EQUITY AND SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2014 |
EQUITY AND SHARE-BASED COMPENSATION [Abstract] | |
EQUITY AND SHARE-BASED COMPENSATION | NOTE 10. EQUITY AND SHARE-BASED COMPENSATION |
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In May 2014, our shareholders approved an increase in our authorized shares of common stock from 6,000,000 shares to 25,000,000 shares. In June 2013, our shareholders approved an increase in the number of our authorized shares of common stock from 2,500,000 to 6,000,000. |
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On October 28, 2013, our board of directors approved a 1 for 200 reverse split of our common stock. We began trading on a post-split basis on November 18, 2013. All share and per share information has been retrospectively adjusted for all prior periods presented giving retroactive effect to the reverse stock split. Such adjustments include calculations of our weighted averages number of shares outstanding and loss per share, as well as disclosures regarding our share-based compensation and convertible debt. |
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We have never declared or paid dividends on our common stock and have no plans to pay dividends in the foreseeable future. Pursuant to the terms of the senior convertible debentures, we may not pay any dividends while a debenture is outstanding. Cash provided by operations in our Brazil segment is generally unavailable for distribution to our Corporate and USA segments pursuant to the terms of the limited liability company agreement for Nutra SA. |
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Stock, Convertible Note and Warrant Offerings |
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In December 2013, we completed a secondary public offering in which we issued and sold 1,714,286 shares of common stock for $5.24 per share and publicly traded warrants to purchase 1,714,286 shares of common stock for $0.01 per underlying share. The net proceeds from the offering were $7.6 million after deducting underwriting discounts and commissions of $0.7 million and other offering expenses of approximately $1.4 million. The publicly traded warrants have an exercise price of $6.55 per share and expire in December 2018. The underwriters on the offering also received a warrant for the purchase of 85,715 shares, at an exercise price of $6.55 per share, which expires in December 2018. |
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In January 2014, an underwriter exercised its overallotment rights related to our December 2013 secondary public offering. We issued and sold 162,586 shares of common stock for $5.24 per share and publicly traded warrants to purchase 162,586 shares of common stock ($6.55 per share exercise price and December 2018 expiration) for $0.01 per underlying share. In connection with the overallotment exercise, the underwriters for the offering also received a warrant for the purchase of 8,130 shares of common stock (exercise price of $6.55 per share and December 2018 expiration). The net proceeds from the overallotment exercise were $0.8 million, after deducting underwriting discounts and commissions and other cash offering expenses of $0.1 million, and are included in equity. |
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We completed the first closing of a private placement offering in March 2014. We issued convertible notes in the principal amount of $4.9 million and warrants for the purchase of up to 1,399,614 shares of common stock ($5.25 per share exercise price and March 2019 expiration). We contributed $1.0 million of the $4.3 million proceeds, net of $0.6 million of costs, to Nutra SA, and used the remainder of the proceeds for capital projects in the United States and for general corporate purposes. On a fully diluted basis, at issuance we had available shares of common stock for 15.8% of the shares underlying the Warrants. To the extent there were available shares, we allocated proceeds to equity for the warrants ($0.4 million). We recorded a derivative liability for the warrants to the extent there were not available shares ($5.0 million). We recorded $1.1 million in financing expense at closing representing the excess of the amounts recorded for the warrants over the net proceeds from the offering. The convertible notes issued in the offering were initially recorded with a discount equal to the face amount of the notes. As discussed below, in Debt Conversions section, these notes converted in May 2014. |
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We completed the second closing of the private placement offering in May 2014. We issued convertible notes in the principal amount of $1.2 million and warrants for the purchase of up to 357,075 shares of common stock, with an exercise price of $5.25 per share and a May 2019 expiration. We contributed $0.5 million of the $1.1 million proceeds, net of $0.2 million of costs, to Nutra SA, and used the remainder of the proceeds for capital projects in the United States and for general corporate purposes. On a fully diluted basis, at issuance we had no available shares of common stock for the shares underlying these warrants and, as a result, recorded a derivative liability for the fair value of these warrants at issuance ($2.0 million). We recorded $1.0 million in financing expense at closing, representing the excess of the amounts recorded for the warrants over the net proceeds from the offering. The convertible notes issued in the offering were initially recorded with a discount equal to the face amount of the notes. As discussed below, in Debt Conversions section, these notes converted in May 2014. |
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In late June 2014, we issued and sold 1,417,500 shares of common stock for $5.29 per share and warrants to purchase 708,750 shares of common stock (exercise price of $5.87 per share and June 2019 expiration) for $0.01 per underlying share. The underwriters for the offering also received a warrant for the purchase of 85,050 shares of common stock (exercise price of $6.625 per share and June 2019 expiration). The net proceeds from the offering of $6.8 million, after deducting underwriting discounts and commissions and other cash offering expenses of $0.7 million, are included in common stock. We contributed $3.0 million of the proceeds to Nutra SA and used $0.8 million of the proceeds to pay all amounts due under the USA segment senior revolving note. |
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In a separate agreement occurring in mid June 2014, we issued warrants to purchase 265,000 shares of common stock (exercise price of $5.25 per share and June 2019 expiration). |
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In October 2014, we issued and sold 1,181,695 shares of common stock and warrants to purchase 1,181,695 shares of common stock (exercise price of $5.27 per share, exercisable beginning April 2015, April 2020 expiration) for $5.40 per unit, where a unit is one share of common stock and a warrant to purchase one share of common stock. The underwriters of the offering also received a warrant for the purchase of 94,536 shares of common stock (exercise price of $5.27 per share and October 2019 expiration). The net proceeds from the offering of $5.8 million, after deducting underwriting discounts and commissions and other estimated cash offering expenses of $0.6 million, are included in common stock. We intend to use the proceeds for investments in USA segment capital projects and to fund Brazil working capital needs. |
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Issuance of Shares to Former Warrant Holders and Note Holder |
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In the fourth quarter of 2013, the holders of our subordinated convertible notes agreed to amend their notes to reduce the interest rate to 5% from 10%, change the maturity of the notes to July 2016 (if there was a different maturity date) and to remove the conversion feature and antidilution protections upon the closing of an equity raise in excess of $7.0 million (Modification). Concurrently, certain warrant holders agreed to exchange warrants to purchase 496,060 shares of common stock for the future issuance of 1,554,734 shares of our common stock (Exchange). Most of the warrants impacted (warrants to purchase 441,395 shares) were warrants issued to the note holders when their notes were originally issued and had contained antidilution protections which caused them to be carried at fair value on our balances sheets. The former warrant holders committed to exchange their warrants, which were cancelled upon our closing an equity raise in the fourth quarter of 2013. The fair market value of the shares was recorded in common stock in the fourth quarter of 2013. We issued the shares, as required, after shareholders approved an increase in our authorized shares of common stock in May 2014. |
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In the fourth quarter of 2013, we also issued $500,000 of notes to a holder and agreed to issue the holder 134,250 shares of common stock. The fair market value of the shares was recorded in common stock in the fourth quarter of 2013. We issued these shares, as required, after shareholders approved an increase in our authorized shares of common stock in May 2014. |
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Debt Conversions |
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In connection with the January 2014 acquisition of HN, we issued convertible promissory notes in the face amount of $3.3 million. The notes were due in equal quarterly payments commencing on March 31, 2015, and ending on December 31, 2018 and bore interest at 1% per year until January 2015, 5% per year from February 2015 until January 2016 and 10% per year after January 2016. We recorded the notes at their $2.2 million fair value and the conversion features at their $0.6 million fair value on the date of issuance. We accreted the notes at an effective interest rate of 18.9%, until the notes, and accumulated interest thereon, converted into 543,894 shares of common stock upon our issuance of shares to the former warrant holders in the Exchange. The notes converted in May 2014. Upon conversion, we recognized a $0.9 million loss on extinguishment for the difference between the fair value of the shares issued ($3.9 million) and the carrying amount of the notes ($2.4 million) and related conversion feature ($0.6 million). |
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The convertible notes issued in the March 2014 and May 2014 private placement closings, due in July 2016, bore interest at 5% interest until the $6.2 million outstanding on the notes, including accumulated interest thereon (less than $0.1 million), automatically converted in May 2014, at a conversion price of $5.25, into 1,180,567 shares of common stock upon shareholders voting to approve an increase in our authorized shares of common stock. When the notes converted, we recognized interest expense of $6.2 million, to accrete the notes to their face value, and increased equity $6.2 million. |
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Warrants Reclassified to Equity |
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Shares of available common stock increased in 2014 as a result of (i) the expiration of certain outstanding warrants and options and (ii) the 19,000,000 share increase in our authorized shares of common stock. As a result, during the second quarter of 2014, we transferred to equity the $8.9 million fair value of warrants previously classified as derivative liabilities solely due to a lack, on a fully-diluted basis, of available shares of common stock. |
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Equity Incentive Plans, Options and Warrants |
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A summary of stock option and warrant activity for 2014 and 2013 follows. |
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| | Options | | | Equity and Liability Warrants | | | | |
| | Shares | | | Weighted | | | Weighted | | | Shares Under | | | Weighted | | | Weighted | | | | |
Under | Average | Average | Warrants | Average | Average | | | |
Options | Exercise | Remaining | | Exercise | Remaining | | | |
| Price | Contractual | | Price | Contractual | | | |
| | Life (Years) | | | Life (Years) | | | |
Outstanding, January 1, 2013 | | | 169,254 | | | $ | 32 | | | | 6.3 | | | | 806,769 | | | $ | 24 | | | | 3.5 | | | | |
Granted | | | 40,000 | | | | 15.38 | | | | | | | | 1,859,111 | | | | 6.85 | | | | | | | | |
Impact of anti-dilution clauses | | | - | | | NA | | | | | | | | 385,292 | | | NA | | | | | | | | |
Impact of amendment | | | - | | | NA | | | | | | | | (496,061 | ) | | NA | | | | | | | | |
Exercised | | | - | | | NA | | | | | | | | - | | | | - | | | | | | | | |
Forfeited, expired or cancelled | | | (29,817 | ) | | | 50.58 | | | | | | | | (148,829 | ) | | | 66.92 | | | | | | | | |
Outstanding, December 31, 2013 | | | 179,437 | | | | 24.28 | | | | 6.2 | | | | 2,406,282 | | | | 6.33 | | | | 4.5 | | | | |
Granted or issued | | | 141,134 | | | | 4.77 | | | | | | | | 4,262,436 | | | | 5.44 | | | | | | | | |
Exercised | | | - | | | NA | | | | | | | | - | | | | - | | | | | | | | |
Forfeited, expired or cancelled | | | (50,929 | ) | | | 34.61 | | | | | | | | (164,759 | ) | | | 5.24 | | | | | | | | |
Outstanding, December 31, 2014 | | | 269,642 | | | $ | 12.12 | | | | 7.9 | | | | 6,503,959 | | | $ | 5.77 | | | | 4.3 | | | | |
Exercisable, December 31, 2014 | | | 138,671 | | | $ | 18.5 | | | | 6.2 | | | | 5,322,264 | | | $ | 5.88 | | | | 4.1 | | | | |
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Our board of directors adopted our 2014 equity incentive plan in August 2014, after the plan was approved by shareholders. A total of 1,600,000 shares of common stock were initially reserved for issuance under the plan. Under the terms of the plan, we may grant options to purchase common stock and shares of common stock to officers, directors, employees or consultants providing services on such terms as are determined by the board of directors. Our board of directors administers the plan, determines vesting schedules on plan awards and may accelerate the vesting schedules for award recipients. The options granted under the plan have terms of up to 10 years. As of December 31, 2014, options to purchase 141,134 shares have been issued and remain outstanding, 281,620 common shares have been issued and remain outstanding and 1,177,246 shares are reserved for future grants. |
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Our board of directors adopted our 2010 Equity Incentive Plan (2010 Plan) in February 2010. A total of 125,000 shares of common stock were initially reserved for issuance under the 2010 Plan. The amount reserved increased annually each January 1st by 5% of the outstanding shares as of the prior December 31st. Additionally, in 2011 the board approved a 40,000 increase in the number of shares of common stock reserved under the plan. |
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Under the terms of the 2010 Plan, we could grant options to purchase common stock and shares of common stock to officers, directors, employees or consultants providing services on such terms as are determined by the board of directors. Our board of directors administered the 2010 Plan, determined vesting schedules on plan awards and could accelerate the vesting schedules for award recipients. The options granted under the 2010 Plan have terms of up to 10 years. In 2013, the board of directors froze the 2010 Plan and there are no longer any shares reserved for future grants. |
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Our board of directors adopted the 2005 Equity Incentive Plan (2005 Plan) in May 2005 and our shareholders approved the 2005 Plan in September 2005. Under the terms of the 2005 Plan, we could grant options to purchase common stock and shares of common stock to officers, directors, employees or consultants providing services on such terms as are determined by the board of directors. Options granted under the 2005 Plan have terms of up to 10 years. There are no longer any shares reserved for future grants under the 2005 Plan. |
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We have outstanding a total of 17,384 options awarded to current and former directors, employees and consultants at various times beginning in 2004 through 2009 that do not fall under the plans described above. Expiration periods, typically ten years, and other terms of these non-plan specific options are not materially different from those issued under the 2010 Plan and 2005 Plan. |
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Share-based compensation expenses related to option and stock grants issued to employees and directors are included in selling, general and administrative expenses in the statements of operations, and consisted of the following (in thousands): |
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| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | |
Stock Options: | | | | | | | | | | | | | | | | | | | | | | | | | |
Consultants | | $ | 4 | | | $ | 16 | | | | | | | | | | | | | | | | | | | | |
Directors | | | 11 | | | | 262 | | | | | | | | | | | | | | | | | | | | |
Employees | | | 132 | | | | 127 | | | | | | | | | | | | | | | | | | | | |
Executive officers | | | 136 | | | | 133 | | | | | | | | | | | | | | | | | | | | |
Stock: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Directors | | | 332 | | | | - | | | | | | | | | | | | | | | | | | | | |
Executive officers | | | 114 | | | | - | | | | | | | | | | | | | | | | | | | | |
Total share-based compensation expense | | $ | 729 | | | $ | 538 | | | | | | | | | | | | | | | | | | | | |
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In the third quarter of 2014, we issued shares of common stock to directors and executive officers at a grant date fair value of $4.91 per share. We issued 44,026 shares which vested in August 2014, 52,412 shares which vest in August 2015 (or at the next annual shareholder meeting date if earlier) and 185,182 shares which vest in August 2017. In 2014, we recognized $0.5 million in compensation for these share of common stock. These shares are the only shares vesting in the future. As of December 31, 2014, we expect to recognize the remaining $0.9 million of unrecognized compensation over a weighted average period of 2.3 years. |
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In April 2013, our board granted each of our five non-employee directors a stock option to purchase up to 3,750 shares of common stock. Each option has an exercise price of $16.00 per share, vests in nine equal monthly installments ending December 31, 2013, and expires in April 2023. In January 2013, we issued each of those five non-employee directors an option for the purchase of up to 1,250 shares of common stock under the non-employee director automatic grant provision. Each option has an exercise price of $16.00 per share, vested in twelve equal monthly installments ending December 2013, and expires in January 2023. |
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In April 2013, the Board granted each of the two directors serving on the strategic committee and consulting special counsel each a stock option to purchase up to 1,250 shares of common stock. Each option has an exercise price of $16.00 per share, vested in twelve equal monthly installments ending in March 2014 and expires in April 2018. |
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The following table summarizes option activity during 2014 and 2013: |
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| | Employees and Directors | | | Consultants | | | | | | | | | | | |
| | | | | Weighted | | | | | | Weighted | | | Total | | | | | | | | |
Shares | Average | Shares | Average | Shares | | | | | | | |
Underlying | Exercise | Underlying | Exercise | Underlying | | | | | | | |
Options | Price | Options | Price | Options | | | | | | | |
Outstanding, January 1, 2013 | | | 158,304 | | | $ | 26 | | | | 10,950 | | | $ | 106 | | | | 169,254 | | | | | | | | |
Granted | | | 38,750 | | | | 15.36 | | | | 1,250 | | | | 16 | | | | 40,000 | | | | | | | | |
Forfeited, expired or cancelled | | | (27,317 | ) | | | 27.75 | | | | (2,500 | ) | | | 300 | | | | (29,817 | ) | | | | | | | |
Exercised | | | - | | | NA | | | | - | | | NA | | | | - | | | | | | | | |
Outstanding, December 31, 2013 | | | 169,737 | | | $ | 23.13 | | | | 9,700 | | | $ | 44.45 | | | | 179,437 | | | | | | | | |
Granted | | | 141,134 | | | | 4.77 | | | | - | | | NA | | | | 141,134 | | | | | | | | |
Forfeited, expired or cancelled | | | (50,929 | ) | | | 34.61 | | | | - | | | NA | | | | (50,929 | ) | | | | | | | |
Exercised | | | - | | | NA | | | | - | | | NA | | | | - | | | | | | | | |
Outstanding, December 31, 2014 | | | 259,942 | | | $ | 10.91 | | | | 9,700 | | | $ | 44.45 | | | | 269,642 | | | | | | | | |
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Exercisable, December 31, 2014 | | | 129,539 | | | $ | 16.8 | | | | 9,132 | | | $ | 42.62 | | | | 138,671 | | | | | | | | |
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As of December 31, 2014, our outstanding options have no intrinsic value. The average fair value of options granted was $4.29 per share in 2014 and $11.18 per share in 2013. The following are the assumptions used in valuing stock options: |
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| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | |
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Assumed volatility | | | 119.90% | | | | 119.2%-122.3% | | | | | | | | | | | | | | | | | | | | |
| | | | | | (121.1% weighted average) | | | | | | | | | | | | | | | | | | | | |
Assumed risk free interest rate | | | 1.70% | | | | 0.7%-1.4% | | | | | | | | | | | | | | | | | | | | |
| | | | | | (0.9% weighted average) | | | | | | | | | | | | | | | | | | | | |
Average expected life of options (in years) | | | 6.2 | | | | 6.2 | | | | | | | | | | | | | | | | | | | | |
Expected dividends | | | - | | | | - | | | | | | | | | | | | | | | | | | | | |
Forfeiture rate | | | 5% | | | | 5% | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes information related to outstanding and exercisable options: |
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| | | As of December 31, 2014 | | |
| | | Outstanding | | | Exercisable | | |
Range of Exercise | | | Shares | | | Weighted | | | Weighted | | | Shares | | | Weighted | | | Weighted | | |
Prices | Underlying | Average | Average | Underlying | Average | Average | |
| Options | Exercise | Remaining | Options | Exercise | Remaining | |
| | Price | Contractual | | Price | Contractual | |
| | | Life (Years) | | | Life (Years) | |
$ | 4.77 | | | | 141,134 | | | $ | 4.77 | | | | 9.6 | | | | 15,671 | | | $ | 4.77 | | | | 9.6 | | |
$ | 6.00 -$16.00 | | | | 116,217 | | | | 15.79 | | | | 6.1 | | | | 111,277 | | | | 15.79 | | | | 6.1 | | |
$ | 28 | | | | 1,457 | | | | 28 | | | | 7.2 | | | | 1,457 | | | | 28 | | | | 7.2 | | |
$ | 40 | | | | 2,834 | | | | 40 | | | | 6.8 | | | | 2,834 | | | | 40 | | | | 6.8 | | |
$ | 60 | | | | 5,000 | | | | 60 | | | | 0.1 | | | | 5,000 | | | | 60 | | | | 0.1 | | |
$ | 74 | | | | 2,500 | | | | 74 | | | | 6.2 | | | | 1,932 | | | | 74 | | | | 6.2 | | |
$ | 242 | | | | 500 | | | | 242 | | | | 1 | | | | 500 | | | | 242 | | | | 1 | | |
$ | 4.77 to $242.00 | | | | 269,642 | | | $ | 12.12 | | | | 7.9 | | | | 138,671 | | | $ | 18.5 | | | | 6.2 | | |
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The following table summarizes equity and liability warrant activity during 2014 and 2013: |
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| | Equity Warrants | | | Liability Warrants | | | | |
| | Shares | | | Weighted | | | Weighted | | | Shares | | | Weighted | | | Weighted | | | | |
Underlying | Average | Average | Underlying | Average | Average | | | |
| Exercise | Remaining | | Exercise | Remaining | | | |
| Price | Contractual | | Price | Contractual | | | |
| | Life (Years) | | | Life (Years) | | | |
Balance, January 1, 2013 | | | 5,756 | | | $ | 90 | | | | 2.4 | | | | 801,013 | | | $ | 24 | | | | 3.5 | | | | |
Granted | | | 1,820,711 | | | | 7 | | | | | | | | 38,400 | | | | 16 | | | | | | | | |
Impact of antidilution clauses | | | - | | | NA | | | | | | | | 385,292 | | | NA | | | | | | | | |
Impact of amendment | | | (8,711 | ) | | NA | | | | | | | | (487,350 | ) | | NA | | | | | | | | |
Exercised | | | - | | | NA | | | | | | | | - | | | NA | | | | | | | | |
Forfeited, expired or cancelled | | | (2,722 | ) | | | 137.6 | | | | | | | | (146,107 | ) | | | 65.6 | | | | | | | | |
Outstanding, December 31, 2013 | | | 1,815,034 | | | | 6.69 | | | | 5 | | | | 591,248 | | | | 5.24 | | | | 2.9 | | | | |
Granted | | | 4,262,436 | | | | 5.44 | | | | | | | | - | | | NA | | | | | | | | |
Exercised | | | - | | | NA | | | | | | | | - | | | NA | | | | | | | | |
Forfeited, expired or cancelled | | | - | | | NA | | | | | | | | (164,759 | ) | | | 5.24 | | | | | | | | |
Outstanding, December 31, 2014 | | | 6,077,470 | | | $ | 5.81 | | | | 4.4 | | | | 426,489 | | | $ | 5.24 | | | | 2.9 | | | | |
Exercisable, December 31, 2014 | | | 4,895,775 | | | $ | 5.94 | | | | 4.2 | | | | 426,489 | | | $ | 5.24 | | | | 2.9 | | | | |
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The following table summarizes information related to outstanding and exercisable warrants: |
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| | | | Outstanding | | | Exercisable | |
Range of Exercise | | Type of | | Shares | | | Weighted | | | Weighted | | | Shares | | | Weighted | | | Weighted | |
Prices | Warrant | Under | Average | Average | Under | Average | Average |
| | Warrants | Exercise | Remaining | Warrants | Exercise | Remaining |
| | | Price | Contractual | | Price | Contractual |
| | | | Life (Years) | | | Life (Years) |
$ | 5.24 | | Liability (1) | | | 426,489 | | | $ | 5.24 | | | | 2.9 | | | | 426,489 | | | $ | 5.24 | | | | 2.9 | |
$ | 5.25 to $5.87 | | Equity | | | 4,006,670 | | | | 5.37 | | | | 4.6 | | | | 2,824,975 | | | | 5.41 | | | | 4.3 | |
$ | 6.55 to $6.63 | | Equity | | | 2,055,767 | | | | 6.55 | | | | 4 | | | | 2,055,767 | | | | 6.55 | | | | 4 | |
$ | 16.00 to $16.80 | | Equity | | | 12,004 | | | | 16.4 | | | | 3.5 | | | | 12,004 | | | | 16.4 | | | | 3.5 | |
$ | 46.8 | | Equity | | | 3,029 | | | | 46.8 | | | | 1.9 | | | | 3,029 | | | | 46.8 | | | | 1.9 | |
| | | | | | 6,503,959 | | | $ | 5.77 | | | | 4.3 | | | | 5,322,264 | | | $ | 5.88 | | | | 4.1 | |
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| -1 | The warrants contain full ratchet anti-dilution provisions. | | | | | | | | | | | | | | | | | | | | | | | | | |
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As of December 31, 2014, we have two warrant agreements outstanding (with one holder) that contain antidilution clauses. The related warrants are classified as derivative warrant liabilities in our balance sheets. Under the antidilution clauses contained in these warrants, in the event of equity issuances at prices below the exercise prices of these warrants, we may be required to lower the exercise price on these warrants and increase the number of shares underlying these warrants. Equity issuances may include issuances of our common stock, certain awards of options to employees, and issuances of warrants and/or other convertible instruments. |
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Certain equity issuances in 2013 triggered the antidilution clauses in certain liability warrants and, as a result, we were required to lower the exercise price and increase the number of shares underlying certain liability warrants. In addition, certain amendments in 2013 required us to lower the exercise price and increase the numbers of shares underlying certain warrants. |