Shareholders’ Equity

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Shareholders’ Equity

Shareholders’ Equity

Common Stock

During the six months ended June 30, 2014, the Company issued a total of 5,473,751 shares of common stock and canceled a total of 39,862 shares of common stock, of which: (i) 5,341,670 shares were issued upon the conversion of Series C-1² Preferred Stock; (ii) 129,105 shares were issued upon the conversion of Series F Preferred Stock; (iii) 2,976 shares were granted to a consultant; (iv) 39,811 shares of an unvested restricted stock grant were canceled; and (v) 51 shares were canceled due to fractional share interests as a result of the 2014 Reverse Stock Split.

Preferred Stock

As of June 30, 2014, the Company is authorized to issue 8,000,000 shares of preferred stock, with a par value of $0.0001 per share, in one or more series, of which 11,000 are designated Series C-1² Preferred Stock and 10,000 are designated Series F Preferred Stock. As of June 30, 2014, 3,917 shares of Series C-1² Preferred Stock and 2,798 shares of Series F Preferred Stock were issued and outstanding.

Share-Based Compensation

Share-Based Compensation Plan

In September 2013, the Company adopted an equity compensation plan entitled the 2013 Equity Incentive Plan (the “2013 Equity Plan”). The 2013 Equity Plan is an omnibus equity compensation plan that permits the issuance of various types of equity-based compensation awards, including options, stock awards, stock appreciation rights and restricted stock units, as well as cash awards, to employees, directors and eligible consultants of the Company. The 2013 Equity Plan has a ten-year term and it permits the issuance of incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. The administrator under the plan has broad discretion to establish the terms of awards, including the size, term, exercise price (if applicable) and applicable vesting conditions.

The 2013 Equity Plan currently allows for automatic annual increases on the first day of each year, with such increases based on 10% of the outstanding shares of the Company’s common stock as of the last day of the previous year end. On January 1, 2014, the total shares available for grant under the 2013 Equity Plan increased to 440,441. At June 30, 2014, there were 53,745 shares available for future grants under the 2013 Equity Plan.

The following table summarizes all share-based compensation expense related to stock options, restricted stock and restricted stock units by expense category (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Research and development:
Stock options	$	36	$	251	$	44	$	647
Restricted stock	146		35		505		43
Research and development share-based compensation expense	182		286		549		690
General and administrative:
Stock options	266		1,892		289		4,962
Restricted stock	1,706		112		4,014		121
Restricted stock units	—		52		—		52
General and administrative share-based compensation expense	1,972		2,056		4,303		5,135
Total share-based compensation expense included in expenses	$	2,154	$	2,342	$	4,852	$	5,825

Stock Options

During the three months ended June 30, 2014, stock options representing the right to acquire a total of up to 274,900 shares of common stock were granted to our President and Chief Executive Officer, three employees and three non-employee directors. The options granted to our President and Chief Executive Officer and three employees vest: (i) with respect to one quarter of the underlying shares, on the first anniversary of the grant; and (ii) with respect to the remaining three quarters of the underlying shares, on a quarterly basis equally over the following three years. The three non-employee directors were granted two options each: (i) one option that vests fully on the one year anniversary of such grant; and (ii) one option that vests: (a) with respect to one third of the underlying shares, on the first anniversary of such grant; and (b) with respect to the remaining two thirds of the underlying shares, on a quarterly basis equally over the following two years. The Company uses the Black-Scholes valuation model to calculate the fair value of its stock options. Share-based compensation expense is recognized over the vesting period using the straight-line method. The fair values of the stock options were estimated at the respective grant dates using the following assumptions:

	Three Months Ended  June 30, 2014
Dividend yield	—
Volatility	199.4	%
Risk-free interest rate	2.24	%
Expected life of options (years)	6.11 - 10.00

The grant date, weighted-average fair value per share of the stock options granted during the three months ended June 30, 2014 was $10.73.

As of June 30, 2014, there was $3.3 million in unrecognized stock option, share-based compensation expense to be recognized over the next 47 months. If there are any modifications or cancellations of underlying unvested share-based awards, we may be required to accelerate, increase or cancel the remaining unearned share-based compensation expense. Future share-based compensation expense and unearned share-based compensation will increase, to the extent that we grant additional share-based awards.

A summary of the Company’s stock option activity and related data for the six months ended June 30, 2014 is as follows:

	Outstanding Options
	Number of Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)
Balance at December 31, 2013	54,000	$	6.00	9.63
Granted	55,000	$	7.51	9.90
Balance at March 31, 2014	109,000	$	6.76	9.76
Granted	274,900	$	10.73	9.77
Balance at June 30, 2014	383,900	$	9.60	9.70

Restricted Stock

On January 25, 2014, the Company granted 2,976 shares of restricted stock to a consultant. The restricted stock vested immediately and was issued under the 2013 Equity Plan.

On March 31, 2014, restricted stock awards representing 39,811 shares of common stock were canceled on their forfeiture. The remaining unamortized share-based compensation expense for the canceled restricted stock awards was expensed on March 31, 2014.

The remaining unamortized share-based compensation expense for research and development to be recognized over the next 18 months is $2.0 million. The remaining unamortized share-based compensation expense for general and administrative to be recognized over the next 29 months is $9.7 million.