Equity |
9 Months Ended | ||||||||||||||||
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Sep. 30, 2015 | |||||||||||||||||
| Equity [Abstract] | |||||||||||||||||
| Equity |
Equity
September 2015 Offering
In September 2015, the Company entered into a Securities Purchase Agreement whereby it issued to certain investors 13,123,360 shares of common stock at a price of $0.381 per share for gross proceeds of $5.0 million before deducting placement agent fees and related offering expenses. Pursuant to the terms of the Securities Purchase Agreement the company also issued to the investors Series A Warrants, Series B Warrants, Series C Warrants and Series D Warrants. Each of the Series A Warrants, the Series B Warrants and the Series C Warrants are initially exercisable for 13,123,360 shares of common stock with at an initial exercise price of $0.47 per share.
Shareholder approval is required for the issuance of the common shares underlying the Series B Warrants, the Series C Warrants and the Series D Warrants. The Company obtained the requisite shareholder approval for the issuance at a Special Meeting of Stockholders held on November 3, 2015. The Series B and Series C Warrants have automatic exercise provisions if certain conditions are met, which include, the attainment of requisite shareholder approval and the satisfaction of certain other equity trading conditions. The Company could receive up to a maximum of $5.0 million from the exercise of the Series B Warrants and up to a maximum of $5.0 million from the exercise of the Series C Warrants. If the Series B and Series C Warrants are exercised, the Series C exercise price will be the lesser of the current exercise price of $0.47 per share or 75% of the sum of the three lowest closing consolidated bid prices of the common stock during the five trading day period prior to the date on which payment of the exercise price is received by the Company. If, as a result of the application of such formula, the exercise price is adjusted downward from the initial exercise price of $0.47 per share, then the number of common shares issuable upon the exercise of each of the warrants will be increased such that the gross proceeds from exercise of each of the Series B Warrants and Series C Warrants will equal $5.0 million, respectively, or a lesser amount if the warrants are not exercised in full. The Series B Warrants and Series C Warrants expire on November 17, 2015 and December 30, 2015, respectively.
The number of Series A Warrants would increase to match the number of shares of common stock issued upon the exercise of the Series B and Series C Warrants. The Series A Warrants have an exercise price adjustment provision that in the event the Company sells shares of any additional common stock or securities convertible into common stock prior to December 30, 2015, subject to certain exceptions, at a price per share less than the original exercise price of the warrant, the exercise price shall be adjusted to a price equal to the price paid per share for such additional common stock or securities.
The Series A Warrants, Series B Warrant and Series C Warrants are considered to be liabilities and are marked to market at each reporting period until they are exercised or are no longer classified as liabilities. The Company estimated the fair value of these warrants to be $14.4 million. The Company recorded $4.9 million of the $5.0 million gross proceeds from the offering to derivative liabilities and $131,000 to equity and recorded a loss of $9.5 million, which was included in the change in fair value of derivative liabilities per the Condensed Consolidated Statements of Operations and Comprehensive Loss. Furthermore, all of the $821,000 of the September 2015 offering costs were expensed since the value of the warrants exceeded the gross proceeds.
The Company entered into a placement agent agreement in connection with the September 2015 Offering. As part of the placement agent agreement, the Company issued a warrant to the placement agent to purchase 656,168 shares of common stock at an exercise price of $0.47. The warrant was determined to be a liability and the estimated fair value of $157,000 was included in offering costs.
November 2014 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 nine months ended September 30, 2015, 13,047,372 of the Secondary Offering Warrants had been exercised via the cashless exercise provision resulting in the issuance of 38,202,840 shares of common stock. Had the cashless exercise provision been exercised by all the holders of the remaining 110,520 Secondary Offering Warrants at September 30, 2015, the Company would have had to either pay $87,000 in cash or issue an additional 274,738 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 nine months ended September 30, 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, 853,365 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 were 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. During June 2015, these treasury shares were issued upon the conversion of restricted stock units into common stock. Additionally, during the nine months ended September 30, 2015, 242 shares of common stock were issued upon the exercise of warrants.
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