Common Stock

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to dividends when and if declared by the Board of Directors. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the holders of common stock are entitled to share ratably in the assets of the Company available for distribution.

On January 30, 2014, the Company announced the amendment of the licensing agreement with Baxter in which certain financial and timing aspects of the agreement were modified. As a result, the Company is entitled to receive certain amounts in development, regulatory and sales milestone payments as well as increased royalties on potential net sales. In addition, Baxter SA made a direct equity investment of $10 million in cash in exchange for 10,695,187 shares of the Company’s common stock. See Note 4, Significant Strategic Drug Development Collaborations, for further discussion on the Company’s collaboration agreement with Baxter.

On December 31, 2014, 3,244,784 shares of new common stock were granted to FDS Pharma ASS (“FDS”) in consideration for the performance of services and termination of a prior collaboration agreement between Lipoxen and FDS. The Company determined that the fair value of the shares of common stock granted is more reliably measurable than the fair value of the services received. The Company assessed the fair value of one share of common stock on the measurement date to be $0.25, which is the Company’s quoted price per share of common stock on the OTCQB marketplace exchange on December 31, 2014. As performance by FDS was complete at the issuance date, the Company recorded expense of approximately $812,000 to research and development expense in the consolidated statement of comprehensive loss during the year ended December 31, 2014. FDS is a related party of SynBio, an affiliate of the Company.

Warrants

In connection with the Company’s collaboration agreements, the Company issued warrants to purchase shares of common stock to its collaborative partners. A warrant was also issued to a non-employee director for consulting services provided to the Company. These warrants were fair valued at issuance date using the Black-Scholes option pricing model. The warrants are subject to re-measurement at each reporting period until the measurement date is reached. Expense is recognized on a straight-line basis over the expected service period or at the date of issuance, if there is not a service period.

In 2010, Baxter SA was granted a warrant to purchase 4,588,298 new shares of common stock, which were exercisable immediately after issuance and expire on June 30, 2015. These warrants, which were fair valued at $932,000 at the time of issuance, were outstanding as of December 31, 2014 and 2013.

In 2011, Serum Institute was granted a warrant to purchase 2,400,000 new shares of common stock in three tranches of 800,000 each, which are exercisable immediately after issuance and expire in a range of 6 to 18 months after issuance (“Serum Institute 2011 Warrant”). The Serum Institute 2011 Warrant was fair valued at $10,000 at the time of issuance. The Serum Institute 2011 Warrant fully expired over a period spanning 2012 and 2013. Serum Institute did not exercise any warrants during the year ended December 31, 2013. On December 31, 2014, Serum Institute was granted a warrant to purchase 3,200,000 new shares of common stock at an exercise price of $0.77 per share (“Serum Institute 2014 Warrant”). The Serum Institute 2014 Warrant, which was fair valued at approximately $480,000 at the time of issuance, is exercisable in two equal tranches, each with separate non-market, performance-based vesting criteria. The Company uses its judgment to assess the probability and timing of Serum Institute achieving this vesting criteria and estimated that it is probable that the vesting criteria will be achieved for each tranche. These judgments are reassessed at each reporting period until the measurement date is reached.

In connection with the Serum Institute 2014 Warrant grant, warrants to purchase 160,000 aggregate new shares of common stock were issued to Serum Institute employees (“Serum Institute Partner Warrants”) on December 31, 2014 under the same terms and conditions of the Serum Institute 2014 Warrant. The Serum Institute Partner Warrants were fair valued at approximately $24,000 at the time of issuance. The Serum Institute 2014 Warrant and Serum Institute Partner Warrants expire on December 30, 2019 and no warrants were exercised during the year ended December 31, 2014.

In 2011, SynBio was granted a warrant to purchase 3,545,600 new shares of common stock, which was exercisable two years after issuance and expires on December 2, 2016 (“SynBio 2011 Warrant”). The SynBio 2011 Warrant, which was fair valued at $108,000 at the time of issuance, was outstanding as of December 31, 2013. On December 31, 2014, SynBio was granted a warrant to purchase 6,745,000 new shares of common stock at an exercise price of $0.77 per share (“SynBio 2014 Warrant”). The SynBio 2014 Warrant is exercisable in four equal tranches, each with separate non-market, performance-based vesting criteria. The Company uses its judgment to assess the probability and timing of SynBio achieving this vesting criteria and estimated that it is probable that the vesting criteria will be achieved for two of the defined tranches. The warrant tranches expected to vest were fair valued at approximately $506,000 at the time of issuance, The two tranches with vesting criteria not probable to be achieved will not be initially recognized. These judgments are reassessed at each reporting period until the measurement date is reached. Upon issuance of the SynBio 2014 Warrant on December 31, 2014, the SynBio 2011 Warrant was canceled and of no further force and effect.

In connection with the SynBio 2014 Warrant grant, warrants to purchase 320,000 aggregate new shares of common stock were issued to SynBio and Pharmsynthez non-director designees (“SynBio Partner Warrants”) on December 31, 2014 under the same terms and conditions of the SynBio 2014 Warrant. The SynBio Partner Warrants were fair valued at approximately $24,000 at the time of issuance. The SynBio 2014 Warrant expires on December 30, 2019 and no warrants were exercised during the year ended December 31, 2014.

On December 31, 2014, a non-employee director was granted a warrant to purchase 1,600,000 new shares of common stock at an exercise price of $0.77 per share for services provided to the Company. This warrant, which was fair valued at approximately $240,000 at the time of issuance, is exercisable two years after issuance. As performance was completed and the measurement date reached at the time of issuance, the Company recorded expense of approximately $240,000 to general and administrative expenses in the consolidated statement of comprehensive loss during the year ended December 31, 2014. This warrant expires on December 30, 2019 and was still outstanding as of December 31, 2014.

Key assumptions used in the Black-Scholes option pricing model for warrants granted during the year ended December 31, 2014 are as follows: