Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Stockholders' Equity

11. Stockholders’ Equity:

Stock-based compensation

During the six months ended June 30, 2016, a total of 296,013 options to purchase Common Stock, with an aggregate fair market value of approximately $1.1 million, were granted to Company employees, directors and contractors. The options granted have a term of 10 years from the grant date and vest ratably over a three year period. The fair value of each option is amortized as compensation expense evenly through the vesting period.

The Company’s stock-based compensation expense is allocated between research and development and selling, general and administrative as follows:

	Three months ended,		Six months ended,
Stock-based compensation expense	June 30, 2016	June 30, 2015	June 30, 2016	June 30, 2015
Research and Development	$0.5	$1.1	$1.6	$1.9
Selling, General and Administrative	$2.9	$3.1	$5.9	$5.7

The fair value of each option award is estimated on the grant date using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on implied volatilities from historical volatility of the Common Stock, and other factors estimated over the expected term of the options. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The weighted average for key assumptions used in determining the fair value of options granted during the six months ended June 30, 2016 follows:

Expected price volatility	62.2% -82.10%
Risk-free interest rate	1.26% - 1.70%
Weighted average expected life in years	6 years
Dividend yield	—

Option activity during the six months ended June 30, 2016 was as follows:

	Number of     Shares			Weighted Average Exercise Price   Per Share		Aggregate     Intrinsic Value
Outstanding at January 1, 2016		3,397,529		$	5.42
Granted in 2016
Officers and Directors		95,000			2.34
Others		201,013			4.33
Exercised		(112,425	)		2.00
Forfeitures		(214,722	)		9.64
Outstanding at June 30, 2016		3,366,395		$	5.11	$	874

As of June 30, 2016, options exercisable totaled 2,542,729. There was approximately $18 million of unrecognized compensation cost related to non-vested share-based compensation awards, including options and restricted stock units (“RSUs”) granted. These costs will be expensed through 2019.

Earnings Per Share

During the six months ended June 30, 2016 and 2015, outstanding stock options, RSUs, warrants and convertible preferred stock of 10,490,874 and 9,544,743, respectively, were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect. During the three months ended June 30, 2016 and 2015, outstanding stock options, RSUs, warrants and convertible preferred stock of 10,113,296 and 9,459,110, respectively, were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect.

Restricted Stock Units

During the six months ended June 30, 2016, 1,314,000 restricted stock units (“RSUs”) were granted to the Company’s executive officers, directors and employees, with a fair market value of approximately $4.4 million. The fair value of restricted units is determined using quoted market prices of the Common Stock and the number of shares expected to vest. These RSUs were issued under the Company’s 2011 Equity Incentive Plan, as amended, and vest in equal installments over three years for the executive officers, vest in equal installments over two years for directors and vest in the following year for employees.

Restricted stock activity during the six months ended June 30, 2016 was as follows:

	Number of       Restricted Shares		Weighted Average Fair     Market Value     Per RSU
Outstanding at January 1, 2016		4,298,154	$	10.23
Granted:
Executive officers		913,000		3.80
Directors		185,000		2.43
Employees		216,000		2.36
Vested		(104,025)		3.89
Forfeitures		(561,791)		12.45
Outstanding at June 30, 2016		4,946,338	$	8.52

Common Stock

On December 16, 2015, the Company and Dr. Andrew Finn entered into a retirement agreement (the “Retirement Agreement”) setting forth their mutual understandings regarding Dr. Finn’s retirement from the Company. Pursuant to the Retirement Agreement, all unvested RSUs previously issued under the Company’s equity incentive plans and held by Dr. Finn as of the retirement date were cancelled and, in lieu thereof, Dr. Finn was awarded a one-time issuance of shares of Common Stock based upon a net present valuation of the cancelled RSUs as set forth in the Retirement Agreement (which resulted in an issuance of 513,221 shares of Common Stock which were issued in January 2016).

In early 2016, following its review of the Company’s corporate performance for 2015, the Compensation Committee approved equity awards in the form of RSUs to its named executive officers (including Dr. Finn) and other senior executives in amounts at or below the 25th% percentile of the Company’s peer group. Dr. Finn, who retired on December 31, 2015, received an immediate award of 150,000 shares of Common Stock in fulfillment of the Company’s contractual obligation to him under the Retirement Agreement. Such shares were issued in March 2016.

Warrants

During the six months ended June 30, 2016, the Company granted warrants to purchase 84,986 shares of Common Stock to Midcap and its affiliates in connection with the Company’s extension agreement with Midcap, at an exercise price of $3.53 per share. As of June 30, 2016, 84,986 warrants remain outstanding.