NOTE 5 - STOCKHOLDERS' EQUITY

Preferred Stock

Our amended and restated certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock, $0.001 par value, with rights senior to those of our common stock, issuable in one or more series. Upon issuance, we can determine the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.

Stockholder Rights Plan

On July 18, 2014, we adopted a stockholder rights plan. The stockholder rights plan is embodied in the Stockholder Protection Rights Agreement dated as of July 18, 2014 (the “Rights Agreement”), between us and American Stock Transfer & Trust Company, LLC, as rights agent (the “Rights Agent”).

Accordingly, the Board of Directors declared a distribution of one right (a “Right”) for each outstanding share of common stock, to stockholders of record at the close of business on July 28, 2014, for each share of common stock issued (including shares distributed from treasury) by us thereafter and prior to the Separation Time (as defined in the Rights Agreement), and for certain shares of common stock issued after the Separation Time. Following the Separation Time, each Right entitles the registered holder to purchase from us one one-thousandth (1/1,000) of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share (the "Preferred Stock"), at a purchase price of $100.00 (the "Exercise Price"), subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement. Each one one-thousandth of a share of Preferred Stock has substantially the same rights as one share of common stock. Subject to the terms and conditions of the Rights Agreement, Rights become exercisable ten days after the public announcement that a “Person” has become an “Acquiring Person” (as each such term is defined in the Rights Agreement). Any Rights held by an Acquiring Person are void and may not be exercised.

If a Person becomes an Acquiring Person, all holders of Rights, except the Acquiring Person, may purchase at the Right’s then-current exercise price, common stock having a market value equal to twice the exercise price. Moreover, at any time after a Person becomes an Acquiring Person (unless such Person acquires 50 percent or more of our common stock then outstanding, as more fully described in the Rights Agreement), the Board of Directors may exchange all (but not less than all) of the then outstanding Rights (other than rights owned by such Person, which would have become void) for shares of common stock at an exchange ratio of one share of common stock per Right, appropriately adjusted in order to protect the interests of holders of Rights.

The Rights Agreement was approved by our Board of Directors on July 18, 2014. The Rights will expire at the close of business on its ten year anniversary, unless earlier exchanged or terminated by us.

Common Stock

Our amended and restated certificate of incorporation authorizes the issuance of up to 150,000,000 shares of $0.001 par value common stock. At the annual shareholder meeting on June 6, 2014, an amendment to the Company's Certificate of Incorporation to decrease its authorized share capital by 350,000,000 shares from 500,000,000 to 150,000,000 was approved.

On March 11, 2014, we announced the pricing of an underwritten sale of 2,702,809 shares of our common stock at a price of $6.71 per share for gross proceeds of approximately $18.1 million. Net proceeds from this offering were approximately $16.8 million, net of underwriting discounts and offering expenses of approximately $1.3 million. The shares were sold under a shelf registration statement on Form S-3 (File No. 333-189015) that was previously filed and declared effective by the SEC on June 17, 2013.

On June 21, 2013, we entered into an At-the-Market Issuance Sales Agreement (the “ATM”) with MLV & Co. LLC (“MLV”) under which we may issue and sell shares of our common stock, having an aggregate offering price of up to $50.0 million, from time to time through MLV, acting as the sales agent. Under the agreement we will pay MLV a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock sold through MLV.

In August and September 2014, we sold an aggregate of 2,329,443 shares of common stock pursuant to the ATM for an aggregate of approximately $23.4 million in gross proceeds at an average selling price of $10.03 per share. Net proceeds were approximately $22.8 million after deducting commissions and other transactions costs.

From October 1, 2014 through November 7, 2014, we sold an aggregate of 2,520,612 shares of common stock pursuant to the ATM for an aggregate of approximately $26.6 million in gross proceeds at an average selling price of $10.57 per share. Net proceeds were approximately $26.1 million after deducting commissions and other transactions costs.

During and subsequent to the quarter ended September 30, 2014, we sold a total of 4,850,055 shares of common stock for aggregate total gross proceeds of approximately $50.0 million at an average selling price of $10.31 per share. Net proceeds were approximately $48.9 million after deducting commissions and other transactions costs. We have fully utilized the capacity under the ATM and, accordingly, no further sales can or will be made under the ATM.

We currently have one shelf registration statement on Form S-3 filed and declared effective by the SEC (File No. 333-189015). Subsequent to the above, there remains available under this shelf registration statement up to approximately $67 million of common stock. We may offer the securities under our shelf registration statement from time to time in response to market conditions or other circumstances if we believe such a plan of financing is in the best interests of our stockholders. We believe that this shelf registration statement provides us with the flexibility to raise additional capital to finance our operations, as needed.

Equity Incentive Plans

Shares available for the issuance of stock options or other stock-based awards under our stock option and incentive plans were 797,103 shares at September 30, 2014.

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2014:


		Weighted-		Weighted-	Aggregate
	Number	average		average	Intrinsic
	of shares	exercise price		Contractual Term	Value
				(in years)
Outstanding at December 31, 2013	46,591	$	46.37	8.50	$	—
Granted	—		—
Exercised	(33,000)		4.40
Forfeited	—		—
Expired	(397)		4,457.57
Outstanding at September 30, 2014	13,194	$	18.62	7.78	$	81,510

Vested and expected to vest at September 30, 2014	4,194	$	49.14	7.65	$	25,080
Exercisable at September 30, 2014	4,194	$	49.14	7.65	$	25,080

As of September 30, 2014, the total compensation cost related to unvested time-based option awards not yet recognized was $0. This amount does not include, as of September 30, 2014, 9,000 non-employee options outstanding which are milestone-based and vest upon certain corporate milestones. Stock-based compensation will be measured and recorded if and when a milestone occurs.

Restricted Stock

Certain employees, directors and consultants have been awarded restricted stock under the 2012 Incentive Plan. The restricted stock vesting consists of milestone and time-based vesting provisions. The following table summarizes restricted share activity for the nine months ended September 30, 2014:

		Weighted
		Average
		Grant Date
	Number of Shares	Fair Value
Outstanding at December 31, 2013	7,034,957	$	4.60
Granted	310,690		8.28
Vested	(903,416)		7.34
Forfeited	—		—
Outstanding at September 30, 2014	6,442,231	$	4.76

Total expense associated with restricted stock grants was $15,814,346 during the nine months ended September 30, 2014. As of September 30, 2014, there was approximately $10,213,000 of total unrecognized compensation cost related to unvested time based restricted stock, which is expected to be recognized over a weighted-average period of 1.1 years. This amount does not include, as of September 30, 2014, 2,017,250 shares of restricted stock outstanding issued to non-employees. The expense for these shares is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. We record compensation expense based on the fair value of the award at the reporting date.

Warrants

The following table summarizes warrant activity for the nine months ended September 30, 2014:

			Weighted-		Aggregate
			average		Intrinsic
	Warrants		exercise price		Value
Outstanding at December 31, 2013		5,718,947	$	1.34	$	14,809,030
Issued		—		—
Exercised		(1,272,340)		2.27
Expired		(9,795)		20.92
Outstanding at September 30, 2014		4,436,812	$	1.03	$	42,811,487

Stock-Based Compensation

The fair value of stock options granted is estimated at the date of grant using the Black-Scholes pricing model. The expected term of options granted is derived from historical data and the expected vesting period. Expected volatility is based on the historical volatility of our common stock. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. We have assumed no expected dividend yield, as dividends have never been paid to stock or option holders and will not be paid for the foreseeable future. We did not grant any stock options during the nine months ended September 30, 2014.

The following table summarizes stock-based compensation expense information about stock options and restricted stock for the three and nine months ended September 30, 2014:

	Three months ended		Nine months ended
	September 30, 2014		September 30, 2014
Stock-based compensation expense associated with restricted stock	$	4,096,572	$	15,814,346
Stock-based compensation expense associated with option grants		—		252,510
	$	4,096,572	$	16,066,856