View Filing Data

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2014	Nov. 11, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Cyclacel Pharmaceuticals, Inc.
Entity Central Index Key	0001130166
Trading Symbol	cycc
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		22,976,475
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Amendment Flag	false
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 26,707	$ 31,146
Prepaid expenses and other current assets	4,202	3,388
Current assets of discontinued operations	267	639
Total current assets	31,176	35,173
Property and equipment (net)	454	275
Long-term assets of discontinued operations		72
Total assets	31,630	35,520
Current liabilities:
Accounts payable	2,201	2,545
Accrued and other current liabilities	4,490	4,431
Other liabilities measured at fair value		20
Current liabilities of discontinued operations	75	260
Total current liabilities	6,766	7,256
Other liabilities	221	241
Total liabilities	6,987	7,497
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized at December 31, 2013 and September 30, 2014; 335,273 shares issued and outstanding at December 31, 2013 and September 30, 2014. Aggregate preference in liquidation of $3,989,749 at December 31, 2013 and September 30, 2014.
Common stock, $0.001 par value; 100,000,000 shares authorized at December 31, 2013 and September 30, 2014; 19,369,332 and 22,676,475 shares issued and outstanding at December 31, 2013 and September 30, 2014, respectively.	23	19
Additional paid-in capital	328,943	317,543
Accumulated other comprehensive loss	(305)	(109)
Accumulated deficit	(304,018)	(289,430)
Total stockholders' equity	24,643	28,023
Total liabilities and stockholders' equity	$ 31,630	$ 35,520

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)	Sep. 30, 2014	Dec. 31, 2013
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	335,273	335,273
Preferred stock, shares outstanding	335,273	335,273
Preferred stock, liquidation preference value (in dollars)	$ 3,989,749	$ 3,989,749
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	22,676,475	19,369,332
Common stock, shares outstanding	22,676,475	19,369,332

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Revenues:
Grant revenue	$ 735	$ 309	$ 1,487	$ 785
Total revenues	735	309	1,487	785
Operating expenses:
Research and development	4,972	4,575	13,861	8,786
General and administrative	1,433	1,529	4,281	5,999
Total operating expenses	6,405	6,104	18,142	14,785
Operating loss	(5,670)	(5,795)	(16,655)	(14,000)
Other income (expense):
Change in valuation of financial instruments associated with stock purchase agreement	(4)		(115)
Change in valuation of Economic Rights				570
Change in valuation of liabilities measured at fair value			20
Foreign exchange gains (losses)	10	25	(23)	44
Interest income	3	8	5	12
Other income, net		16	26	5,520
Total other income (expense)	9	49	(87)	6,146
Loss from continuing operations before taxes	(5,661)	(5,746)	(16,742)	(7,854)
Income tax benefit	750	730	2,135	1,218
Net loss from continuing operations	(4,911)	(5,016)	(14,607)	(6,636)
Discontinued operations:
Income from discontinued operations	6	20	29	70
Income tax on discontinued operations	(2)	(8)	(10)	(28)
Net income from discontinued operations	4	12	19	42
Net loss	(4,907)	(5,004)	(14,588)	(6,594)
Deemed dividend on convertible exchangeable preferred shares		(661)		(9,027)
Dividend on convertible exchangeable preferred shares	(50)	(63)	(150)	(248)
Net loss applicable to common shareholders	$ (4,957)	$ (5,728)	$ (14,738)	$ (15,869)
Basic and diluted earnings per common share:
Net loss per share, continuing operations	$ (0.22)	$ (0.32)	$ (0.68)	$ (1.15)
Net income per share, discontinued operations	0	0	0	0
Net loss per share applicable to common shareholders	$ (0.22)	$ (0.32)	$ (0.68)	$ (1.15)
Weighted average shares of common stock outstanding	22,676,475	17,788,568	21,607,888	13,850,792

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Net loss from continuing operations	$ (4,911)	$ (5,016)	$ (14,607)	$ (6,636)
Net income from discontinued operations	4	12	19	42
Net loss	(4,907)	(5,004)	(14,588)	(6,594)
Translation adjustment	6,214	(6,985)	2,134	(347)
Unrealized foreign exchange gain (loss) on intercompany loans	(6,422)	6,818	(2,330)	127
Comprehensive loss	$ (5,115)	$ (5,171)	$ (14,784)	$ (6,814)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Operating activities:
Net loss	$ (14,588)	$ (6,594)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in valuation of liabilities measured at fair value	(20)	(1,120)
Change in valuation of financial instruments associated with stock purchase agreement	115
Depreciation	115	58
Gain on sale of patents		(5,500)
Stock-based compensation	589	244
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(842)	(746)
Accounts payable and other current liabilities	(403)	837
Net cash used in operating activities	(15,034)	(12,821)
Investing activities:
Purchase of property, plant and equipment	(302)	(99)
Minimum royalty payments received from termination of ALIGN license agreement	288	264
Proceeds from sale of patents		5,500
Net cash provided by (used in) investing activities	(14)	5,665
Financing activities:
Proceeds from issuance of common stock, net of issuance costs	10,965	25,636
Payment of preferred stock dividend	(150)	(255)
Net cash provided by financing activities	10,815	25,381
Effect of exchange rate changes on cash and cash equivalents	(206)	(150)
Net increase (decrease) in cash and cash equivalents	(4,439)	18,075
Cash and cash equivalents, beginning of period	31,146	16,412
Cash and cash equivalents, end of period	26,707	34,487
Cash received during the period for:
Interest	5	9
Taxes	$ 1,811	970
Schedule of non-cash transactions:
Issuance of Ordinary shares in lieu of cash bonus		$ 181

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2014

Organization of the Company

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

1.	NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Operations

Cyclacel Pharmaceuticals, Inc. (“Cyclacel” or “the Company”), a development-stage biopharmaceutical company, is a pioneer in the field of cell cycle biology with a vision to improve patient healthcare with orally available innovative medicines. Cyclacel’s goal is to develop and commercialize small molecule drugs that target the various phases of cell cycle control for the treatment of cancer and other serious diseases, particularly those of high unmet medical need.

Cyclacel’s clinical development priorities are focused on sapacitabine, an orally available, cell cycle modulating nucleoside analogue.

Sapacitabine is being evaluated in the SEAMLESS Phase 3 study being conducted under a Special Protocol Assessment (“SPA”) agreement with the US Food and Drug Administration (“FDA”) for the front-line treatment of acute myeloid leukemia (“AML”) in the elderly and in Phase 2 studies for AML, myelodysplastic syndromes (“MDS”), non-small cell lung cancer (“NSCLC”) and chronic lymphocytic leukemia. Sapacitabine is also being evaluated in a Phase 1 study in combination with seliciclib, the Company’s second clinical candidate, in patients with solid tumors, in particular those carrying gBRCA mutations. The FDA and the European Medicines Agency (“EMA”) have designated sapacitabine as an orphan drug for the treatment of both AML and MDS.

In Cyclacel’s second development program, the Company is evaluating cyclin dependent kinase, or CDK, inhibitors. CDKs are involved in cancer cell growth, metastatic spread and DNA damage repair. Seliciclib, the Company’s most advanced CDK inhibitor, is an oral, highly selective inhibitor of CDK enzymes. To date, seliciclib has been evaluated in several Phase 1 and 2 studies in various cancers, including NSCLC and nasopharyngeal cancer (“NPC”), and has shown signs of anti-cancer activity. Seliciclib will also be evaluated in an investigator-initiated clinical study to treat rheumatoid arthritis (“RA”) supported by an approximately $1.5 million grant from the United Kingdom's Medical Research Council.

Cyclacel’s second generation CDK inhibitor, CYC065, is an oral, highly selective inhibitor of CDK enzymes. CYC065 has been shown to have increased anti-proliferative potency and improved pharmaceutical properties compared to seliciclib. Investigational new drug (“IND”) enabling studies with CYC065 have been completed with support from a $1.9 million grant from the Biomedical Catalyst of the United Kingdom government.

In addition to these development programs, in Cyclacel’s polo-like kinase (“PLK”) inhibitor program, the Company has discovered CYC140 and other potent and selective small molecule inhibitors of PLK1, a kinase active during cell division, targeting the mitotic phase of the cell cycle. PLK was discovered by Professor David Glover, the Company’s Chief Scientist. The Company has received a grant award of approximately $3.7 million from the Biomedical Catalyst of the United Kingdom government to complete IND-directed preclinical development of CYC140.

Cyclacel currently retains virtually all marketing rights worldwide to the compounds associated with the Company’s drug programs.

Substantially all efforts of the Company to date have been devoted to performing research and development, conducting clinical trials, developing and acquiring intellectual property, raising capital and recruiting and training personnel.

Capital Resources

The Company’s existing capital resources are expected to be sufficient to take the Company beyond the completion of the SEAMLESS Phase 3 trial but not sufficient to complete development of other indications or product candidates or to commercialize any of the Company’s product candidates.

Basis of Presentation

The condensed consolidated balance sheet as of September 30, 2014, the condensed consolidated statements of operations, comprehensive loss, and cash flows for the three and nine months ended September 30, 2013 and 2014 and all related disclosures contained in the accompanying notes are unaudited. The condensed consolidated balance sheet as of December 31, 2013 is derived from the audited consolidated financial statements included in the 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements are presented on the basis of accounting principles that are generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements. In the opinion of management, all adjustments, which include only normal recurring adjustments necessary to present fairly the condensed consolidated balance sheet as of September 30, 2014, and the results of operations, comprehensive loss and cash flows for the three and nine months ended September 30, 2014, have been made. The interim results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any other year. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2013, included in the Company’s Annual Report on Form 10-K filed with the SEC.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical estimates include inputs used to determine stock-based compensation expense and the fair value of financial instruments and other liabilities measured at fair value. Cyclacel reviews its estimates on an ongoing basis. The estimates are based on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates. Cyclacel believes the judgments and estimates required by the following accounting policies to be significant in the preparation of the Company’s consolidated financial statements.

Reclassification

Certain amounts in prior period financial statements have been reclassified to conform to current period financial statement presentation. On the consolidated balance sheet as of December 31, 2013, certain amounts have been reclassified from “Accrued and other current liabilities” to “Other liabilities.”

Risks and Uncertainties

Drug candidates developed by the Company typically will require approvals or clearances from the FDA or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s drug candidates will receive any of the required approvals or clearances. If the Company was denied approval or clearance or such approval was delayed, or is unable to obtain the necessary financing to complete development and approval, there will be a material adverse impact on the Company’s financial condition and results of operations.

Cash and Cash Equivalents

Cash equivalents are stated at cost, which is substantially the same as fair value. The Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to be cash equivalents and categorizes such investments as held to maturity. The objectives of the Company’s cash management policy are to safeguard and preserve funds, to maintain liquidity sufficient to meet Cyclacel’s cash flow requirements and to attain a market rate of return.

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, common stock warrants, financial instruments associated with stock purchase agreements, and other arrangements. The carrying amounts of cash and cash equivalents, accounts payable and accrued liabilities approximate their respective fair values due to the nature of the accounts, notably their short maturities. The financial instruments associated with stock purchase agreements and certain other liabilities are measured at fair value using applicable inputs as described in Note 3 - Fair Value.

Revenue Recognition

Grant revenues from government agencies and private research foundations are recognized as the related qualified research and development costs are incurred, up to the limit of the prior approval funding amounts. Grant revenues are not refundable.

Clinical Trial Accounting

Data management and monitoring of the Company’s clinical trials are performed with the assistance of contract research organizations (“CROs”) or clinical research associates (“CRAs”) in accordance with the Company’s standard operating procedures. Typically, CROs and CRAs bill monthly for services performed, and others bill based upon milestones achieved. For outstanding amounts, the Company accrues unbilled clinical trial expenses based on estimates of the level of services performed each period. Costs of setting up clinical trial sites for participation in the trials are recognized upon execution of the clinical trial agreement and expensed immediately as research and development expenses. Clinical trial costs related to patient enrollment are accrued as patients are entered into and progress through the trial.

Research and Development Expenditures

Research and development expenses consist primarily of costs associated with the Company’s product candidates, upfront fees, milestones, compensation and other expenses for research and development personnel, supplies and development materials, costs for consultants and related contract research, facility costs and depreciation. Expenditures relating to research and development are expensed as incurred.

Foreign Currency and Currency Translation

Transactions that are denominated in a foreign currency are remeasured into the functional currency at the current exchange rate on the date of the transaction. Any foreign currency-denominated monetary assets and liabilities are subsequently remeasured at current exchange rates, with gains or losses recognized as foreign exchange gains (losses) in the statement of operations.

The assets and liabilities of the Company’s international subsidiary are translated from its functional currency into United States dollars at exchange rates prevailing at the balance sheet date. Average rates of exchange during the period are used to translate the statement of operations, while historical rates of exchange are used to translate any equity transactions.

Translation adjustments arising on consolidation due to differences between average rates and balance sheet rates, as well as unrealized foreign exchange gains or losses arising from translation of intercompany loans that are of a long-term-investment nature, are recorded in other comprehensive loss.

Income Taxes

The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company applies the accounting guidance codified in ASC 740 “Income taxes” (“ASC 740”) related to accounting for uncertainty in income taxes. ASC 740 specifies the accounting for uncertainty in income taxes recognized in a company’s financial statements by prescribing a minimum probability threshold a tax position is required to meet before being recognized in the financial statements.

Credit is taken in the accounting period for research and development tax credits, which will be claimed from H.M. Revenue & Customs (“HMRC”), the United Kingdom’s taxation and customs authority, in respect of qualifying research and development costs incurred in the same accounting period.

Tax years 2011, 2012 and 2013 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United States and the United Kingdom, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (“IRS”), the HMRC or state tax authorities if they have or will be used in a future period. The Company is currently not under examination by the IRS or any other jurisdictions for any tax years.

Income tax benefit, net from continuing operations, on the consolidated statements of operations of $0.8 million and $2.1 million for the three and nine month periods ended September 30, 2014, respectively, consists of research and development tax credits from HMRC.

Stock-based Compensation

The Company grants stock options, restricted stock units and restricted stock to officers, employees and directors under the Amended and Restated Equity Incentive Plan (“2006 Plan”), which was approved on March 16, 2006, as amended on May 21, 2007, subsequently amended and restated on April 14, 2008, and further amended on May 23, 2012. Under the 2006 Plan, the Company has granted various types of awards, which are described more fully in Note 6 - Stock-Based Compensation Arrangements. The Company accounts for these awards under ASC 718“Compensation — Stock Compensation” (“ASC 718”).

ASC 718 requires measurement of compensation cost for all stock-based awards at fair value on date of grant and recognition of compensation over the requisite service period for awards expected to vest. The fair value of restricted stock and restricted stock units is determined based on the number of shares granted and the quoted price of the Company’s common stock on the date of grant. The determination of grant-date fair value for stock option awards is estimated using the Black-Scholes model, which includes variables such as the expected volatility of the Company’s share price, the anticipated exercise behavior of employees, interest rates, and dividend yields. These variables are projected based on historical data, experience, and other factors. Changes in any of these variables could result in material adjustments to the expense recognized for share-based payments. Such value is recognized as expense over the requisite service period, net of estimated forfeitures, using the straight-line attribution method. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from current estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. The Company considers many factors when estimating expected forfeitures, including type of awards granted, employee class, and historical experience. Actual results and future estimates may differ substantially from current estimates.

Segments

After considering its business activities and geographic reach, the Company has concluded that it operates in just one operating segment being the discovery, development and commercialization of novel, mechanism-targeted drugs to treat cancer and other serious disorders, with development operations in two geographic areas, namely the United States and the United Kingdom.

Net Loss Per Common Share

The Company calculates net loss per common share in accordance with ASC 260 “Earnings Per Share” (“ASC 260”). Basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period.

The following potentially dilutive shares of common stock have not been included in the computation of diluted net loss per share for the three and nine month periods ended September 30, 2013 and 2014 as the result would be anti-dilutive:

	September 30, 2013		September 30, 2014
Stock options		487,719		1,010,298
Restricted Stock and Restricted Stock Units		119,248		119,015
Convertible preferred stock		20,381		20,381
Common stock warrants		1,591,795		1,341,129
Total shares excluded from calculation		2,219,143		2,490,823

Comprehensive Income (Loss)

In accordance with ASC 220 “Comprehensive Income” (“ASC 220”), all components of comprehensive income (loss), including net income (loss), are reported in the financial statements in the period in which they are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net income (loss) and other comprehensive income (loss), including foreign currency translation adjustments, are reported, net of any related tax effect, to arrive at comprehensive income (loss). No taxes were recorded on items of other comprehensive loss.

Recent Events

On September 10, 2014, the Board of Directors (the “Board”) of the Company declared a quarterly cash dividend in the amount of $0.15 per share on the Company’s 6% Convertible Exchangeable Preferred Stock (“Preferred Stock”). The cash dividend was paid on November 3, 2014 to the holders of record of the Preferred Stock as of the close of business on October 1, 2014.

Accounting Standards Adopted in the Period

On January 1, 2014 the Company adopted guidance issued by the Financial Accounting Standards Board (“FASB”) relating to the presentation of an unrecognized tax benefit when a net operating loss carryforward (“NOL”), a similar tax loss, or a tax credit carryforward exists. The guidance states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a NOL, a similar tax loss, or a tax credit carryforward, except to the extent it is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The adoption of this guidance has not had a material impact on the Company’s consolidated financial statements.

On January 1, 2014 the Company adopted guidance issued by the FASB relating to certain foreign currency matters. This guidance clarifies the parent company’s accounting for the cumulative translation adjustment when a reporting entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity or of an investment in a foreign entity. The adoption of this guidance has not had a material impact on the Company’s consolidated financial statements.

On January 1, 2014 the Company adopted guidance issued by the FASB relating to obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. This provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, except for obligations addressed within existing guidance in GAAP. The guidance should be applied retrospectively to all prior periods presented for those obligations resulting from joint and several liability arrangements that exist at the beginning of an entity’s fiscal year of adoption. The adoption of this guidance has not had a material impact on the Company’s consolidated financial statements.

On June 10, 2014 the Company adopted guidance issued by the FASB relating to financial reporting for development stage entities. The guidance eliminates certain financial reporting requirements for development stage entities, including the presentation of inception-to-date information about income statement line items, cash flows, and equity transactions, and also eliminates an exception provided to development stage entities for determining whether an entity is a variable interest entity on the basis of the amount of equity that is at risk. The adoption of this guidance has resulted in the elimination of inception-to-date information.

Recent Accounting Pronouncements Not Yet Effective

In August 2014, the FASB issued guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and the provision of related footnote disclosures. This guidance is effective for annual period ending December 15, 2016 and for annual and interim periods thereafter. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2014, the FASB issued guidance on accounting for share based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period should be treated as a performance condition. This guidance is effective for annual periods, and interim periods within those annual periods, after January 1, 2016. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

In May 2014, the FASB issued new guidance on accounting for revenue from contracts with customers. This new guidance will replace existing revenue guidelines with a new model, in which revenue is recognized upon transfer of control over goods or services to a customer. The new standard will be effective for the Company on January 1, 2017, for both interim and annual periods. The guidance can be adopted using either a full retrospective (with certain practical expedients) or a modified retrospective method of transition. Under the modified retrospective approach, financial statements will be prepared for the year of adoption using the new standard, but prior periods will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings at the effective date for contracts that still require performance by the company, and disclose all line items in the year of adoption as if they were prepared under current revenue requirements. At this time, the Company has not decided on which method it will use to adopt the new standard, nor has it determined the effects of the new guidelines on its results of operations and financial position. For the foreseeable future, the Company’s revenues will be limited to grants received from government agencies or nonprofit organizations, and the Company is evaluating the effects of the new standard on these types of revenue streams.

FAIR VALUE

9 Months Ended

Sep. 30, 2014

Fair Value

FAIR VALUE

FAIR VALUE

As defined in ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considering counterparty credit risk in its measurement of fair value.

The fair value of the Company’s financial assets and liabilities that are measured on a recurring basis were determined using the following inputs as of December 31, 2013 (in $000s):

	Level 1		Level 2		Level 3		Total

ASSETS
Cash equivalents	$	26,476	$	—	$	—	$	26,476
Financial instrument associated with stock purchase agreement		—		397		—		397
Total assets	$	26,476	$	397	$	—	$	26,873

LIABILITIES
Other liabilities measured at fair value:
Scottish Enterprise agreement		—		—		20		20
Other liabilities measured at fair value		—		—		20		20
Total liabilities	$	—	$	—	$	20	$	20

The fair value of the Company’s financial assets and liabilities that are measured on a recurring basis were determined using the following inputs as of September 30, 2014 (in $000s):

	Level 1		Level 2		Level 3		Total
ASSETS
Cash equivalents	$	20,218	$	—	$	—	$	20,218
Financial instrument associated with stock purchase agreement		—		277		—		277
Total assets	$	20,218	$	277	$	—	$	20,495

The following table reconciles the beginning and ending balances of Level 3 inputs for the nine months ended September 30, 2014 (in $000s):

	Level 3
Balance as of December 31, 2013		20
Change in valuation of Scottish Enterprise agreement		(20	)
Balance as of September 30, 2014		—

Financial Instrument Associated with Stock Purchase Agreement

On November 14, 2013, the Company entered into a common stock purchase agreement with Aspire Capital Fund, LLC (“Aspire”) (the “Purchase Agreement”) under which Aspire purchased 511,509 shares of common stock for an aggregate purchase price of $2.0 million and committed to purchase up to an additional 3,042,038 shares from time to time as directed by the Company over the next two years at prices derived from the market prices on or near the date of each sale (see Note 8 – Stockholders’ Equity).

The Company has accounted for the right to sell additional shares under the Purchase Agreement based on the guidance of ASC 815 “Derivative Financial Instruments” (“ASC 815”), which requires the instrument to be measured at fair value with changes in fair value reported in earnings. The instrument had a fair value of $0.5 million at the date of the transaction and a fair value of $0.4 million and $0.3 million as of December 31, 2013 and September 30, 2014, respectively. The $0.1 million decrease in the fair value of the Purchase Agreement during the nine months ended September 30, 2014 was recognized as a loss in the consolidated statements of operations. The primary inputs used to determine fair value are the price of the Company’s common stock, the remaining term, and aggregate share purchases on the measurement date. The fair value of the Purchase Agreement is remeasured each reporting period and gains or losses will continue to be reported until the agreement is exhausted or expired.

Liabilities Measured at Fair Value

Scottish Enterprise Agreement

On June 22, 2009, the Company amended an agreement with Scottish Enterprise (“SE”) (the “Amendment”) pursuant to which, if the Company failed to maintain minimum staff levels before July 1, 2014 without SE’s prior consent, the Company would have been obligated to pay up to £4 million to SE, calculated as a maximum of £4 million (approximately $6.5 million at December 31, 2013) less the market value of the shares held by SE at the time staffing levels in Scotland fell below the prescribed minimum levels. The staffing levels did not fall below the minimum level before July 1, 2014 and the Company is no longer liable to make any payments under the Amendment.

This arrangement was accounted for as a liability under ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”), and is measured at fair value. Changes in fair value are recognized in earnings. Due to the nature of the associated contingency and the likelihood of occurrence, the Company concluded the fair value of this liability was approximately $20,000 at December 31, 2013. The most significant inputs in estimating the fair value of this liability were the probabilities that staffing levels would fall below the prescribed minimum and that the Company would be unable or unwilling to replace such employees within the prescribed time period. At December 31, 2013, the Company used a scenario analysis model to arrive at the fair value of the Scottish Enterprise Agreement and assumed a 30% probability of falling below a minimum staffing level and a 1% probability that the occurrence of such an event would not be cured within the prescribed time period. At September 30, 2014, the Company had no further liability under the agreement and the fair value of the liability was $0. Changes in the value of this liability have been recorded in the consolidated statement of operations.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

PREPAID EXPENSES AND OTHER CURRENT ASSETS

9 Months Ended

Sep. 30, 2014

Prepaid Expenses And Other Current Assets [Abstract]

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

The following is a summary of prepaid expenses and other current assets at December 31, 2013 and September 30, 2014 (in $000s):

	December 31,		September 30,
	2013		2014
Research and development tax credit receivable	$	1,744	$	2,014
Prepayments		427		821
Grant receivable		357		265
Sales tax receivable		209		552
Deposits		132		132
Other current assets		519		418
	$	3,388	$	4,202

ACCRUED AND OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2014

Accrued and Other Current Liabilities

ACCRUED AND OTHER CURRENT LIABILITIES

5.	ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities consisted of the following (in $000s):

	December 31,		September 30,
	2013		2014
Accrued research and development	$	3,435	$	4,082
Accrued legal and professional fees		265		243
Other current liabilities		731		165
	$	4,431	$	4,490

STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2014

Stock-Based Compensation Arrangements

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

ASC 718 requires compensation expense associated with share-based awards to be recognized over the requisite service period, which for the Company is the period between the grant date and the date the award vests or becomes exercisable. Most of the awards granted by the Company (and still outstanding), vest ratably over one to four years.

The Company recognizes all share-based awards under the straight-line attribution method. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company evaluates its forfeiture assumptions quarterly and the expected forfeiture rate is adjusted when necessary. Ultimately, the actual expense recognized over the vesting period is based on only those shares that vest.

Stock based compensation has been reported within expense line items on the consolidated statement of operations for the three and nine months ended September 30, 2013 and 2014 as shown in the following table (in $000s):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2014		2013		2014
General and administrative	$	82	$	160	$	199	$	415
Research and development		15		59		44		174
Stock-based compensation costs before income taxes	$	97	$	219	$	243	$	589

2006 Plan

On March 16, 2006, the 2006 Plan was adopted, under which Cyclacel may make equity incentive grants to its officers, employees, directors and consultants. The Company has reserved 1,428,571 shares of the Company’s common stock under the 2006 Plan. Stock option awards granted under the 2006 Plan have a maximum life of 10 years and generally vest over a one to four-year period from the date of grant.

There were 32,697 and 63,000 options granted during the nine months ended September 30, 2013 and 2014, respectively.

There were no stock options exercised during the three and nine months ended September 30, 2013 and 2014. The Company does not expect to be able to benefit for the deduction for stock option exercises that may occur during the year ended December 31, 2014 because the company has tax loss carryforwards from prior periods that would be expected to offset any potential taxable income for the year ended December 31, 2014.

Outstanding Options

A summary of the share option activity and related information is as follows:

	Number of Options Outstanding			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($000)
Options outstanding at December 31, 2013		949,685		$	15.02		7.38	$	152
Granted		63,000		$	3.11
Exercised		—		$	—
Cancelled/forfeited		(2,387	)	$	31.08
Options outstanding at September 30, 2014		1,010,298		$	14.24		6.83	$	7
Unvested at September 30, 2014		449,915		$	4.15		9.16	$	1
Vested and exercisable at September 30, 2014		560,383		$	22.33		4.96	$	6

The fair value of the stock options granted is calculated using the Black-Scholes option-pricing model as prescribed by ASC 718.

The expected term assumption is estimated using past history of early exercise behavior and expectations about future behaviors.

Estimates of pre-vesting option forfeitures are based on the Company’s experience. Currently the Company uses a forfeiture rate of 0 - 30% depending on when and to whom the options are granted. The Company adjusts its estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment in the period of change and may impact the amount of compensation expense to be recognized in future periods.

The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.

The weighted average risk-free interest rate represents interest rate for treasury constant maturities published by the Federal Reserve Board. If the term of available treasury constant maturity instruments is not equal to the expected term of an employee option, Cyclacel uses the weighted average of the two Federal Reserve securities closest to the expected term of the employee option.

Restricted Stock Units

Summarized information for restricted stock unit activity for the nine months ended September 30, 2014 is as follows:

	Restricted Stock Units ⁽¹⁾			Weighted Average Grant Date Value Per Share
Non-vested at December 31, 2013		119,248		$	5.62
Granted		—		$	—
Forfeited		(233	)	$	5.39
Non-vested at September 30, 2014		119,015		$	5.62

(1)

Includes 85,097 restricted stock units issued that will vest upon the fulfillment of certain clinical and financial conditions.

The Company issued 85,097 restricted stock units to employees during the three months ended March 31, 2013 that will vest upon the fulfillment of certain clinical and financial conditions and will terminate if they have not vested by December 31, 2014. The Company determined that the satisfaction of the vesting criteria was not probable as of September 30, 2014 and, as a result, did not record any expense related to these awards for the three and nine months ended September 30, 2014. The Company did not issue any restricted stock units during the nine months ended September 30, 2014.

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Distribution, Licensing and Research Agreements

The Company has entered into licensing agreements with academic and research organizations. Under the terms of these agreements, the Company has received licenses to technology and patent applications. The Company is required to pay royalties on future sales of products employing the technology or falling under claims of patent applications.

Pursuant to the Daiichi Sankyo license under which the Company licenses certain patent rights for sapacitabine, its lead drug candidate, the Company is under an obligation to use reasonable endeavors to develop a product and obtain regulatory approval to sell a product and has agreed to pay Daiichi Sankyo an up-front fee, reimbursement for Daiichi Sankyo’s enumerated expenses, milestone payments and royalties on a country-by-country basis. The up-front fee, Phase 3 entry milestone, and certain past reimbursements have been paid. A further $10.0 million in aggregate milestone payments could be payable subject to achievement of all the specific contractual milestones which are primarily related to regulatory approval in various territories, and the Company’s decision to continue with these projects. Royalties are payable in each country for the term of patent protection in the country or for ten years following the first commercial sale of licensed products in the country, whichever is later. Royalties are payable on net sales. Net sales are defined as the gross amount invoiced by the Company or its affiliates or licensees, less discounts, credits, taxes, shipping and bad debt losses. The agreement extends from its commencement date to the date on which no further amounts are owed under it. If the Company wishes to appoint a third party to develop or commercialize a sapacitabine-based product in Japan, within certain limitations, Daiichi Sankyo must be notified and given a right of first refusal, with the right of first refusal ending sixty days after notification, to develop and/or commercialize in Japan. In general, the license may be terminated by the Company for technical, scientific, efficacy, safety, or commercial reasons on six months’ notice, or twelve months’ notice, if after a launch of a sapacitabine-based product, or by either party for material default.

STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2014

Stockholders' Equity

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Preferred Stock

As of September 30, 2014, there were 335,273 shares of the Company’s 6% Convertible Exchangeable Preferred Stock (“Preferred Stock”) issued and outstanding at an issue price of $10.00 per share. Dividends on the Preferred Stock are cumulative from the date of original issuance at the annual rate of 6% of the liquidation preference of the Preferred Stock, payable quarterly on the first day of February, May, August and November, commencing February 1, 2005. Any dividends must be declared by the Company’s Board and must come from funds that are legally available for dividend payments. The Preferred Stock has a liquidation preference of $10.00 per share, plus accrued and unpaid dividends.

The Preferred Stock is convertible at the option of the holder at any time into the Company’s shares of common stock at a conversion rate of approximately 0.06079 shares of common stock for each share of Preferred Stock based on a price of $164.50. The Company has reserved 20,381 shares of common stock for issuance upon conversion of the remaining shares of Preferred Stock outstanding at September 30, 2014. The shares of previously-converted Preferred Stock have been retired, cancelled and restored to the status of authorized but unissued shares of preferred stock, subject to reissuance by the Board as shares of Preferred Stock of one or more series.

The Company may automatically convert the Preferred Stock into common stock if the closing price of the Company’s common stock has exceeded $246.75, which is 150% of the conversion price of the Preferred Stock, for at least 20 trading days during any 30-day trading period, ending within five trading days prior to notice of automatic conversion.

The Certificate of Designations governing the Preferred Stock provides that if the Company fails to pay dividends on its Preferred Stock for six quarterly periods, holders of Preferred Stock are entitled to nominate and elect two directors to the Board. This right accrued to the holders of Preferred Stock as of August 2, 2010 and two directors were nominated and elected at the annual meeting held on May 24, 2011.

The Preferred Stock has no maturity date and no voting rights prior to conversion into common stock, except under limited circumstances.

The Company may, at its option, redeem the Preferred Stock in whole or in part, out of funds legally available at the redemption prices per share stated below, plus an amount equal to accrued and unpaid dividends up to the date of redemption:

Year from November 1, 2013 to October 31, 2014		$	10.06
November 1, 2014 and thereafter		$	10.00

The Preferred Stock is exchangeable, in whole but not in part, at the option of the Company on any dividend payment date beginning on November 1, 2005 (the “Exchange Date”) for the Company’s 6% Convertible Subordinated Debentures (“Debentures”) at the rate of $10.00 principal amount of Debentures for each share of Preferred Stock. The Debentures, if issued, will mature 25 years after the Exchange Date and have terms substantially similar to those of the Preferred Stock. No such exchanges have taken place to date.

Conversion of Convertible Preferred Stock

During the nine months ended September 30, 2013, the Company converted an aggregate of 792,460 shares of Preferred Stock into an aggregate of 1,513,653 shares of the Company’s common stock. There were no conversions of the Company’s Preferred Stock into shares of common stock during the nine months ended September 30, 2014. Since the Company’s transaction with Xcyte Therapies, Inc. in 2006, holders have exchanged 1,711,540 shares of Preferred Stock into common stock as a result of arms-length negotiations between the Company and the other parties.

The table below provides details of the aggregate activities during the nine months ended September 30, 2013:

	Nine Months Ended September 30, 2013
Preferred shares exchanged		877,869
Shares of common stock issued:
At stated conversion terms		53,366
Incremental shares issued under the exchange transaction		1,631,105
Total shares of common stock issued		1,684,471

As the Preferred stockholders received additional shares of common stock issued to them upon conversion as compared to what they would have been entitled to receive under the stated rate of exchange, the Company recorded the excess of (1) the fair value of all securities and other consideration transferred to the holders of the Preferred Stock and (2) the fair value of securities issuable pursuant to the original conversion terms as a deemed dividend resulting in an increase in the net loss attributable to common shareholders. Specifically, the Company recorded deemed dividends related to the additional shares issued under the exchange transactions of $9.0 million for the nine months ended September 30, 2013.

Common Stock

April 2014 Underwriting Agreement

On April 3, 2014, the Company entered into an underwriting agreement relating to the public offering and sale of 2,857,143 shares of the Company’s common stock, par value $0.001, at a price to the public of $3.50 per share, for proceeds, net of certain fees and expenses, of approximately $9.3 million.

November 2013 Stock Purchase Agreement

On November 14, 2013, the Company entered into a common stock Purchase Agreement with Aspire. Upon execution of the Purchase Agreement, Aspire purchased 511,509 shares of common stock for an aggregate purchase price of $2.0 million. Under the terms of the Purchase Agreement, Aspire has committed to purchase up to an additional 3,042,038 shares from time to time as directed by the Company or, in certain instances, as agreed to by both parties, over the next two years at prices derived from the market prices on or near the date of each sale. However, such commitment is limited to an additional $18.0 million of share purchases. In consideration for entering into the Purchase Agreement, concurrent with the execution of the Purchase Agreement, the Company issued 166,105 shares of the Company’s common stock to Aspire in lieu of a commitment fee. The fair value of these shares has been recorded as a component of other assets and will continue to be remeasured each reporting period, until the agreement is exhausted or expired, with gains or losses reported in the consolidated statements of operations. During the nine months ended September 30, 2014, the Company sold 450,000 shares to Aspire under the Purchase Agreement for proceeds of $1.7 million.

May 2013 Underwriting Agreement

On May 16, 2013, the Company entered into an underwriting agreement relating to the public offering and sale of up to 6,666,667 shares of the Company’s common stock, par value $0.001, at a price to the public of $3.00 per share. On May 21, 2013, the Company closed the public offering and completed the sale of 6,833,334 shares of its common stock, which includes 166,667 shares that were subject to the underwriters’ over-allotment option, at a price to the public of $3.00 per share, for proceeds, net of certain fees and expenses, of approximately $19.0 million.

Common Stock Bonus

During the nine months ended September 30, 2013, the Company issued 31,643 shares of common stock with a fair value of approximately $0.2 million to employees in lieu of cash in connection with bonuses recorded for the year ended December 31, 2012. There were no such stock issuances during the nine months ended September 30, 2014.

December 2012 Stock Purchase Agreement

On December 14, 2012, the Company entered into a common stock purchase agreement with Aspire. Upon execution of the purchase agreement, Aspire purchased 158,982 shares of common stock for an aggregate purchase price of $1.0 million based on the closing price of the Company’s common stock on December 13, 2012, the date upon which the business terms were agreed. Under the terms of the purchase agreement, Aspire committed to purchase up to an additional 1,455,787 shares from time to time as directed by the Company over the next two years at prices derived from the market prices on or near the date of each sale. However, such commitment was limited to an additional $19.0 million of share purchases. In consideration for entering into the Purchase Agreement, concurrent with the execution of the Purchase Agreement, the Company issued 74,548 shares of the Company’s common stock to Aspire in lieu of a commitment fee. The fair value of the 74,548 shares of common stock along with the direct costs incurred in the connection with the Aspire transaction have been allocated to the shares sold at inception of this agreement and the right to sell additional shares in the future based on the ratio of shares sold at inception to the listed shares subject to this agreement. The agreement terminated on November 14, 2013 and no rights or obligations remain under the agreement.

March 2012 Sale of Common Stock and Economic Rights

On March 22, 2012, the Company entered into a purchase agreement with certain existing institutional stockholders, raising approximately $2.9 million of proceeds, net of certain fees and expenses. The proceeds from the financing were used to fund ongoing litigation-related expenses on certain intellectual property and for general corporate purposes. Under the terms of the purchase agreement, the investors purchased 669,726 shares of the Company’s common stock at a price of $4.53, which is equal to the 10-day average closing price of the Company’s common stock for the period ending on March 21, 2012. The shares issued at closing were subject to a lock-up period of one year from the date of issuance.

In addition to the common stock, investors received contractual rights to receive cash equal to 10% of any future litigation settlement related to the specified intellectual property, subject to a cap. In April 2013, the Economic Rights were settled for payment of $0.6 million.

Common Stock Warrants

The following table summarizes information about warrants outstanding at September 30, 2014:

Issued in Connection With	Expiration Date	Common Shares Issuable		Weighted Average Exercise Price
January 2010 stock issuance	2015		101,785	$	22.82
January 2010 stock issuance	2015		100,714	$	19.95
October 2010 stock issuance	2015		594,513	$	13.44
July 2011 stock issuance	2016		544,117	$	9.52
Total			1,341,129	$	13.05

There were no exercises of warrants during the nine months ended September 30, 2013 and 2014. Warrants for 151,773 shares of common stock, issued in connection with the February 2007 stock issuance and warrants for 98,893 shares of common stock, issued in connection with the July 2009 Series II stock issuance, expired during the nine months ended September 30, 2014.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(d),(e))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB TOPIC 4.E)
-URI http://asc.fasb.org/extlink&oid=27010918&loc=d3e74512-122707

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.29-31)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 4
-Subparagraph (SAB TOPIC 4.C)
-URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187143-122770

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 30
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Preferred Stock
-URI http://asc.fasb.org/extlink&oid=6521494

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph d
-Article 4

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 29, 30, 31
-Article 5

Reference 16: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 4
-Section E

Reference 17: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Article 4

Reference 18: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 4
-Section C

Reference 19: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Article 3

+ Details

DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2014

Discontinued Operations

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

On August 10, 2012, the Company entered into an agreement with Sinclair Pharmaceuticals Limited (“Sinclair”) to terminate, effective September 30, 2012, the distribution agreements relating to the promotion and sale of Xclair®, Numoisyn® Lozenges and Numoisyn® Liquid (collectively, the “ALIGN products”).

Product revenue, cost of goods sold and selling, general and administrative costs related to the promotion and sale of the ALIGN products have been reclassified from operating results from continuing operations to income from discontinued operations in the consolidated statement of operations for all periods presented as follows (in $000s):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2014			2013			2014
Interest income	$	20		$	6		$	70		$	29
Income tax on discontinued operations		(8	)		(2	)		(28	)		(10	)
Net income from discontinued operations	$	12		$	4		$	42		$	19

The assets and liabilities associated with product promotion and sales have been classified within assets and liabilities of discontinued operations in the accompanying consolidated balance sheets (in $000s):

	December 31, 2013		September 30, 2014

Current assets of discontinued operations:
Short term portion of minimum royalty arrangement receivable, net	$	379	$	192
Returns indemnification receivable		260		75
Total current assets of discontinued operations		639		267
Long-term assets of discontinued operations:
Long-term portion of minimum royalty arrangement receivable, net		72		—
Total assets of discontinued operations	$	711	$	267

Current liabilities of discontinued operations:
Returns provision	$	260	$	75
Total current liabilities of discontinued operations	$	260	$	75

- Definition

The entire disclosure for the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1436-107760

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1361-107760

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1474-107760

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1510-107760

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 45
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e957-107759

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 45
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1020-107759

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 205
-SubTopic 20
-Section 45
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1012-107759

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 360
-SubTopic 10
-Section 45
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=8077374&loc=d3e2443-110228

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 360
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6391110&loc=d3e2941-110230

+ Details

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies

Use of Estimates

Use of Estimates

Reclassification

Reclassification

Risks and Uncertainties

Risks and Uncertainties

Cash and Cash Equivalents

Cash and Cash Equivalents

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Revenue Recognition

Revenue Recognition

Clinical Trial Accounting

Clinical Trial Accounting

Research and Development Expenditures

Research and Development Expenditures

Foreign Currency and Currency Translation

Foreign Currency and Currency Translation

Income Taxes

Income Taxes

Stock-based compensation

Stock-based Compensation

Segments

Segments

Net Loss Per Common Share

Net Loss Per Common Share

	September 30, 2013		September 30, 2014
Stock options		487,719		1,010,298
Restricted Stock and Restricted Stock Units		119,248		119,015
Convertible preferred stock		20,381		20,381
Common stock warrants		1,591,795		1,341,129
Total shares excluded from calculation		2,219,143		2,490,823

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Recent Events

Recent Events

Accounting Standards Adopted in the Period

Accounting Standards Adopted in the Period

Recent Accounting Pronouncements Not Yet Effective

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies

Schedule of antidilutive shares excluded from computation of diluted net loss per share

	September 30, 2013		September 30, 2014
Stock options		487,719		1,010,298
Restricted Stock and Restricted Stock Units		119,248		119,015
Convertible preferred stock		20,381		20,381
Common stock warrants		1,591,795		1,341,129
Total shares excluded from calculation		2,219,143		2,490,823

FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value

Schedule of financial assets and liabilities measured on a recurring basis

The fair value of the Company’s financial assets and liabilities that are measured on a recurring basis were determined using the following inputs as of December 31, 2013 (in $000s):

	Level 1		Level 2		Level 3		Total

ASSETS
Cash equivalents	$	26,476	$	—	$	—	$	26,476
Financial instrument associated with stock purchase agreement		—		397		—		397
Total assets	$	26,476	$	397	$	—	$	26,873

LIABILITIES
Other liabilities measured at fair value:
Scottish Enterprise agreement		—		—		20		20
Other liabilities measured at fair value		—		—		20		20
Total liabilities	$	—	$	—	$	20	$	20

The fair value of the Company’s financial assets and liabilities that are measured on a recurring basis were determined using the following inputs as of September 30, 2014 (in $000s):

	Level 1		Level 2		Level 3		Total
ASSETS
Cash equivalents	$	20,218	$	—	$	—	$	20,218
Financial instrument associated with stock purchase agreement		—		277		—		277
Total assets	$	20,218	$	277	$	—	$	20,495

Schedule of of Level 3 inputs

	Level 3
Balance as of December 31, 2013		20
Change in valuation of Scottish Enterprise agreement		(20	)
Balance as of September 30, 2014		—

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

9 Months Ended

Sep. 30, 2014

Prepaid Expenses And Other Current Assets [Abstract]

Schedule of prepaid expenses and other current assets

	December 31,		September 30,
	2013		2014
Research and development tax credit receivable	$	1,744	$	2,014
Prepayments		427		821
Grant receivable		357		265
Sales tax receivable		209		552
Deposits		132		132
Other current assets		519		418
	$	3,388	$	4,202

ACCRUED AND OTHER CURRENT LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2014

Accrued and Other Current Liabilities

Schedule of accrued and other current liabilities

	December 31,		September 30,
	2013		2014
Accrued research and development	$	3,435	$	4,082
Accrued legal and professional fees		265		243
Other current liabilities		731		165
	$	4,431	$	4,490

STOCK BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2014

Stock-Based Compensation Arrangements

Schedule of stock based compensation expense

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2014		2013		2014
General and administrative	$	82	$	160	$	199	$	415
Research and development		15		59		44		174
Stock-based compensation costs before income taxes	$	97	$	219	$	243	$	589

Schedule of stock option activity

	Number of Options Outstanding			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($000)
Options outstanding at December 31, 2013		949,685		$	15.02		7.38	$	152
Granted		63,000		$	3.11
Exercised		—		$	—
Cancelled/forfeited		(2,387	)	$	31.08
Options outstanding at September 30, 2014		1,010,298		$	14.24		6.83	$	7
Unvested at September 30, 2014		449,915		$	4.15		9.16	$	1
Vested and exercisable at September 30, 2014		560,383		$	22.33		4.96	$	6

Schedule of restricted stock units activity

	Restricted Stock Units ⁽¹⁾			Weighted Average Grant Date Value Per Share
Non-vested at December 31, 2013		119,248		$	5.62
Granted		—		$	—
Forfeited		(233	)	$	5.39
Non-vested at September 30, 2014		119,015		$	5.62

(1)

Includes 85,097 restricted stock units issued that will vest upon the fulfillment of certain clinical and financial conditions.

STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2014

Stockholders' Equity

Schedule of redemption prices per share

Year from November 1, 2013 to October 31, 2014		$	10.06
November 1, 2014 and thereafter		$	10.00

Schedule of conversion of convertible preferred stock

	Nine Months Ended September 30, 2013
Preferred shares exchanged		877,869
Shares of common stock issued:
At stated conversion terms		53,366
Incremental shares issued under the exchange transaction		1,631,105
Total shares of common stock issued		1,684,471

Schedule of warrants outstanding

Issued in Connection With	Expiration Date	Common Shares Issuable		Weighted Average Exercise Price
January 2010 stock issuance	2015		101,785	$	22.82
January 2010 stock issuance	2015		100,714	$	19.95
October 2010 stock issuance	2015		594,513	$	13.44
July 2011 stock issuance	2016		544,117	$	9.52
Total			1,341,129	$	13.05

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References + Details

DISCONTINUED OPERATIONS (Tables)

9 Months Ended

Sep. 30, 2014

Discontinued Operations

Schedule of assets and liabilities, and product revenue, cost of goods sold and selling, general and administrative costs of discontinued operations

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2014			2013			2014
Interest income	$	20		$	6		$	70		$	29
Income tax on discontinued operations		(8	)		(2	)		(28	)		(10	)
Net income from discontinued operations	$	12		$	4		$	42		$	19

	December 31, 2013		September 30, 2014

Current assets of discontinued operations:
Short term portion of minimum royalty arrangement receivable, net	$	379	$	192
Returns indemnification receivable		260		75
Total current assets of discontinued operations		639		267
Long-term assets of discontinued operations:
Long-term portion of minimum royalty arrangement receivable, net		72		—
Total assets of discontinued operations	$	711	$	267

Current liabilities of discontinued operations:
Returns provision	$	260	$	75
Total current liabilities of discontinued operations	$	260	$	75

- Definition

Tabular disclosure of disposal groups, which may include the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the classification and carrying value of the assets and liabilities comprising the disposal group, and the segment in which the disposal group was reported. Also may include the amount of adjustments to amounts previously reported in discontinued operations such as resolution of contingencies arising from the disposal transaction or the operations of the component prior to disposal.

+ References + Details

NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details) $ in Millions	9 Months Ended
	Sep. 30, 2014 USD ($)
Nature of Operations
Grants awarded from United Kingdom' s Medical Research Council	$ 1.5
Grant awarded from UK Government's Biomedical Catalyst	1.9
Grant received	$ 3.7

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net loss per common share
Total shares excluded from calculation	2,490,823	2,219,143	2,490,823	2,219,143
Stock options
Net loss per common share
Total shares excluded from calculation	1,010,298	487,719	1,010,298	487,719
Restricted Stock and Restricted Stock Units
Net loss per common share
Total shares excluded from calculation	119,015	119,248	119,015	119,248
Convertible preferred stock
Net loss per common share
Total shares excluded from calculation	20,381	20,381	20,381	20,381
Common stock warrants
Net loss per common share
Total shares excluded from calculation	1,341,129	1,591,795	1,341,129	1,591,795

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) $ / shares in Units, $ in Thousands		3 Months Ended		9 Months Ended
	Sep. 10, 2014 $ / shares	Sep. 30, 2014 USD ($) Country	Sep. 30, 2013 USD ($)	Sep. 30, 2014 USD ($) Segment Country	Sep. 30, 2013 USD ($)
Summary of Significant Accounting Policies
Income tax benefit \| $		$ 750	$ 730	$ 2,135	$ 1,218
Segments
Number of operating segments \| Segment				1
Number of geographic areas for development operations \| Country		2		2
Cash dividend declared per share (in dollars per share) \| $ / shares	$ 0.15
Dividend rate (in percent)	6.00%

FAIR VALUE (Details) - Recurring basis - USD ($) $ in Thousands	Sep. 30, 2014	Dec. 31, 2013
Level 1
ASSETS
Cash equivalents	$ 20,218	$ 26,476
Financial instrument associated with stock purchase agreement
Total assets	20,218	26,476
Other liabilities measured at fair value:
Scottish Enterprise agreement
Other liabilities measured at fair value
Total liabilities
Level 2
ASSETS
Cash equivalents
Financial instrument associated with stock purchase agreement	277	397
Total assets	277	397
Other liabilities measured at fair value:
Scottish Enterprise agreement
Other liabilities measured at fair value
Total liabilities
Level 3
ASSETS
Cash equivalents
Financial instrument associated with stock purchase agreement
Total assets
Other liabilities measured at fair value:
Scottish Enterprise agreement		20
Other liabilities measured at fair value		20
Total liabilities		20
Total
ASSETS
Cash equivalents	20,218	26,476
Financial instrument associated with stock purchase agreement	277	397
Total assets	$ 20,495	26,873
Other liabilities measured at fair value:
Scottish Enterprise agreement		20
Other liabilities measured at fair value		20
Total liabilities		$ 20

FAIR VALUE (Details 1) - Guarantees $ in Thousands	9 Months Ended
FAIR VALUE (Details 1) - Guarantees $ in Thousands	Sep. 30, 2014 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance as of December 31, 2013	$ 20
Change in valuation of Scottish Enterprise agreement	(20)
Balance as of September 30, 2014

FAIR VALUE (Details 2) - Purchase Agreement - Aspire Capital Fund, LLC - USD ($) $ in Millions		9 Months Ended
	Nov. 14, 2013	Sep. 30, 2014	Dec. 31, 2013
Fair value measurements
Number of shares issued under purchase agreement	511,509
Purchase price for shares issued under purchase agreement	$ 2.0
Shares committed to purchase	3,042,038
Period of common stock purchase agreement	2 years
Fair value of financial instrument	$ 0.5	$ 0.3	$ 0.4
Decrease in the fair value of the Purchase Agreement		$ 0.1

FAIR VALUE (Details 3) - Scottish Enterprise Agreement £ in Millions	12 Months Ended
	Dec. 31, 2013 USD ($)	Sep. 30, 2014 USD ($)	Dec. 31, 2013 GBP (£)	Jun. 22, 2009 USD ($)	Jun. 22, 2009 GBP (£)
Scottish Enterprise Agreement
Maximum guaranteed amount potentially due to SE	$ 6,500,000		£ 4		£ 5
Modified payment for which parties agreed				$ 1,700,000	£ 1
Fair value of the liability	$ 20,000	$ 0
Expected volatility (as a percent)	30.00%
Probability of falling below a minimum staffing level within prescribed time period (as a percent)	1.00%

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Sep. 30, 2014	Dec. 31, 2013
Prepaid Expense and Other Assets, Current [Abstract]
Research and development tax credit receivable	$ 2,014	$ 1,744
Prepayments	821	427
Grant receivable	265	357
Sales tax receivable	552	209
Deposits	132	132
Other current assets	418	519
Prepaid expenses and other current assets	$ 4,202	$ 3,388

ACCRUED AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands	Sep. 30, 2014	Dec. 31, 2013
Accrued and Other Current Liabilities
Accrued research and development	$ 4,082	$ 3,435
Accrued legal and professional fees	243	265
Other current liabilities	165	731
Total	$ 4,490	$ 4,431

STOCK BASED COMPENSATION (Details)	9 Months Ended
STOCK BASED COMPENSATION (Details)	Sep. 30, 2014
Minimum
Stock-based compensation
Vesting period	1 year
Maximum
Stock-based compensation
Vesting period	4 years

STOCK BASED COMPENSATION (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Stock-based compensation
Stock-based compensation costs before income taxes	$ 219	$ 97	$ 589	$ 243
General and administrative
Stock-based compensation
Stock-based compensation costs before income taxes	160	82	415	199
Research and development
Stock-based compensation
Stock-based compensation costs before income taxes	$ 59	$ 15	$ 174	$ 44

STOCK BASED COMPENSATION (Details 2) - shares	9 Months Ended
STOCK BASED COMPENSATION (Details 2) - shares	Sep. 30, 2014	Sep. 30, 2013
Stock-based compensation
Number of shares reserved for issuance	1,428,571
Minimum
Stock-based compensation
Vesting period	1 year
Maximum
Stock-based compensation
Vesting period	4 years
Stock options
Stock-based compensation
Expiration period	10 years
Options granted (in shares)	63,000	32,697
Stock options \| Minimum
Stock-based compensation
Vesting period	1 year
Stock options \| Maximum
Stock-based compensation
Vesting period	4 years

STOCK BASED COMPENSATION (Details 3) - Stock options - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Number of Options Outstanding
Options outstanding at December 31, 2013 (in shares)	949,685
Granted (in shares)	63,000	32,697
Exercised (in shares)
Cancelled / forfeited (in shares)	(2,387)
Options outstanding at September 30, 2014 (in shares)	1,010,298		949,685
Unvested at September 30, 2014	449,915
Vested and exercisable at September 30, 2014	560,383
Weighted Average Exercise Price Per Share
Options outstanding at December 31, 2013 (in dollars per share)	$ 15.02
Granted (in dollars per share)	3.11
Exercised (in dollars per share)
Cancelled / forfeited (in dollars per share)	31.08
Options outstanding at September 30, 2014 (in dollars per share)	14.24		$ 15.02
Unvested at September 30, 2014 (in dollars per share)	4.15
Vested and exercisable at September 30, 2014 (in dollars per share)	$ 22.33
Weighted Average Remaining Contractual Term (Years)
Options outstanding	6 years 9 months 29 days		7 years 4 months 17 days
Unvested at the end of the period	9 years 1 month 28 days
Vested and exercisable at the end of the period	4 years 11 months 16 days
Aggregate Intrinsic Value
Options outstanding	$ 7		$ 152
Unvested at the end of the period	1
Vested and exercisable at the end of the period	$ 6

STOCK BASED COMPENSATION (Details 4) - Restricted Stock Units - $ / shares

3 Months Ended

9 Months Ended

Mar. 31, 2013

Sep. 30, 2014

Nonvested activity

Non-vested at December 31, 2013 (in shares)

^[1]

119,248

Granted (in shares)

85,097

^[1]

Forfeited (in shares)

^[1]

(233)

Non-vested at September 30, 2014 (in shares)

^[1]

119,015

Weighted Average Grant Date Value Per Share

Non-vested at December 31, 2013 (in dollars per share)

$ 5.62

Granted (in dollars per share)

Forfeited (in dollars per share)

5.39

Non-vested at September 30, 2014 (in dollars per share)

$ 5.62

[1]	Includes 85,097 restricted stock units issued that will vest upon the fulfillment of certain clinical and financial conditions.

STOCK BASED COMPENSATION (Details 5)

3 Months Ended

9 Months Ended

Mar. 31, 2013

Sep. 30, 2014

Security

Minimum

Stock based compensation, additional disclosures

Forfeiture rate (as a percent)

0.00%

Maximum

Stock based compensation, additional disclosures

Forfeiture rate (as a percent)

30.00%

Stock options

Stock based compensation, additional disclosures

Number of Federal Reserve securities whose weighted average is used for calculation of weighted average risk-free interest rate | Security

Restricted Stock Units

Stock based compensation, additional disclosures

Granted (in shares) | shares

85,097

^[1]

[1]	Includes 85,097 restricted stock units issued that will vest upon the fulfillment of certain clinical and financial conditions.

COMMITMENTS AND CONTINGENCIES (Details) $ in Millions	Sep. 30, 2014 USD ($)
Commitments and Contingencies
Future milestone payments payable	$ 10.0

STOCKHOLDERS' EQUITY (Details)	Sep. 30, 2014 $ / shares
Year from November 1, 2013 to October 31, 2014
Stockholders' equity
Redemption price per share (in dollars per share)	$ 10.06
November 1, 2014 and thereafter
Stockholders' equity
Redemption price per share (in dollars per share)	$ 10.00

STOCKHOLDERS' EQUITY (Details 1) $ / shares in Units, $ in Thousands			3 Months Ended	9 Months Ended		105 Months Ended
	Sep. 10, 2014	Aug. 02, 2010 Director	Sep. 30, 2013 USD ($)	Sep. 30, 2014 Conversion_rate Series Quarter Director $ / shares shares	Sep. 30, 2013 USD ($) shares	Sep. 30, 2014 Series Quarter $ / shares shares	Dec. 31, 2013 $ / shares shares
Stockholders' equity
Preferred stock, shares issued				335,273		335,273	335,273
Preferred stock, shares outstanding				335,273		335,273	335,273
Preferred stock, par value (in dollars per share) \| $ / shares				$ 0.001		$ 0.001	$ 0.001
Dividend rate on convertible exchangeable preferred stock (in percent)	6.00%
Deemed dividends recorded \| $			$ 661		$ 9,027
Preferred stock
Stockholders' equity
Preferred stock, shares issued				335,273		335,273
Preferred stock, shares outstanding				335,273		335,273
Preferred stock, par value (in dollars per share) \| $ / shares				$ 10		$ 10
Dividend rate on convertible exchangeable preferred stock (in percent)				6.00%
Liquidation preference (in dollars per share) \| $ / shares				$ 10.00		$ 10.00
Number of shares to be issued for each preferred stock upon conversion \| Conversion_rate				0.06079
Conversion price (in dollars per share) \| $ / shares				$ 164.50
Shares reserved for future issuance upon conversion				20,381		20,381
Percentage of the closing sales price of the entity's common stock that the conversion price must exceed in order for the preferred stock to be convertible				150.00%
Number of trading days during which the closing price of the entity's common stock must exceed the conversion price for at least 20 days in order for the preferred stock to be convertible				30 days
Number of trading days prior to notice of automatic conversion				5 days
Number of quarters in which no preferred stock dividends have been paid \| Quarter				6		6
Number of Board of Directors to be elected by Preferred Stock holders if entity fails to pay dividends on Preferred Stock \| Director				2
Number of Board of Directors elected by the Preferred Stock holders when the entity failed to pay dividends on Preferred Stock \| Director		2
Interest rate (as a percent)				6.00%		6.00%
Debt principal amount per share, basis for exchange (in dollars per share) \| $ / shares				$ 10.00
Debt instrument, term				25 years
Preferred shares exchanged (in shares)						1,711,540
Preferred stock \| Minimum
Stockholders' equity
Number of series of Preferred Stock \| Series				1		1
Closing price of stock (in dollars per share) \| $ / shares				$ 246.75		$ 246.75
Number of trading days within 30 trading days in which the closing price of the entity's common stock must exceed the conversion price for the preferred stock to be convertible				20 days
Common stock
Stockholders' equity
Preferred shares exchanged (in shares)					877,869
Number of shares issued upon conversion					1,684,471

STOCKHOLDERS' EQUITY (Details 2) - USD ($) $ / shares in Units, $ in Millions		9 Months Ended
	Apr. 03, 2014	Sep. 30, 2013	Sep. 30, 2014	Dec. 31, 2013
Equity Offering [Line Items]
Common stock, par value (in dollars per share)			$ 0.001	$ 0.001
Common stock
Equity Offering [Line Items]
Number of common shares sold into underwriting agreement (in shares)		31,643
Common stock \| April 2014 Underwriting Agreement
Equity Offering [Line Items]
Number of common shares sold into underwriting agreement (in shares)	2,857,143
Common stock, par value (in dollars per share)	$ 0.001
Share price per share	$ 3.50
Proceed from public offering	$ 9.3

STOCKHOLDERS' EQUITY (Details 3) - Common stock	9 Months Ended
STOCKHOLDERS' EQUITY (Details 3) - Common stock	Sep. 30, 2013 shares
Conversion of Convertible Preferred Stock
Preferred shares exchanged	877,869
Shares of common stock issued:
At stated conversion terms	53,366
Incremental shares issued under the exchange transaction	1,631,105
Total shares of common stock issued	1,684,471

STOCKHOLDERS' EQUITY (Details 4) - USD ($) $ / shares in Units, $ in Thousands			1 Months Ended				3 Months Ended	9 Months Ended
	Nov. 14, 2013	Dec. 14, 2012	May 21, 2013	May 16, 2013	Apr. 30, 2013	Mar. 22, 2012	Sep. 30, 2014	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Common Stock
Common stock, par value (in dollars per share)							$ 0.001	$ 0.001		$ 0.001
Change in valuation of financial instruments associated with stock purchase agreement							$ 4	$ 115
Economic Rights settled for payments					$ 600
Common stock
Common Stock
Shares sold (in shares)									31,643
Fair value of common stock issued									$ 200
November 2013 Stock Purchase Agreement \| Common stock \| Aspire Capital Fund, LLC
Common Stock
Number of shares issued under purchase agreement	511,509							450,000
Purchase price for shares issued under purchase agreement	$ 2,000							$ 1,700
Period of common stock purchase agreement	2 years
Stock issued for non-cash consideration	166,105
November 2013 Stock Purchase Agreement \| Common stock \| Maximum \| Aspire Capital Fund, LLC
Common Stock
Shares committed to purchase	3,042,038
Common stock purchase agreement, purchase commitment	$ 18,000
December 2012 Stock Purchase Agreement \| Common stock \| Aspire Capital Fund, LLC
Common Stock
Number of shares issued under purchase agreement		158,982
Purchase price for shares issued under purchase agreement		$ 1,000
Period of common stock purchase agreement		2 years
Stock issued for non-cash consideration		74,548
December 2012 Stock Purchase Agreement \| Common stock \| Maximum \| Aspire Capital Fund, LLC
Common Stock
Shares committed to purchase		1,455,787
Common stock purchase agreement, purchase commitment		$ 19,000
May 2013 Underwriting Agreement
Common Stock
Shares committed for sale under agreement				6,666,667
Common stock, par value (in dollars per share)				$ 0.001
Offering price (in dollars per share)			$ 3.00	$ 3.00
Shares sold (in shares)			6,833,334
Number of share sold that were subject to the underwriters' over-allotment option			166,667
Proceeds from sale of common stock, net of certain fees and expenses			$ 19,000
March 2012 Sale of Common Stock and Economic Rights
Common Stock
Offering price (in dollars per share)						$ 4.53
Shares sold (in shares)						669,726
Proceeds from sale of common stock, net of certain fees and expenses						$ 2,900
Number of days used to calculate average closing price						10 days
Amount to be paid as percentage of future litigation settlement amount received						10.00%
Lock-up period from the date of issuance						1 year

STOCKHOLDERS' EQUITY (Details 5)	9 Months Ended
STOCKHOLDERS' EQUITY (Details 5)	Sep. 30, 2014 $ / shares shares
Warrants outstanding
Common Shares Issuable	1,341,129
Weighted Average Exercise Price (in dollars per share) \| $ / shares	$ 13.05
February 2007 stock issuance
Warrants outstanding
Number of shares of common stock issued in connection with warrants	151,773
July 2009 Series II stock issuance
Warrants outstanding
Common Shares Issuable	98,893
January 2010 stock issuance, one
Warrants outstanding
Common Shares Issuable	101,785
Weighted Average Exercise Price (in dollars per share) \| $ / shares	$ 22.82
Expiration Date	2015
January 2010 stock issuance, two
Warrants outstanding
Common Shares Issuable	100,714
Weighted Average Exercise Price (in dollars per share) \| $ / shares	$ 19.95
Expiration Date	2015
October 2010 stock issuance
Warrants outstanding
Common Shares Issuable	594,513
Weighted Average Exercise Price (in dollars per share) \| $ / shares	$ 13.44
Expiration Date	2015
July 2011 stock issuance
Warrants outstanding
Common Shares Issuable	544,117
Weighted Average Exercise Price (in dollars per share) \| $ / shares	$ 9.52
Expiration Date	2016

DISCONTINUED OPERATIONS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
DISCONTINUED OPERATIONS (Details) - USD ($) $ in Thousands	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Reclassification of operating results from continuing operations to loss from discontinued operations
Income tax on discontinued operations	$ (2)	$ (8)	$ (10)	$ (28)
Net income from discontinued operations	4	12	19	42
ALIGN products
Reclassification of operating results from continuing operations to loss from discontinued operations
Interest income	6	20	29	70
Income tax on discontinued operations	(2)	(8)	(10)	(28)
Net income from discontinued operations	$ 4	$ 12	$ 19	$ 42

DISCONTINUED OPERATIONS (Details 1) - USD ($) $ in Thousands	Sep. 30, 2014	Dec. 31, 2013
Current assets of discontinued operations:
Total current assets of discontinued operations	$ 267	$ 639
Current liabilities of discontinued operations:
Total current liabilities of discontinued operations	75	260
ALIGN products
Current assets of discontinued operations:
Short-term portion of minimum royalty arrangement receivable, net	192	379
Returns indemnification receivable	75	260
Total current assets of discontinued operations	267	639
Long-term assets of discontinued operations:
Long-term portion of minimum royalty arrangement receivable, net		72
Total assets of discontinued operations	267	711
Current liabilities of discontinued operations:
Returns provision	75	260
Total current liabilities of discontinued operations	$ 75	$ 260