Stockholders' Equity

6 Months Ended

Jun. 30, 2013

Stockholders' Equity

3. Stockholders’ Equity

Common Stock

During the six months ended June 30, 2013, the Company issued a total of 16,218,845 shares of commonstock: (i) of which 2,663,114shares were issued upon the conversion of Series C-12 Preferred; (ii) 10,095,731 shares were issued upon the conversion of Series D-12 Preferred; (iii) 800,000shares of unregistered common stock were issued to our President and Chief Executive Officer; (iv) 300,000 shares of unregistered common stock were issued to a director; (v) 700,000 shares of unregistered common stock were issues to two employees; (vi) 200,000 shares of restricted stock issued to one employee and (vii)1,460,000shares were issued upon the vesting of restricted stock units.

          The 1,800,000 shares were issued during April 2013 and vested immediately.  The share-based compensation expense related to these shares during the three months and six months ended June30, 2013 is $112,000 and $121,000 for general and administrative expenses respectively, and share-based compensation expense during the three months and six months ended June30, 2013 is $32,000 and $35,500 for research and development expenses respectively

Preferred Stock

As of June 30, 2013, the Company’s Board of Directors 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 SeriesC-12 Preferred, 22,000 are designated SeriesC-22 Preferred, 5,134 are designated SeriesD-12 Preferred, and 10,868 are designated Series D-22 Preferred. As of June 30, 2013, 6,214 shares of SeriesC-12 Preferred, 530 shares of SeriesC-22 Preferred and 4,568 shares of Series D-12 Preferred were issued and outstanding.

On May 25, 2013 the Company paid dividends in kind to holders of the Series C-12 Preferred and Series C-22 Preferred. The Series C-12 Preferred and Series C-22 Preferred received 433 and 30 shares, respectively, of the corresponding preferred. In addition to the payment of dividends on May 25, 2013, there have been 98 shares of Series C-12 and C-22 Preferred accrued during the period from May 26, 2013 until June 30, 2013.

From January1, 2013 through June 30, 2013, there were 11 shares of Series C-12 Preferred and 47shares of Series D-12 Preferred converted into 2,663,114 and 10,095,731 shares of common stock, respectively.

Warrants

In connection with the Company’s public offering of shares of Common Stock and warrants to purchase shares of Common Stock in May 2008, the Company issued warrants to purchase 390 shares of the Company’s Common Stock. The warrants were immediately exercisable upon grant, had an exercise price of $21,500 per share and remained exercisable for five years. On May 12, 2013 the 390 warrants issued in the May 2008 public offering expired. As of June 30, 2013, there were no warrants outstanding.

Stock Options

The Company’s share-based plans permit the grant of stock options (both incentive and nonqualified stock options), restricted stock and restricted stock units to certain employees, directors and consultants.

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

	ThreeMonthsEnded				SixMonthsEnded
	June30,				June30,
	2013		2012		2013		2012
Research and development	$	251	$	248	$	647	$	248
General and administrative		1,892		2,462		4,962		2,462
Share-based compensation expense included in operating expenses	$	2,143	$	2,710	$	5,609	$	2,710

As of June 30, 2013 there was approximately $22.1 million of unrecognized stock option share-based compensation expense. This expense is currently expected to be recognized over a weighted average period of approximately 2.6 years. If there are any modifications or cancellations of the underlying unvested share-based awards, we may be required to accelerate, increase or cancel 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 three months ended June 30, 2013 is as follows:

	Outstanding Options
	Number of Shares		Weighted-Average ExercisePrice
Balance at December31, 2012		592,230,567	$	0.0655
Granted		—		—
Forfeited/Expired		2		148,500
Balance at June 30, 2013		592,230,565	$	0.0655

Restricted Stock

In April 2013, the Company issued an aggregate of 200,000shares of restricted stock to an employee.The shares were issued under the 2010 Plan and vest quarterly beginning on January 14, 2013.These shares are subject to a reacquisition right if the services of the holder are terminated during the vesting period.  No consideration is paid for the redemption of the shares under the reacquisition right, but the holder is required to return to the Company any cash dividends paid or payable with respect to the shares. The grant date fair value is the market value on the grant date multiplied by the number of shares granted and share-based compensation expense is recognized on a straight-line basis over the vesting period. The share-based compensation expense during the three months and six months ended June 30, 2013 is $7,000for research and development expenses. The remaining unamortized share-based compensation expense for research and development to be recognized over the next seven months is $9,000.

Restricted Stock Units

The share-based compensation expense during the three and six months ended June 30, 2013 by expense category was zero and $52,000 for general and administrative expenses respectively. The share-based compensation during the three and six months ended June 30, 2013 was $53 and $110 for research and development expenses, respectively. The remaining unamortized share-based compensation expense to be recognized over the remaining service period for the restricted stock unitsis $544.