Stockholders’ Equity

3 Months Ended

Mar. 31, 2015

Stockholders' Equity

Convertible Preferred Stock and Stockholders’ Equity (Deficit)

6. Stockholders’ Equity

Common Stock

We are authorized to issue 100,000,000 shares of common stock, with a par value of $0.0001, of which 22,334,901 and 23,331,230were issued and outstanding at December 31, 2014 and March 31, 2015, respectively.

At the Market Offering

On March 13, 2015, we entered into a Sales Agreement with Guggenheim Securities, LLC, or Guggenheim, to offer shares of our common stock from time to time through Guggenheim, as our sales agent for the offer and sale of the shares.  We may offer and sell shares for an aggregate offering price of up to $25 million.  We did not make any sales under the Sales Agreement during the three months ended March 31, 2015.

Stock-based compensation expense

Stock-based payments to employees, including grants of employee stock options, are recognized in the statements of operations and comprehensive loss based on fair value. Stock-based payments to non-employees are recognized at fair value on the date of grant and re-measured at each subsequent reporting date through the settlement of the instrument.

In January 2015, we granted stock options for 600,000 shares of our common stock to certain of our executive officers that include both a service condition and a market condition.  The awards vest monthly at a rate of 2% per month (service condition) and the vesting is subject to acceleration if, at any time during the vesting period, the closing price of our common stock on NASDAQ is equal to or greater than $20.00 per share for 5 consecutive trading days (market condition).  Should this market condition occur, all remaining unvested options shall vest immediately at that time.  We calculated the fair value and derived service period of these options using a Monte Carlo simulation model and will recognize compensation expense over the derived service period of 1.88 years using the accelerated attribution method.  The fair value of all other stock options is calculated using the Black-Scholes valuation model, and is recognized over the vesting period.

Stock-based compensation expense recognized by award type is as follows:

	Three Months Ended
	March 31,
	2014		2015
Options awards	$	784,811	$	1,327,207
Restricted stock awards		28,867		293,624
Total stock-based compensation expense	$	813,678	$	1,620,831

Total compensation cost recognized for all stock-based compensation awards in the statements of operations and comprehensive loss is as follows:

	Three Months Ended
	March 31,
	2014		2015
Research and development	$	238,471	$	469,678
General and administrative		575,207		1,151,153
Total stock-based compensation expense	$	813,678	$	1,620,831

A summary of activity for all options for the three months ended March 31, 2015 is presented below:

					Fair Value
		Weighted Average		Weighted Average	of		Aggregate
		Exercise Price		Contractual	Options		Intrinsic
	Shares	Per Share		Life (In Years)	Granted		Value
Outstanding—December 31, 2014	3,277,308	$	5.53	8.5			$	13,575,815
Granted	775,900		5.18		$	3,066,622
Exercised	(22,020)		1.29
Forfeited	(7,286)		5.24
Outstanding—March 31, 2015	4,023,902	$	5.49	8.6			$	—
Vested and expected to vest—March 31, 2015	3,968,251	$	5.49	8.6			$	—
Exercisable at March 31, 2015	1,885,991	$	5.25	8.0			$	—

The per-share weighted-average fair value of the options granted to employees and non-employees during the three months ended March 31, 2015 was estimated at the date of grant using the Monte Carlo simulation model for stock options with both market conditions and service conditions for vesting, and using the Black-Scholes option-pricing model for all other options, with the following weighted-average assumptions:

	Monte Carlo			Black Scholes
Expected stock price volatility		80	%		91	%
Expected term of options		8	years		5.3	years
Risk‑free interest rate		1.73	%		1.25	%
Expected annual dividend yield		—	%		—	%
Weighted average grant date fair value	$	4.07		$	3.55

In January 2015, we granted 450,000 shares of restricted stock to certain of our executive officers that include both a service and market condition.  The awards cliff vest in their entirety 3 years from the date of grant (service condition),  and the vesting is subject to acceleration if, at any time during the vesting period, the closing price of our common stock on NASDAQ is equal to or greater than $20.00 per share for 5 consecutive trading days (market condition).  We calculated the derived service period for these restricted shares using a Monte Carlo simulation model and will recognize compensation expense over the derived service period of 1.5 years.

A summary of our restricted stock activity for the three month ended March 31, 2015 is as follows:

		Weighted
		Average
		Grant Date
		Fair Value
	Shares	per Share
Unvested Balance—December 31, 2014	11,765
Granted	450,000	$	5.25
Vested	(11,765)
Forfeited	—
Unvested Balance—March 31, 2015	450,000

As of March 31, 2015, there was $9,070,601 of total unrecognized compensation expense related to unvested stock options, and $2,086,875 of total unrecognized compensation expense related to unvested shares of restricted stock.

Warrants

We presently have the following warrants outstanding to purchase shares of our common stock:

		Number of
		Shares	Exercise
Warrant Series	Underlying Equity Security	Issuable	Price		Expiration Date
2007 Warrant	common stock	1,961	$	7.65	May 2017
2006 Warrants	common stock	21,786	$	7.65	March 2016-May 2016
2009/2010 Warrants	common stock	52,815	$	0.85	November 2019-March 2020

Our 2006 Warrants and 2009/2010 Warrants are classified as derivative liabilities on our balance sheets with subsequent changes to fair value recorded through earnings at each reporting period on our statements of operations and comprehensive loss as change in fair value of derivative liabilities. See Note 3 with respect to fair value.