Stockholders' Equity | 9 Months Ended |
Sep. 30, 2014 |
Equity [Abstract] | ' |
Stockholders' Equity | ' |
11. STOCKHOLDERS’ EQUITY |
Preferred Stock |
The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.10 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. |
On July 24, 2014, in connection with the Offering (see Note 9 “DEBT”), the Company issued to certain investors 12,300 shares of Series B Convertible Preferred Stock at a price of $1,000 per share convertible into Common Stock at an initial price of $2.565 per share and Series B Warrants to purchase up to an aggregate of 4,795,321 shares of Common Stock at an exercise price of $2.45 per share, expiring in January 2016. The Preferred Stock is convertible into an aggregate of 4,795,321 shares of Common Stock. Holders of the Preferred Stock are entitled to dividends only in the event that dividends are paid on the Common Stock, and the Preferred Stock has no preferences over the Common Stock, including liquidation rights. The Preferred Stock and the July 2014 Series A Warrants are immediately exercisable and are subject to certain ownership limitations. |
For financial reporting purposes, the $12,300,000 preferred stock value was allocated first to the fair value of the July 2014 Series B warrants, which totaled $2,486,780, then to the intrinsic value of the beneficial conversion feature of $1,887,364. The amount of the beneficial conversion feature is considered to be a deemed dividend on the date of issuance to the Series B preferred stockholders due to the July 2014 Series B warrants being immediately exercisable. The deemed dividend was accounted for as a movement within additional paid-in capital. The following table represents the net loss attributable to common stockholders after giving effect for the deemed dividend: |
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| | Three months ended | | | Nine months ended | | | | | |
September 30, 2014 | September 30, 2014 | | | | |
Net loss | | $ | (2,287,862 | ) | | $ | (9,641,410 | ) | | | | |
Series B preferred stock beneficial conversion feature | | | (1,887,364 | ) | | | (1,887,364 | ) | | | | |
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Net loss attributable to common stockholders | | $ | (4,175,226 | ) | | $ | (11,528,774 | ) | | | | |
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Basic and diluted net loss per common share | | $ | (0.80 | ) | | $ | (2.26 | ) | | | | |
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Basic and diluted weighted average number of commons shares outstanding | | | 5,216,290 | | | | 5,108,418 | | | | | |
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Pursuant to the terms of the Purchase Agreement, the Series A Convertible Preferred Stock was redeemed from the proceeds of the Series B Convertible Preferred Stock. In September 2014, the Company amended the registration statement related to the Series A Preferred Stock to deregister those shares that would have been issuable upon conversion of the Series A Preferred Stock had it not already been redeemed by the proceeds of the Series B Preferred Stock. |
On February 5, 2014, pursuant to a securities purchase agreement, dated as of January 31, 2014, the Company sold to the Purchasers (i) an aggregate of 12,300 shares of Series A Convertible Preferred Stock, par value $0.10 and a stated value of $1,000 per share (the “Series A Preferred Stock”), convertible into 1,464,287 shares of common stock at an initial conversion price of $8.40, and (ii) warrants to purchase up to 1,329,731 shares of common stock for net proceeds of $11,457,831. The warrants have an exercise price of $7.40 per share, are immediately exercisable and have a term of five years. These warrants have non-standard terms as they relate to a fundamental transaction and require a net-cash settlement upon a change in control of the Company and therefore are classified as a derivative liability and recorded at fair value on the inception date of February 5, 2014. They will be recorded at their respective fair value at each subsequent balance sheet date. The fair value of these warrants on September 30, 2014 was approximately $957,406. The change in fair value of these warrants for the three and nine months ended September 30, 2014 was a benefit of $1,436,107 and $4,627,459, respectively (see footnote 12 “FAIR VALUE OF FINANCIAL INSTRUMENTS”). |
In connection with this financing, the Company also granted to the Purchasers resale registration rights with respect to the shares of common stock underlying the Series A Preferred Stock and the warrants pursuant to the terms of a Registration Rights Agreement. The Purchasers were entitled to receive liquidated damages upon the occurrence of a number of events relating to filing, effectiveness and maintaining an effective registration statement covering the shares underlying the Series A Preferred Stock and the warrants. The Company was unable to meet certain filing and effectiveness requirements and as a result paid liquidated damages to the Purchasers in the aggregate amount of $3,419,698. Under the terms of the Registration Rights Agreement, the Company filed a registration statement on March 18, 2014, which was declared effective by the SEC on April 3, 2014. Should this registration statement cease to remain effective for more than ten consecutive calendar days or more than an aggregate of 15 calendar days during any 12-month period, the Company would be subject to additional liquidated damages of up to approximately $500,000. |
On July 21, 2014, the Company entered into the Purchase Agreement and issued, among other things, the Series B Preferred Stock (See Footnote 9 “DEBT”). In connection with the issuance of the Series B Preferred Stock, the Company redeemed all 12,300 shares of Series A Preferred Stock. In September 2014, the Company amended the registration statement related to the Series A Preferred Stock (File No. 333-194649) to deregister those shares that would have been issuable upon conversion of the Series A Preferred Stock. |
Common Stock |
The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.001 per share. |
On October 29, 2013, the Company entered into a securities purchase agreement with certain accredited investors in connection with a $6,000,000 registered offering of 422,819 shares of the Company’s common stock, fully paid prefunded Series B Warrants to purchase up to 434,325 shares of its common stock and additional warrants (“October 2013 Series A Warrants”) to purchase up to 685,715 shares of its common stock. The October 2013 Series A Warrants are exercisable beginning on May 1, 2014 at a price of $8.50 per share and expire on May 1, 2019. The prefunded Series B Warrants are exercisable immediately for no additional consideration. The offering closed on October 31, 2013. |
The holders exercised all of the prefunded Series B warrants in March 2014. There were no warrant exercises in the first nine months of 2013. |
The October 2013 Series A Warrants have non-standard terms as they relate to a fundamental transaction and require a net-cash settlement upon a change in control of the Company and therefore are classified as a derivative. Therefore, these warrants have been recorded at fair value at the inception date of October 31, 2013, and will be recorded at their respective fair values at each subsequent balance sheet date. Any change in value between reporting periods will be recorded as a non-operating, non-cash charge in the Statements of Operations. The fair value of these warrants on September 30, 2014 was approximately $493,715. The change in fair value of these warrants for the three and nine months ended September 30, 2014, was a benefit of $671,999 and $2,523,427, respectively (see footnote 12 “FAIR VALUE OF FINANCIAL INSTRUMENTS”). |
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On August 22, 2013, the Company received a notice from NASDAQ that, for the previous 30 consecutive business days, the Company was not in compliance with the minimum bid price requirement of $1.00 per share for continued listing on the NASDAQ Capital Market. In July 2014, the Company effected a one-for-ten reverse split of its common stock in order to regain compliance with the minimum bid price requirement prior to the expiration of the last applicable grace period. On July 24, 2014, the Company was notified by NASDAQ that it is now in compliance with the minimum bid price requirement. |
Outstanding common stock warrants consist of the following: |
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Issue Date | | Expiration Date | | | Total | | | Ex. Price | |
Warrants |
4/26/2013 | | | 4/26/18 | | | | 69,321 | | | $ | 11.18 | |
10/31/13 | | | 4/30/19 | | | | 685,715 | | | $ | 8.5 | |
2/5/2014 | | | 2/5/19 | | | | 1,329,731 | | | $ | 7.4 | |
7/24/2014 | | | 7/24/19 | | | | 6,198,832 | | | $ | 2.45 | |
7/24/2014 | | | 1/24/16 | | | | 4,795,321 | | | $ | 2.45 | |
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| | | | | | | 13,078,920 | | | | | |
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During the three months ended September 30, 2014, the number of outstanding shares of the Company’s common stock increased from 5,213,969 to 5,217,742. |