 shares of common stock at an exercise price of $0.08 per share, a quarter of which vested on the one year anniversary of employment, in May 2012, and the remaining options are vesting ratably over the remaining 36 month term. Other than this grant, the Company does not intend to issue any additional shares under the 2008 Plan. |
During the year ended March 31, 2014, the three months ended March 31, 2013, and the year ended December 31, 2012, under the 2012 Equity Incentive Plan, 2,519,572, 927,981 and 2,023,394 incentive stock options were issued, respectively, at various exercise prices, a quarter of which will vest on either the one year anniversary of employment or one year anniversary of the vesting commencement date. The remaining options will vest ratably over the remaining 36 month terms, with the exception of 218,655, 24,690 and 83,986 of the incentive stock option grants during the year ended March 31, 2014, the three month period ended March 31, 2013, and the year ended December 31, 2012, respectively, that have immediate vesting at the grant date, 99,500 and 126,000 of the incentive stock option grants in the years ended March 31, 2014 and December 31, 2012, respectively, that vest quarterly over three years, and 122,500 and 70,750 of the incentive stock option grants in the years ended March 31, 2014 and December 31, 2012, respectively, that vest after one full year. |
The following table summarizes stock option activity for 2010 through March 31, 2014: |
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| | | | | | | | | | | | |
| | Options | | | Weighted- | | | Aggregate | |
Outstanding | Average | Intrinsic |
| Exercise Price | Value |
Outstanding at December 31, 2010 | | | — | | | | — | | | | — | |
Options granted | | | 896,256 | | | $ | 0.08 | | | | | |
Options canceled | | | — | | | | — | | | | | |
Options exercised | | | — | | | | — | | | | | |
| | | | | | | | | | | | |
Outstanding at December 31, 2011 | | | 896,256 | | | $ | 0.08 | | | | — | |
Options granted | | | 2,023,394 | | | $ | 1.95 | | | | | |
Options canceled | | | (5,000 | ) | | $ | 2.25 | | | | | |
Options exercised | | | (224,064 | ) | | $ | 0.08 | | | $ | 564,641 | |
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Outstanding at December 31, 2012 | | | 2,690,586 | | | $ | 1.48 | | | $ | 3,041,476 | |
Options granted | | | 927,981 | | | $ | 3.93 | | | | | |
Options canceled | | | — | | | | — | | | | | |
Options exercised | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Outstanding at March 31, 2013 | | | 3,618,567 | | | $ | 2.11 | | | $ | 5,909,154 | |
Options granted | | | 2,519,572 | | | $ | 8.63 | | | | | |
Options canceled | | | (18,455 | ) | | | 3.31 | | | | | |
Options exercised | | | (183,796 | ) | | | 2.19 | | | $ | 1,002,419 | |
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Outstanding at March 31, 2014 | | | 5,935,888 | | | $ | 4.87 | | | $ | 20,482,823 | |
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Vested and Exercisable at March 31, 2014 | | | 1,546,377 | | | $ | 2.73 | | | $ | 7,733,041 | |
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The weighted-average remaining contractual term of options exercisable and outstanding at March 31, 2014 was approximately 8.5 years and 8.92 years, respectively. |
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The Company uses the Black-Scholes valuation model to calculate the fair value of stock options. Stock based compensation expense is recognized over the vesting period using the straight-line method. The fair value of stock options was estimated at the grant date using the following weighted average assumptions: |
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| | Year Ended | | | Three Months | | | Year Ended | |
March 31, 2014 | Ended | December 31, 2012 |
| March 31, 2013 | |
Dividend yield | | | — | | | | — | | | | — | |
Volatility | | | 78.22 | % | | | 96.83 | % | | | 96.22 | % |
Risk-free interest rate | | | 1.32 | % | | | 1.19 | % | | | 0.89 | % |
Expected life of options | | | 6.00 years | | | | 6.07 years | | | | 6.05 years | |
Weighted average grant date fair value | | $ | 5.92 | | | $ | 3.04 | | | $ | 1.5 | |
The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. Due to the Company’s limited historical data, the estimated volatility incorporates the historical and implied volatility of comparable companies whose share prices are publicly available. The risk-free interest rate assumption was based on the U.S. Treasury rates. The weighted average expected life of options was estimated using the average of the contractual term and the weighted average vesting term of the options. Certain options granted to consultants are subject to variable accounting treatment and are required to be revalued until vested. |
The total stock option based compensation recorded as operating expense was approximately $3,783,000, $370,000, $4,000, $600,000, and $6,000 for the year ended March 31, 2014, the three months ended March 31, 2013 and March 31, 2012, and the years ended December 31, 2012, and 2011, respectively. The Company recorded stock-based compensation expense of approximately $4,761,000 for the period from April 19, 2007 (inception) through March 31, 2014. Expense for each of the periods included approximately $462,000, $58,000 and $81,000 for research and development during the year ended March 31, 2014, the three months ended March 31, 2013, and the year ended December 31, 2012, respectively. General and administrative expense for the year ended March 31, 2014, the three months ended March 31, 2013 and March 31, 2012, and years ended December 31, 2012, and 2011 were approximately $3,321,000, $312,000, $4,000, $519,000, and $6,000 respectively. |
The total unrecognized compensation cost related to unvested stock option grants as of March 31, 2014 was approximately $16,045,500 and the weighted average period over which these grants are expected to vest is 3.5 years. |
Warrants |
During the years ended December 31, 2012 and 2011, the Company issued warrants to investors to purchase 21,347,182 and 2,909,750 shares, respectively, of its common stock. |
During the year ended March 31, 2014, the three months ended March 31, 2013 and the year ended December 31, 2012, 225,000, 3,852,214, and 13,259,987 of these warrants were exercised for cash proceeds of approximately $210,000, $3,850,000 and $11,356,000, respectively, and 2,628,003, 3,138,342, and 272,500 of these warrants were exercised through a cashless exercise for issuance of 2,139,577, 2,220,764, and 163,635 shares of common stock, respectively. No warrants were exercised during 2011. |
In December 2012, the Company consummated a warrant tender offer to the holders of outstanding warrants to purchase approximately 14.5 million shares of the Company’s common stock. In accordance with the tender offer, for those warrant holders that elected to participate, this resulted in a reduction of the exercise price of the warrants from $1.00 per share to $0.80 per share of common stock in cash, shortened the exercise period of the warrants so that they expired concurrently with the tender offer, and removed the price-based anti-dilution provisions contained in the warrants. The Company completed the tender offer on December 21, 2012, resulting in approximately 9.6 million warrants being exercised for gross proceeds of approximately $7,700,000. In connection with the transaction, the Company recognized an expense for the inducement to exercise the warrants of approximately $1,900,000. The Company also incurred approximately $400,000 in placement agent fees, legal costs, and other related fees, which have been recognized as an offset to the proceeds received from the warrant exercises. |
During the year ended March 31, 2014, derivative liability warrants of 1,920,874 were exercised and 6,990,556 of the warrants exercised during the three months ended March 31, 2013 and 13,010,237 of the warrants exercised in 2012 were derivative liabilities and were valued at the settlement date. The warrant liability was reduced to equity at the fair value on the settlement date. See Note 5. |
During the twelve months ended March 31, 2014 and the three months ended March 31, 2013, the Company entered into amendment agreements for 269,657 and 601,735, warrants respectively, to purchase common stock which reduced the exercise price of the warrants from $1.00 to between $0.85 and $0.90, which removed the down-round price protection provision of the warrant agreement related to the adjustment of exercise price upon issuance of additional shares of common stock. As a result of the removal of the down-round price protection provision, the warrants were reclassified from liability to equity instruments at their fair value. The Company determined the incremental expense associated with the modification based on the fair value of the awards prior to and subsequent to the modification. The fair value of the awards subsequent to modification was calculated using the Black-Scholes model. The incremental expense associated with the modification of approximately $12,000 and $65,000 was recognized as interest expense for the twelve months ended March 31, 2014 and the three months ended March 31, 2013, respectively. |
During the year ended December 31, 2012 the Company entered into four agreements with consultants for services. In connection with the agreements, the Company issued a total of 650,000 warrants to purchase common stock, at prices ranging from $1.70 to $3.24, with lives ranging from two to five years, to be earned over service periods of up to six months. The fair value of the warrants was estimated to be approximately $890,000, which was recognized as a prepaid asset and is being amortized over the term of the consulting agreements. These warrants were classified as equity instruments because they do not contain any anti-dilution provisions. The Black-Scholes model, using volatility rates ranging from 79.8% to 103.8% and risk free interest rate factors ranging from 0.24% to 0.63%, were used to determine the value. The value is being amortized over the term of the agreements. During the year ended March 31, 2014, three months ended March 31, 2013 and the year ended December 31, 2012, the Company recognized approximately $72,000, $261,000, and $556,000, respectively, of expense related to these services. During the year ended March 31, 2014, 348,630 warrants held by consultants were exercised resulting in proceeds to the Company of approximately $891,000. During the three months ended March 31, 2013, 58,220 shares of common stock were issued through a cashless exercise of 100,000 of these warrants. |
Additionally, during November 2013 the Company entered into an agreement with a consultant for services. In connection with the agreement, the Company issued 75,000 warrants to purchase common stock, at a price of $7.36, with a life of five years, to be earned over a twelve month service period. The fair value of the warrants was estimated to be approximately $404,000, which was recognized as a prepaid asset and is being amortized over the term of the consulting agreement. These warrants were classified as equity instruments because they do not contain any anti-dilution provisions. The Black-Scholes model, using a volatility rate of 96.90% and a risk-free interest rate factor of 0.60%, was used to determine the value. The Company recognized approximately $163,000 during the year ended March 31, 2014 and for the period from April 19, 2007 (inception) through March 31, 2014, related to these services. |
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The following table summarizes warrant activity for the year ended March 31, 2014, the three months ended March 31, 2013, and the years ended December 31, 2012, 2011, and 2010: |
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| | Warrants | | | Weighted-Average | | | | | |
Exercise Price | | | | |
Balance at December 31, 2010 | | | — | | | | — | | | | | |
Granted | | | 2,909,750 | | | $ | 1 | | | | | |
Expired / Canceled | | | — | | | | — | | | | | |
Exercised | | | — | | | | — | | | | | |
| | | | | | | | | | | | |
Balance at December 31, 2011 | | | 2,909,750 | | | $ | 1 | | | | | |
Granted | | | 21,997,182 | | | $ | 1.04 | | | | | |
Exercised | | | (13,532,487 | ) | | $ | 0.84 | | | | | |
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Balance at December 31, 2012 | | | 11,374,445 | | | $ | 1.08 | | | | | |
Granted | | | — | | | | — | | | | | |
Exercised | | | (7,090,556 | ) | | $ | 1.01 | | | | | |
| | | | | | | | | | | | |
Balance at March 31, 2013 | | | 4,283,889 | | | $ | 1.17 | | | | | |
Granted | | | 112,500 | | | $ | 7.36 | | | | | |
Expired / Canceled | | | — | | | | — | | | | | |
Exercised | | | (3,201,633 | ) | | | 1.16 | | | | | |
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Balance at March 31, 2014 | | | 1,194,756 | | | $ | 1.79 | | | | | |
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The warrants outstanding at March 31, 2014 are immediately exercisable at prices between $0.85 and $7.36 per share, and have a weighted average remaining term of approximately 2.55 years. |
Common stock reserved for future issuance |
Common stock reserved for future issuance consisted of the following at March 31, 2014: |
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| | | | | | | | | | | | |
Common stock warrants outstanding | | | 1,194,756 | | | | | | | | | |
Common stock options outstanding under the 2008 Plan | | | 672,192 | | | | | | | | | |
Common stock options outstanding and reserved under the 2012 Plan | | | 9,534,989 | | | | | | | | | |
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Total | | | 11,401,937 | | | | | | | | | |
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Preferred stock |
The Company is authorized to issue 25,000,000 shares of preferred stock. There are no shares of preferred stock currently outstanding, and the Company has no present plans to issue shares of preferred stock. |