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Equity
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3 Months Ended | ||||||||||||||||
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Mar. 31, 2015
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| Equity |
Equity
Secondary Offering
On November 26, 2014, the Company completed a secondary offering, in which the Company sold and issued 11,441,646 units. Each unit was issued at a price of $1.14 and consisted of one share of common stock and one common stock warrant (“Secondary Offering Warrant”). The Company issued an additional 1,716,246 Secondary Offering Warrants pursuant to the underwriters’ over-allotment option.
The Secondary Offering Warrants were immediately exercisable after issuance into common shares at an exercise price of $1.48 and terminate on November 26, 2019. The Secondary Offering Warrants contain a cashless exercise provision whereby the holders may exercise warrants by paying the exercise price in cash or, in lieu of payment of the exercise price in cash, at any time 120 days after issuance, by electing to receive a cash payment from the Company equal to the Black Scholes Value (as defined below) of the number of shares the holder elects to exercise (the “Black Scholes Payment”); provided that we have discretion as to whether to deliver the Black Scholes Payment or, subject to meeting certain conditions, to deliver a number of shares of our common stock determined according to the following formula (the “Cashless Exercise”):
Total Shares = (A x B) / C
Where:
As defined in the Secondary Offering Warrants, “Black Scholes Value” means the Black Scholes value of an option for one share of our common stock at the date of the applicable Black Scholes Payment or Cashless Exercise, which is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the closing bid price of the common stock as of trading day immediately preceding the date of issuance of the warrant, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of the warrant as of the applicable Black Scholes Payment or Cashless Exercise, (iii) a strike price equal to the exercise price in effect at the time of the applicable Black Scholes Payment or Cashless Exercise, (iv) an expected volatility equal to 135% and (v) a remaining term of such option equal to five years (regardless of the actual remaining term of the warrant).
The Secondary Offering Warrants are considered to be liabilities and are marked to market at each reporting period. During the three months ended March 31, 2015, 913,145 of the Secondary Offering Warrants had been exercised via the cashless exercise provision resulting in the issuance of 1,717,840 shares of common stock. Had the cashless exercise provision been exercised by all the holders of the remaining 12,244,747 Secondary Offering Warrants at March 31, 2015, the Company would have had to either pay $9.7 million in cash or issue an additional 22,524,640 shares of common stock. The number of shares of common stock that would be required to satisfy the cashless exercise provision increases as the price of the Company’s common stock decreases and decreases as the price of the Company’s common stock increases.
Other Issuances
During the three months ended March 31, 2015, the Company issued 30,000 shares of common stock to a service provider as consideration for services to be rendered under a consulting agreement. Furthermore, 617,447 shares of common stock were issued upon the conversion of restricted stock units into common stock, of which 206,380 shares of common stock were withheld to satisfy the employees' tax withholding obligations associated with the conversion of the restricted stock units into common stock. The withheld shares are now included in treasury stock at a total value of $120,000, which was based on the market price of the common stock on the date the shares were issued. Additionally, 242 shares of common stock were issued upon the exercise of warrants.
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