Stockholders' Equity

6 Months Ended

Jun. 30, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

5. Stockholders’ Equity

Stock Option Plans:

Prior to 2008 the Company adopted a 1998 Stock Option Plan and a 2000 Equity Incentive Plan, and in September 2008 it adopted a 2008 Incentive Award Plan (the “Plans”). The Plans provide for grants of options to those officers, key employees, directors and consultants whose substantial contributions are essential to the continued growth and success of the Company. In the aggregate the Plans provide for grants of both qualified and non-qualified stock options to purchase up to 14,000,000 shares at a purchase price equal to or greater than the fair market value on the date of grant in the case of qualified options granted to employees.

On January 31, 2011 the Company’s Board of Directors approved option grants to certain officers and employees for an aggregate of 604,000 shares at an exercise price of $2.00 per share. The options were fully vested as of the grant date and have a ten-year term. The Company has recorded an expense for the options of $779 thousand, as calculated using the Black-Scholes option pricing model which is recognized by accounting principles generally accepted in the United States.

On March 14, 2011, the Company entered into amended and restated executive employment contracts with Jonnie R. Williams, Sr, the Company’s Chief Executive Officer, Paul L. Perito, Esquire, the Company’s President, Chief Operating Officer and Chairman of the Board and Dr. Curtis Wright IV, Rock Creek’s Senior Vice President for Medical/Clinical affairs. The executive employment agreements with Messrs. Perito and Williams provide for performance-based stock options that will vest in such amounts and upon the achievement of the performance goals set forth in the agreements, provided that such performance goals and vesting schedule is approved by the Company’s stockholders. The options are for a ten-year term from March 14, 2011 and have an exercise price of $2.95 per share. Because the options issued to Messrs. Perito and Williams are subject to stockholder approval and performance criteria, the Company has not recognized an expense for the options during the first or second quarter. See the Company’s Annual Report filed with the SEC on March 16, 2011 for details of these agreements.

The executive employment agreement with Dr. Wright provides Dr. Wright with performance based options to purchase 300,000 shares of common stock under the Company’s 2008 Incentive Award Plan. These options will vest ratably on an annual basis over a three year period subject to the achievement of certain performance goals set forth in Dr. Wright’s employment agreement. The options are for a ten-year term from March 14, 2011 and have an exercise price of $2.95 per share. The options were valued at $751 thousand, as calculated using the Black-Scholes option pricing model which is recognized by accounting principles generally accepted in the United States. The option value will be amortized over the vesting period. As of June 30, 2011, $165 thousand of the option value has been recorded as an expense by the Company.

On March 17, 2011, the Board of Directors elected Richard L. Sharp to the Board as an Independent Director. Upon his election to the Board, Mr. Sharp was awarded a stock option grant in the amount of 50,000 option shares. Those options have a strike price of $2.90 per share and aggregate stock compensation of $123 thousand, which will be recognized in the financial statements over the two year vesting period of the options. As of June 30 2011, $18 thousand of the option value has been recorded as an expense by the Company.

During the six months ended June 30, 2011, 625,000 stock options were exercised resulting in proceeds to the company of $1.0 million with an intrinsic value of $1.8 million.

At June 30, 2011, there were 8,045,200 options issued and outstanding with a weighted average exercise price of $2.37 per share.

A summary of the status of the Company’s unvested stock options at June 30, 2011, and changes during the six months then ended, is presented below.

			Weighted
			Average
			Fair Value at
Nonvested Stock Options (in thousands)	Shares		Grant Date
Nonvested at December 31, 2010		100,000	$	1.74
Granted		350,000		2.49
Vested		—		—
Forfeited		—		—
Nonvested at June 30, 2011		450,000	$	2.32

As of June 30, 2011, there was $795 thousand of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Plans, which will be amortized to expense through March 2013.

The intrinsic value of the exercisable options at June 30, 2011 was $16.4 million.

Warrant activity:

On February 28, 2011, the Company entered into a Securities Purchase and Registration Rights Agreement (the “February 28 Agreement”) with an accredited investor who held previously issued warrants (the “Warrant Holder”) for 2,000,000 shares of the Company’s common stock, par value $0.0001 per share, at an exercise price of $1.00 per share (the “Prior Warrants”). Pursuant to the February 28 Agreement, the Warrant Holder exercised on the Prior Warrants and the Company granted the Warrant Holder new warrants with an exercise price of $2.00 per share for the same amount of shares of common stock as the Prior Warrants (the “New Warrants”). The February 28 Agreement resulted in gross proceeds to the Company of $2.0 million. The New Warrants are exercisable immediately into an aggregate of 2,000,000 shares of common stock and expire on February 28, 2016.

On March 4, 2011, the Company entered into a Securities Purchase and Registration Rights Agreement (the “March 4 Agreement”) with certain accredited investors (the “March 4 Investors”), to sell 4,856,730 shares of common stock (the “March 4 Shares”) and warrants to purchase an aggregate of 4,856,730 shares of common stock at an exercise price of $2.00 per share (the “Warrants”) (collectively, the “March 4 Offering”). The March 4 Offering resulted in gross proceeds to the Company of $9.0 million. The Warrants are first exercisable on September 4, 2011 and expire on September 4, 2016.

On March 30, 2011, the Company entered into a Securities Purchase and Registration Rights Agreement (the “March 30 Agreement”) with an accredited investor (the “March 30 Investor”), to sell 254,452 shares of common stock (the “March 30 Shares”), and warrants to purchase an aggregate of 254,452 shares of common stock at an exercise price of $4.00 per share (the “Warrants”) (collectively, the “March 30 Offering”). The March 30 Offering resulted in gross proceeds to the Company of $1.0 million. The Warrants are first exercisable on September 30, 2011 and expire on September 30, 2016.

On June 4, 2011, 200,000 warrants were exercised resulting in proceeds to the Company of $0.2 million.

As of June 30, 2011 the Company had 35,951,707 warrants outstanding with a weighted average exercise price of $1.77 per share.

Net Loss Basic and Diluted Per Common Share:

Due to the Company’s net losses, both basic and diluted loss per share were $(0.08) and $(0.11) for the six months ended June 30, 2011 and 2010, respectively. An aggregate of 43,996,907 at June 30, 2011 and 31,730,816 at June 30, 2010 of stock options and warrants outstanding were excluded from this computation because they would have had an anti-dilutive effect.