Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

v3.7.0.1
Stockholders' Equity
12 Months Ended
Dec. 31, 2016
Stockholders' Equity Note [Abstract]  
Stockholders' Equity
10. Stockholders’ Equity
 
Bankruptcy Related Common Stock Issuances
 
As more fully described in Note 2, on June 30, 2016, pursuant to the SPA and in repayment of its obligations under the Credit Agreement, the Company issued an aggregate of 9,497,515 shares of its common stock to the DIP Lenders.

As more fully described in Note 2, on June 30, 2016, the Company issued 327,608 shares of common stock to the plaintiffs in litigation related to the Company’s 2015 private financing transaction in accordance with the settlement stipulation. The Company recorded an obligation to issue the related shares in stockholders’ equity and recorded the related expense of approximately $1.5 million in the attached Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2015.

As more fully described in Note 2, on June 30, 2016, the Company issued 3,750 shares of common stock to a former director in satisfaction of claims against the Company. The Company recorded an obligation to issue the related shares in stockholders’ equity and recorded the related expense of approximately $16,000 in the attached Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2015.

As more fully described in Note 2, on June 30, 2016, the Company issued 300,000 shares of common stock for issuance to the plaintiffs in a class action litigation related to the events surrounding the Company’s former Chairman and Chief Executive Officer. The Company recorded an obligation to issue the related shares in stockholders’ equity and recorded the related expense of approximately $1.3 million in the attached Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2015.

Common Stock
 
In June 2014, the Company amended and restated its certificate of incorporation to increase the authorized common stock to 85,000,000 shares.
 
On July 13, 2015, the Company effected a one-for-eight reverse stock split of its outstanding common stock pursuant to an amendment to the Company’s certificate of incorporation. As a result of the reverse stock split, each eight shares of the Company’s common stock were combined into one share of common stock. The reverse stock split was effective with respect to stockholders of record at the close of business on July 13, 2015, and trading of the Company’s common stock on the Nasdaq Global Market began on a split-adjusted basis on July 14, 2015. Holders of common stock who would have otherwise received fractional shares of the Company’s common stock pursuant to the reverse stock split received cash in lieu of the fractional share. The reverse stock split reduced the total number of shares of the Company’s common stock outstanding from approximately 33.0 million shares to approximately 4.1 million shares. In addition, the number of shares of common stock subject to outstanding options, restricted stock units and warrants issued by the Company and the number of shares reserved for future issuance under the Company’s stock plans were reduced by a factor of eight to proportionately reflect the reverse stock split, and per share exercise prices were increased by a factor of eight. The reverse stock split was accounted for retroactively and is reflected in the Company’s common stock, warrant, stock option and restricted stock activity as of and for the years ended December 31, 2016 and 2015. Unless stated otherwise, all share data in the financial statements and accompanying notes have been adjusted, as appropriate, to reflect the reverse stock split.
 
On December 3, 2015, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain investors (the “Purchasers”) relating to a private placement of up to an aggregate 511,596 shares of common stock at a purchase price of $29.32 per share, or up to $15 million (the “Private Placement”).
 
On December 15, 2015 the Securities Purchase Agreement was amended resetting the share price for all Purchasers other than those Purchasers who were directors, officers, employees or consultants of the Company to $24.86.  Upon closing of the Private Placement, the Company issued to the Purchasers 326,698 shares of common stock for an aggregate of $8.2 million.
 
On November 7, 2016, the Company issued 25,000 shares of restricted common stock to an investor relations consultant.  The fair value of the shares issued based on the closing price on November 7, 2016 was $77,500 and was recorded as stock based compensation in the attached Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2016.

On November 15, 2016, the Company issued 40,000 shares of restricted common stock to a financial advisor in return for services.  The fair value of the shares issued based on the closing price on November 15, 2016 was $120,000 and was recorded as stock based compensation in the attached Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2016.

The Company had reserved the following shares of common stock for issuance as of December 31, 2016:
 
Warrants to purchase common stock
   
356,193
 
Options:
       
Outstanding under the 2012 Equity Incentive Plan
   
1,826,548
 
Outstanding under the 2001 Equity Incentive Plan
   
9,287
 
Available for future grants under the 2012 Equity Incentive Plan
   
1,980,201
 
Total common stock reserved for future issuance
   
4,172,229
 
 
2012 Equity Incentive Plan
 
Under the Company’s 2012 Equity Incentive Plan, the Company may grant shares, stock units, stock appreciation rights, performance cash awards and/or options to employees, directors, consultants, and other service providers. For options, the per share exercise price may not be less than the fair market value of a Company common share on the date of grant. Awards generally vest and become exercisable over three to four years and expire 10 years from the date of grant. Options generally become exercisable as they vest following the date of grant.

In general, to the extent that awards under the 2012 Plan are forfeited or lapse without the issuance of shares, those shares will again become available for awards.
 
The 2012 Plan will continue in effect for 10 years from its adoption date, unless the Company’s board of directors decides to terminate the plan earlier.
 
On September 13, 2016, the Board of Directors of the Company approved an amendment to the Company’s 2012 Equity Incentive Plan to increase the number of shares of the Company’s common stock available for issuance under the Plan by 3,000,000 shares and to increase the annual maximum aggregate number of shares subject to stock option awards that may be granted to any one person under the Plan from 125,000 to 1,100,000.
 
As of December 31, 2016, there were 1,980,201 shares available for grant under the 2012 Equity Incentive Plan.
 
2001 Equity Incentive Plan
 
Under the Company’s 2001 Stock Plan (the “2001 Plan”), the Company was able to grant shares and/or options to purchase up to 426,030 shares of common stock to employees, directors, consultants, and other service providers. In connection with the 2012 Plan taking effect, the 2001 Plan was terminated in August 2012. However, the awards under the 2001 Plan outstanding as of the termination of the 2001 Plan continued to be governed by their existing terms. As of December 31, 2015, there were no shares available for grant under the 2001 Plan.
 
2012 Employee Stock Purchase Plan

The Employee Stock Purchase Plan (the “ESPP”) provided eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions, based on a six-month look-back period, at a price equal to the lesser of 85% of the fair market value of the ordinary shares at either the beginning of the offering period, or the fair market value on the purchase date. The ESPP was structured as a qualified employee stock purchase plan under Section 423 stock bonus plan under Section 401(a) of the Internal Revenue Code of 1986 and was not subject to the provisions of the Employee Retirement Income Security Act of 1974. There were 21,058 shares initially authorized for issuance under the plan, and the first offering period commenced on June 1, 2014 and ended on October 31, 2014. The second offering period commenced on November 1, 2014 and ended on April 30, 2015. Offerings subsequent to the second offering commence on May 1 and November 1 and end on April 30 and October 31 each year.  On May 3, 2016, the ESPP was terminated.
 
Stock Option Activity
 
The following table summarizes stock option activity for the year ended December 31, 2016:
 

                         
               
Weighted-
       
         
Weighted-
   
Average
       
         
Average
   
Remaining
       
         
Exercise
   
Contractual
   
Aggregate
 
   
Number of
   
Price
   
Term
   
Intrinsic Value
 
   
Shares
   
(Per Share)(1)
   
(in years)
   
(in thousands)(2)
 
Balances at December 31, 2014
   
334,686
   
$
34.00
             
Options granted
   
321,020
     
3.46
             
Options forfeited
   
(176,764
)
   
17.58
             
Options expired
   
(13,541
)
   
24.32
             
Options exercised
   
     
             
Balances at December 31, 2015
   
465,401
   
$
19.29
             
Options granted
   
1,778,022
     
3.38
             
Options forfeited
   
(3,416
)
   
5.86
             
Options expired
   
(398,547
)
   
18.38
             
Options exercised
   
(5,625
)
   
1.77
             
Balances at December 31, 2016
   
1,835,835
    $
4.15
     
9.50
   
$
947,896
 
As of December 31, 2016:
                               
Options vested and expected to vest
   
1,829,593
    $
4.15
     
9.50
   
$
944,673
 
Exercisable
   
287,041
    $
8.35
     
8.46
   
$
133,792
 
 
                                                    
(1)
The weighted average price per share is determined using exercise price per share for stock options.
 
(2)
The aggregate intrinsic value is calculated as the difference between the exercise price of the option and the fair value of the Company’s common stock for in‑the‑money options at December 31, 2016.
 
The stock options outstanding and exercisable by exercise price at December 31, 2016 are as follows:
 
   
Stock Options Outstanding
   
Stock Options Exercisable
 
         
Weighted-
                   
         
Average
 
Weighted-
       
Weighted-
 
         
Remaining
 
Average
       
Average
 
   
Number
of
   
Contractual
Life
 
Exercise
Price
   
Number of
 
Exercise
Price
 
Range of Exercise Prices
 
Shares
   
In Years
 
Per Share
   
Shares
 
Per Share
 
$1.91 - $1.91
   
8,500
     
8.76
   
$
1.91
     
2,479
   
$
1.91
 
$2.11 - $3.30
   
51,800
     
9.74
     
3.26
     
50,562
     
3.29
 
$3.38 - $3.38
   
1,678,022
     
9.71
     
3.38
     
139,831
     
3.38
 
$3.40 - $4.72
   
55,712
     
9.63
     
3.52
     
52,430
     
3.45
 
$8.24 - $17.36
   
9,200
     
1.13
     
9.78
     
9,200
     
9.78
 
$42.88 - $48.00
   
32,601
     
1.08
     
45.52
     
32,539
     
45.52
 
     
1,835,835
     
9.50
   
$
4.15
     
287,041
   
$
$8.35
 

The total fair value of options vested for the years ended December 31, 2016 and 2015 was $0.8 million and $2.9 million, respectively.
 
Stock Option Modifications
 
During the year ended December 31, 2015, the Company’s Board of Directors approved modifications to certain stock options in connection with the Company’s restructuring activities.  The modifications included both the acceleration of the vesting of options in connection with terminations of certain employees, as well as the extension of the exercise period post termination from the standard 90 day period to one year.  The Company accounted for the option modification under ASC Topic 718, Compensation – Stock Compensation, and as a result, recognized $959,000 in incremental compensation expense during the year ended December 31, 2015.
 
In addition, the vesting on certain options was accelerated upon termination based upon terms of the employment agreements with certain individuals.
 
Stock‑Based Compensation
 
The Company’s stock‑based compensation expense for stock options is estimated at the grant date based on the award’s fair value as calculated by the Black‑Scholes option pricing model and is recognized as expense over the requisite service period. The Black‑Scholes option pricing model requires various highly judgmental assumptions including expected volatility and expected term. The expected volatility is based on the historical stock volatilities of several of the Company’s publicly listed peers over a period equal to the expected terms of the options as the Company does not have a sufficient trading history to use the volatility of its own common stock. To estimate the expected term, the Company has opted to use the simplified method, which is the use of the midpoint of the vesting term and the contractual term. If any of the assumptions used in the Black‑Scholes option pricing model changes significantly, stock‑based compensation expense may differ materially in the future from that recorded in the current period. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. The Company estimates the forfeiture rate based on historical experience and its expectations regarding future pre‑vesting termination behavior of employees. The Company reviews its estimate of the expected forfeiture rate annually, and stock‑based compensation expense is adjusted accordingly.
 
The weighted‑average fair value‑based measurement of stock options granted under the Company’s stock plans in the years ended December 31, 2016 and 2015 was $2.41 and $2.15 per share, respectively. The fair value‑ based measurement of stock options granted under the Company’s stock plans was estimated at the date of grant using the Black‑Scholes model with the following assumptions:
 
   
Year Ended December 31,
 
   
2016 
 
2015 
Expected term
 
5-6 years 
 
5-6 years 
Expected volatility
85 - 90%
 
67 - 78%
 
Risk-free interest rate
   
1.3 - 1.4%
   
1.5 - 1.8%
 
Expected dividend yield
   
0%
   
0%
 

Total stock‑based compensation expense recognized was as follows:
 
   
Year Ended December 31,  
 
(In thousands)  
2016 
   
2015
 
General and administrative
 
$
547
   
$
1,134
 
Research and development
   
297
     
837
 
   
$
844
   
$
1,971
 

At December 31, 2016, the Company had $3.1 million of total unrecognized compensation expense, net of estimated forfeitures, related to outstanding stock options that will be recognized over a weighted‑average period of 2.5 years.