Stockholders' Equity

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Stockholders' Equity

12. Stockholders’ equity:

Stock-based compensation

During the three months ended March 31, 2017, a total of 615,155 options to purchase Common Stock, with an aggregate fair market value of approximately $1.2 million, were granted to Company employees. 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,
Stock-based compensation expense	March 31, 2017		March 31, 2016
Research and Development	$	401	$	1,128
Selling, General and Administrative	$	2,669	$	2,983

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.

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 three months ended March 31, 2017 follows:

Expected price volatility	62.34% -79.88%
Risk-free interest rate	1.90% - 1.94%
Weighted average expected life in years	6 years
Dividend yield	—

Option activity during the three months ended March 31, 2017 was as follows:

	Number of Shares			Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Outstanding at January 1, 2017		3,468,991		$	4.14
Granted in 2017
Officers and Directors		—			—
Others		615,155			1.87
Exercised		—			—
Forfeitures		(186,387	)		5.27
Outstanding at March 31, 2017		3,897,759		$	3.73	$	31

As of March 31, 2017, options exercisable totaled 2,612,869. There was approximately $11.9 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 2020.

Restricted stock units

During the three months ended March 31, 2017, 2,060,000 RSUs were granted to the Company’s executive officers and employees, with a fair market value of approximately $3.7 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. One-half of such RSUs are time-based and one-half are performance based and all vest over a three-year period. The performance-based RSUs provide for vesting if specified predetermined net revenue and operating income goals are achieved with respect to the annual fiscal years 2017 through 2019. These RSUs were granted over the plan allotment of our 2011 Equity Incentive Plan and will require approval during the 2017 annual stockholder meeting.

	Number of Restricted Shares			Weighted Average Fair Market Value Per RSU
Outstanding at January 1, 2017		4,584,297		$	7.29
Granted:
Executive officers		1,640,000			1.80
Directors		—			—
Employees		420,000			1.80
Vested		(1,207,952	)		2.04
Forfeitures		(84,000	)		3.14
Outstanding at March 31, 2017		5,352,345		$	4.69

Warrants

The Company has granted warrants to purchase shares of Common Stock. Warrants may be granted to affiliates in connection with certain agreements.

In connection with the initial borrowing made under the Loan Agreement on February 21, 2017, the Company issued to CRG and certain of its affiliates five separate warrants to purchase an aggregate of 1,701,583 shares of the Company’s common stock (the “CRG Warrants”). The CRG Warrants are exercisable any time prior to February 21, 2027 at a price of $2.38 per share, with typical provisions for cashless exercise and stock-based anti-dilution protection. The exercise of the CRG Warrants could have a dilutive effect to the Company’s common stock to the extent that the market price per share of the Company’s common stock, as measured under the terms of the CRG Warrants, exceeds the exercise price of the CRG Warrants. CRG is also entitled to receive a smaller amount of similar warrants concurrently with the funding, if applicable, of the Second Draw and the Third Draw.

The fair value of each warrant grant 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 warrants.

Expected term of warrants 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 warrants granted during the three months ended March 31, 2017 follows:

Expected price volatility	78.39	%
Risk-free interest rate	1.92	%
Weighted average expected life in years	6 years
Dividend yield	—

Warrant activity during the three months ended March 31, 2017 was as follows:

	Number of Shares		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Outstanding at January 1, 2017		84,986	$	3.53
Granted in 2017		1,701,583		2.38
Exercised		—		—
Forfeitures		—		—
Outstanding at March 31, 2017		1,786,569	$	2.43	$	—