Shareholders' Equity | 12 Months Ended |
Dec. 31, 2014 |
Equity [Abstract] | |
Shareholders Equity | 6 | Shareholders’ Equity | | | | | | | | | | | | | | | |
Common Stock |
In February 2011, the Company raised $7,460,129 (after commissions and offering expenses) from the sale of 5,219,768 shares of common stock and warrants to purchase 2,609,898 shares of common stock at an exercise price of $2.25 per share, to various investors in a private placement. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that certain future common stock issuances are made at a price less than $1.55. The January and October 2012 underwritten public offerings (see below) provided for the issuance of shares at prices that were less than $1.55. Accordingly, the exercise price of these warrants was adjusted to $1.87 and the number of warrants was proportionately increased to 2,823,696 net of exercises. (See “Warrants and Warrant Liabilities” below) |
In January 2012, the Company raised $9,271,370 in an underwritten public offering, net of offering expenses of approximately $1.1 million, from the sale of 9,489,436 shares of common stock and warrants to purchase 4,744,718 shares of common stock at an exercise price of $1.41 per share, to various investors in an underwritten public offering. The warrants have a term of 60 months from the date of issuance. The warrants do not contain any features (such as net cash settlement or anti-dilution features) that would preclude the Company from accounting for these warrants as equity. Accordingly, the warrants are accounted for as equity. |
In October 2012, the Company raised $19,359,553 in an underwritten public offering, net of offering expenses of approximately $1.6 million, from the sale of 10,000,000 shares of common stock and warrants to purchase 4,500,000 shares of common stock at an exercise price of $2.65 per share, to various investors in an underwritten public offering. The warrants have a term of 60 months from the date of issuance. The warrants do not contain any features (such as net cash settlement or anti-dilution features) that would preclude the Company from accounting for these warrants as equity. Accordingly, the warrants are accounted for as equity. |
See Subsequent Events (Note 10) for a description of the Company’s February 2015 underwritten public offering. |
Controlled Equity Offering |
On April 18, 2013, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the Sales Agreement) with Cantor Fitzgerald & Co., as agent (Cantor), pursuant to which the Company may offer from time to time through Cantor, shares of our common stock having an aggregate offering price of up to $25.0 million (of which only $17.0 million is currently registered for offer and sale). Under the Sales Agreement, Cantor may sell shares by any method permitted by law and deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act, as amended, including sales made directly on the NYSE MKT, on any other existing trading market for our common stock or to or through a market maker. The Company may instruct Cantor not to sell shares if the sales cannot be effected at or above the price designated by us from time to time. The Company is not obligated to make any sales of the shares under the Sales Agreement. The offering of shares pursuant to the Sales Agreement will terminate upon the earlier of (a) the sale of all of the shares subject to the Sales Agreement or (b) the termination of the Sales Agreement by Cantor or the Company, as permitted therein. Cantor will receive a commission rate of 3.0% of the aggregate gross proceeds from each sale of shares and the Company has agreed to provide Cantor with customary indemnification and contribution rights. The Company will also reimburse Cantor for certain specified expenses in connection with entering into the Sales Agreement. On April 22, 2013, NYSE MKT approved the listing of 10,593,220 shares of our common stock in connection with the Sales Agreement. Through December 31, 2014, we sold 6,946,261 shares of our common stock under the Sales Agreement that resulted in net proceeds to the Company of approximately $9,402,383. As of December 31, 2014, aggregate gross sales for additional common stock of approximately $7,081,494 remained available under the Sales Agreement. |
Stock Options |
In February 2005, the Company adopted an Equity Incentive Plan (Plan). Pursuant to the Plan, a committee appointed by the Board of Directors may grant, at its discretion, qualified or nonqualified stock options, stock appreciation rights and may grant or sell restricted stock to key individuals, including employees, nonemployee directors, consultants and advisors. Option prices for qualified incentive stock options (which may only be granted to employees) issued under the plan may not be less than 100% of the fair market value of the common stock on the date the option is granted (unless the option is granted to a person who, at the time of grant, owns more than 10% of the total combined voting power of all classes of stock of the Company; in which case the option price may not be less than 110% of the fair market value of the common stock on the date the option is granted). Option prices for nonqualified stock options issued under the Plan are at the discretion of the committee and may be equal to, greater or less than fair market value of the common stock on the date the option is granted. The options vest over periods determined by the Board of Directors and are exercisable no later than ten years from date of grant (unless they are qualified incentive stock options granted to a person owning more than 10% of the total combined voting power of all classes of stock of the Company, in which case the options are exercisable no later than five years from date of grant). Initially, the Company reserved 6,000,000 shares of common stock for issuance under the Plan. On October 24, 2011, the Company’s shareholders voted to increase the number of authorized shares reserved for the Plan to 8,000,000 shares. On September 20, 2013, the Company’s shareholders voted to increase the number of authorized shares reserved for the Plan to 12,000,000 shares. Options to purchase 3,231,340 common shares have been granted under the Plan and are outstanding as of December 31, 2014. As of December 31, 2014, there were 5,835,731 options available for issuance under the Plan. |
The following is a summary of stock option grants issued outside the Plan: |
In January 2007, the Company granted an option to purchase 1,500,000 shares of its common stock at an exercise price of $1.10 per share to the Chairman of the Company’s Scientific Advisory Board. |
In November 2006, the Company granted an option to purchase 300,000 shares of its common stock at an exercise price of $1.00 per share to an affiliate of the Company’s then Chairman of the Board. |
In November 2006, the Company granted an option to purchase 5,933,424 shares of its common stock at an exercise price of $1.00 per share to a Board member in connection with the Cedars-Sinai license acquisition. |
The following table summarizes stock option activity for the Company during the three years ended December 31, 2014: |
|
| | | | | Weighted | | | Weighted | | | | |
| | | | | Average | | | Average | | | Aggregate | |
| | | | | Exercise | | | Contractual | | | Intrinsic | |
| | Options | | | Price | | | Term | | | Value | |
Outstanding December 31, 2011 | | | 10,774,078 | | | $ | 1.07 | | | | | | | | | |
Granted | | | 1,292,500 | | | $ | 2.5 | | | | | | | | | |
Exercised | | | (1,285,384 | ) | | $ | 0.95 | | | | | | | | | |
Forfeited or expired | | | (200,000 | ) | | $ | 2.25 | | | | | | | | | |
Outstanding December 31, 2012 | | | 10,581,194 | | | $ | 1.16 | | | | | | | | | |
Granted | | | 862,287 | | | $ | 2.67 | | | | | | | | | |
Exercised | | | (829,702 | ) | | $ | 0.92 | | | | | | | | | |
Forfeited or expired | | | (147,084 | ) | | $ | 1.81 | | | | | | | | | |
Outstanding December 31, 2013 | | | 10,466,695 | | | $ | 1.37 | | | | | | | | | |
Granted | | | 547,117 | | | $ | 1.28 | | | | | | | | | |
Exercised | | | (624,047 | ) | | $ | 2.36 | | | | | | | | | |
Forfeited or expired | | | (1,075,000 | ) | | $ | 1.08 | | | | | | | | | |
Outstanding December 31, 2014 | | | 9,314,765 | | | $ | 1.33 | | | | 2.94 | | | $ | 23,000 | |
| | | 7,923,353 | | | $ | 1.19 | | | | 2.38 | | | $ | 23,000 | |
Vested or expected to vest at December 31, 2014 |
As of December 31, 2014, the total unrecognized compensation cost related to unvested stock options amounted to $1,622,889, which will be amortized over the weighted-average remaining requisite service period of approximately 16 months. |
Warrants |
In connection with the May 2010 common stock private placement, the Company issued to the investors warrants to purchase 1,245,455 shares of the Company’s common stock at $1.50 per share. The warrants have a term of 36 months from the date of issuance. As of December 31, 2014 these warrants have been fully exercised, except for warrants to purchase 4,000 shares of the Company’s common stock that expired. (see “Warrant Liability” below) |
In connection with the sale of Preferred Stock in May 2010, the Company issued warrants to purchase 1,350,000 shares of common stock at an exercise price of $2.50. The warrants have a term of five-years from the date of issuance. As of December 31, 2014, warrants to purchase 1,290,996 shares of the Company’s common stock at $2.50 were outstanding related to this private placement. (See “Warrant Liability” below.) |
In connection with the February 2011 common stock private placement, the Company issued to the investors warrants to purchase 2,818,675 shares of the Company’s common stock at $2.25 per share. The warrants have a five-year term from the date of issuance and contain a provision that provides for an adjustment to the exercise price in the event the Company completes an equity financing at a per share price of its common stock that is less than the adjusted exercise price. As a result of the January and October 2012 financings, the exercise price of the warrants was adjusted to $1.87 and the number of warrants was proportionately increased to 2,823,670 net of exercises. During 2014, the exercise price was further adjusted to $1.79 and the number of warrants was proportionately increased to 2,949,867 net of exercises to reflect the issuances pursuant to the Company’s Controlled Equity OfferingSM. As of December 31, 2014, warrants to purchase 2,949,867 shares of the Company’s common stock were outstanding related to this private placement. (See “Warrant Liability” below.) |
In connection with the January 2012 underwritten public offering, the Company issued to the investors warrants to purchase 4,744,718 shares of the Company’s common stock at $1.41 per share. The warrants have a five-year term from the date of issuance. These warrants qualify for equity treatment since they do not have any provisions that would require the Company to redeem them for cash or that would result in an adjustment to the number of warrants. As of December 31, 2014, warrants to purchase 1,418,575 shares of the Company’s common stock remain outstanding relating to this public offering. |
In connection with the October 2012 underwritten public offering, the Company issued to the investors warrants to purchase 4,500,000 shares of the Company’s common stock at $2.65 per share. The warrants have a five-year term from the date of issuance. These warrants qualify for equity treatment since they do not have any provisions that would require the Company to redeem them for cash or that would result in an adjustment to the number of warrants. As of December 31, 2014, warrants to purchase 4,446,775 shares of the Company’s common stock remain outstanding relating to this public offering. |
Warrant Liability |
The Company’s warrant liability is adjusted to fair value each reporting period and is influenced by several factors including the price of the Company’s common stock as of the balance sheet date. On December 31, 2014, the price per share of Company’s common stock was $0.73 per share compared to $0.93 per share at December 31, 2013 and $1.92 per share at December 31, 2012. |
In connection with the March 2010 common stock private placement, the Company issued to the investors warrants to purchase 696,000 shares of the Company’s common stock at $1.15 per share. Of the total proceeds from the March 2010 common stock private placement, $257,520 was allocated to the freestanding warrants associated with the units based upon the fair value of the warrants determined under the Black Scholes option pricing model. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that future common stock issuances are made at a price less than $1.00. Due to the potential variability of their exercise price, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. The warrant liability was adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations. Prior to 2011, the Company had concluded that Black-Scholes method of valuing the price adjustment feature does not materially differ from the valuation of such warrants using the lattice simulation model, and therefore, the use of the Black-Scholes valuation model was considered a reasonable method to value the warrants. The assumptions used in the Black Scholes model for determining the initial fair value of the warrants were as follows: (i) dividend yield of 0%; (ii) expected volatility of 102%, (iii) risk-free interest rate of 1.00%, and (iv) contractual life of 26 months. During the year ended December 31, 2011, the Company determined that it was more appropriate to value the warrants using a binomial lattice simulation model. During 2012, the remaining warrants were fully exercised; however, the Company recorded a charge to other expense of $745,500 as the Company revalued the warrants through the date of exercise. |
In connection with the May 2010 common stock private placement, the Company issued to the investors warrants to purchase 1,245,455 shares of the Company’s common stock at $1.50 per share. Of the total proceeds from the May 2010 common stock private placement, $834,455 was allocated to the freestanding warrants associated with the units based upon the fair value of the warrants determined under the Black Scholes option pricing model. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that future common stock issuances are made at a price less than $1.00. Due to the potential variability of their exercise price, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. The warrant liability is adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations. Prior to 2011, the Company concluded that the Black-Scholes method of valuing the price adjustment feature does not materially differ from the valuation of such warrants using the binomial lattice simulation models, and therefore, the use of the Black-Scholes valuation model was considered a reasonable method to value the warrants. The assumptions used in the Black Scholes model for determining the initial fair value of the warrants were as follows: (i) dividend yield of 0%; (ii) expected volatility of 102%, (iii) risk-free interest rate of 1.375%, and (iv) contractual life of 36 months. Effective January 1, 2011 the Company determined that it was more appropriate to value the warrants using a binomial lattice simulation model. During 2013, the remaining warrants were fully exercised; however, the Company recorded a charge to other expense of $583,134 as the Company revalued the warrants through the date of exercise. |
In connection with the sale of Preferred Stock in 2010, the Company vested warrants to purchase 1,350,000 shares of the Company’s common stock at an exercise price of $2.50 per share. Of the total proceeds from the May 2010 preferred stock sale, $5,710,500 was allocated to the freestanding warrants associated with the units based upon the fair value of these warrants determined under the Black Scholes option pricing model. The warrants contain a provision whereby the warrant may be settled for cash in connection with a change of control with a private company. Due to their potential cash settlement, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. The warrant liability is adjusted to fair value each reporting period and any change in value is recognized in the statement of operations. Prior to 2011, the Company concluded that the Black-Scholes method of valuing the price adjustment feature does not materially differ from the valuation of such warrants using the Monte Carlo or binomial lattice simulation models, and therefore, the use of the Black-Scholes valuation model was considered a reasonable method to value the warrants. The assumptions used in the Black Scholes model for determining the initial fair value of the warrants were as follows: (i) dividend yield of 0%; (ii) expected volatility of 102%, (iii) risk-free interest rate of 2.50%, and (iv) contractual life of 60 months. Effective January 1, 2011, the Company determined that it was more appropriate to value the warrants using a binomial lattice simulation model. The lattice simulation model used by the Company at December 31, 2013, assumed (i) dividend yield of 0%; (ii) expected volatility of 123%; (iii) risk free rate of 0.21% and (iv) expected term of 1.34 years. For the year ended December 31, 2013, the Company recorded a credit to other expense of $320,167. As of December 31, 2014, the Company revalued the warrants using the binomial lattice simulation model assuming (i) dividend yield of 0%; (ii) expected volatility of 106%; (iii) risk free rate of 0.04% and (iv) expected term of 0.34 years. For the year ended December 31, 2014, the Company recorded a credit to other expense of $260,781. As of December 31, 2014, the carrying value of the warrant liability is $7,746. |
In connection with the February 2011 common stock private placement, the Company issued to the investors warrants to purchase 2,818,675 shares of the Company’s common stock at $2.25 per share. Of the total proceeds from the February 2011 common stock private placement, $2,476,790 was allocated to the freestanding warrants associated with the units based upon the fair value of the warrants determined under the Binomial lattice model. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that certain future common stock issuances are made at a price less than $1.55. Due to the potential variability of their exercise price, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. As a result of the January and October 2012 financings, the exercise price of the warrants was adjusted to $1.87 and the number of warrants was proportionately increased to 2,823,696 net of exercises. The Company recorded a charge to financing expense of $397,294 to reflect the issuance of the additional warrants. As a result of the Company’s Controlled Equity OfferingSM during 2014, the exercise price of the warrants was adjusted to $1.79 and the number of warrants was proportionately increased to 2,949,867, net of exercises. The Company recorded a charge to financing expense of $62,683 to reflect the issuance of the additional warrants. The warrant liability is adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations. The Company initially valued these warrants using a binomial lattice simulation model assuming (i) dividend yield of 0%; (ii) expected volatility of 146%; (iii) risk free rate of 1.96% and (iv) expected term of 5 years. Based upon those calculations, the Company calculated the initial valuation of the warrants to be $2,476,790. The lattice simulation model used by the Company at December 31, 2013assumed (i) dividend yield of 0%; (ii) expected volatility of 111%; (iii) risk free rate of 0.44% and (iv) expected term of 2.14 years. For the year ended December 31, 2013, the Company recorded a credit to other expense of $905,377. As of December 31, 2014, the Company revalued the warrants using the binomial lattice simulation model assuming (i) dividend yield of 0%; (ii) expected volatility of 148%; (iii) risk free rate of 0.31% and (iv) expected term of 1.14 years. For the year ended December 31, 2014, the Company recorded a credit to other expense of $268,993. As of December 31, 2014, the carrying value of the warrant liability is $589,973. The exercise price of these warrants will be adjusted in conjunction with the Company’s February 2015 underwritten public offering. See Subsequent Events (Note 10). |
The below table summarizes the warrant liability activity for the years ended December 31, 2014, 2013 and 2012. The loss included in earnings is reflective of several factors including the increase in the Company’s stock during the years ended December 31, 2014, 2013 and 2012. |
|
| | 2014 | | | 2013 | | | 2012 | | | | | |
Beginning Balance, January 1 | | $ | 1,064,810 | | | $ | 2,852,880 | | | $ | 2,157,408 | | | | | |
Issuance of warrants and effect of repricing | | | 62,683 | | | | — | | | | 397,294 | | | | | |
Exercise of warrants | | | — | | | | (1,145,659 | ) | | | (1,981,745 | | | | | |
(Gain) or loss included in earnings | | | (529,774 | ) | | | (642,411 | ) | | | 2,279,923 | ) | | | | |
Transfers in and/or out of Level 3 | | | — | | | | — | | | | — | | | | | |
Ending Balance, December 31 | | $ | 597,719 | | | $ | 1,064,810 | | | $ | 2,852,880 | | | | | |
|