Stockholders' Equity | 12 Months Ended |
Dec. 31, 2013 |
Stockholders' Equity (Deficit) | ' |
Stockholders' Equity | ' |
Note 11 - Stockholders’ Equity |
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Description of Authorized Capital |
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Preferred Stock activity for the years ended December 31, 2013 and 2012 are as follows (share amounts in this chart are in thousands): |
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| | Series A | | | Series C | | | Series E | | | Series E-1 | | | Series E-2 | |
Balance at January 1 ,2012 | | | 215 | | | | 10,000 | | | | 11,831 | | | | 1,334 | | | | 10,000 | |
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Issued | | | — | | | | — | | | | — | | | | — | | | | 7,000 | |
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Balance at December 31, 2012 | | | 215 | | | | 10,000 | | | | 11,831 | | | | 1,334 | | | | 17,000 | |
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Issued | | | — | | | | — | | | | — | | | | — | | | | 2,000 | |
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Balance at December 31, 2013 | | | 215 | | | | 10,000 | | | | 11,831 | | | | 1,334 | | | | 19,000 | |
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Issuances |
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Series A Participating Preferred Stock |
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The shares of Series A Participating Preferred Stock (the “Series A Preferred) have the following rights, privileges and preferences, among others, as more fully set forth in the amended Certificate of Incorporation. Subject to the liquidation preference described below, the Series A Preferred ranks pari passu with the Company’s common stock with respect to dividends and distributions upon liquidation, winding-up and dissolution of the Company and junior to any class or series of capital stock that ranks senior to the Series A Preferred. The Company may not declare, pay or set aside any dividends on shares of its common stock unless the holders of the Series A Preferred then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A Preferred in an amount at least equal to a rate per share of Series A Preferred determined by multiplying the amount of the dividend payable on each share of common stock by one hundred (100) (subject to standard adjustments) In the event of any liquidation, dissolution or winding up of the Company (including certain changes of control that are deemed a liquidation), subject to the rights of any series of preferred stock which may from time to time come into existence, the holders of Series A Preferred shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock or the holders of any series of preferred stock expressly made junior to the Series A Preferred, an amount per share equal to $0.01 Thereafter, subject to the rights of any series of preferred stock, the remaining assets of the Company available for distribution to its stockholders are required to be distributed among the holders of shares of Series A Preferred and common stock, pro rata based on the number of shares held by each such holder, treating for this purpose each such share of Series A Preferred as if it had been converted into one hundred (100) shares of common stock immediately prior to such liquidation (including a deemed liquidation), dissolution or winding up of the Company. The Series A Preferred is non-voting capital stock of the Company, except as may otherwise be required by applicable law and except that the holders thereof have certain limited approval rights, including. |
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Series C Convertible Preferred Stock |
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The Shares of Series C Preferred have the following rights, privileges and preferences, among others, as more fully set forth in the amended Certificate of Incorporation: |
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• | are convertible at the option of the holders of a majority of the issued and outstanding shares of Series C Preferred, at the current conversion price of $40.00 per share and the conversion value of $2,500,000, for a conversion ratio of 2,500 shares of the Company’s Common Stock for each share of Series C Preferred or 25,000,000 shares of common stock in the aggregate. | | | | | | | | | | | | | | | | | | | |
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• | are mandatory convertible into shares of the Company’s Common Stock upon certain milestones related to the trading of the Company’s Common Stock. | | | | | | | | | | | | | | | | | | | |
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• | in the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, and upon certain changes, subject to the rights of holders shares of Series E Preferred, Series E-1 Preferred and Series E-2 Preferred, the holders will be entitled to a liquidation preference; and | | | | | | | | | | | | | | | | | | | |
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• | holders have the right to vote with holders of the Company’s Common Stock on an as-converted basis. | | | | | | | | | | | | | | | | | | | |
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Series E, E-1 and E-2 Convertible Preferred Stock |
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The shares of Series E Preferred, Series E-1 Preferred and Series E-2 Preferred have the following rights, privileges and preferences, among others, as more fully set forth in the amended Certificate of Incorporation: |
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• | are initially convertible at the option of the holder into shares Common Stock at a conversion price of $28.00 per share, for an initial conversion ratio of 14,286 shares of Common Stock for each share; provided that, for a period of 18 months following the date of their issuance, if the Company issues shares of Common Stock (or is deemed to issue shares of Common Stock) for a price per share less than $28.00 then the exercise price will be reduced by a “weighted-average” anti-dilution formula (subject to certain exempted issuances) the current conversion price is $28.00; | | | | | | | | | | | | | | | | | | | |
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• | is mandatorily convertible into shares of our Common Stock under certain milestones related to the trading of the Company’s common stock; | | | | | | | | | | | | | | | | | | | |
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• | is mandatorily convertible into shares of our Series A Preferred upon the same mandatory conversion event applicable to the Series E-1 Preferred; | | | | | | | | | | | | | | | | | | | |
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• | dividends of 8% per annum shall accrue but are payable only as, if and when declared by the Board, in connection with the conversion thereof (in which case payment shall be in-kind) or as part of the liquidation or change of control preference summarized below; | | | | | | | | | | | | | | | | | | | |
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• | holders of Series E-2 Preferred shall be entitled to a preferential payment (prior to any payment to holders of Series E Preferred, Series E-1 Preferred, Series C Preferred, Series A Preferred or Common Stock) upon a liquidation or change of control, as applicable, in certain circumstances; and | | | | | | | | | | | | | | | | | | | |
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• | holders have the right to vote with holders of Common Stock on an as-converted basis. | | | | | | | | | | | | | | | | | | | |
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As of December 31, 2013 there were cumulative undeclared dividends of $1,962,974 with a weighted average price per share amount of $166. |
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Preferred Stock Series E-1 Issuance |
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As of December 31, 2013 there were cumulative undeclared dividends of $221,334 with a weighted average price per share amount of $166. |
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Preferred Stock Series E-2 Issuance |
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On January 24, 2012, the Company sold an aggregate of 3 units for a total purchase price of $300,000, with each unit comprised of (a) warrants to purchase 1,428,572 shares of Common Stock and (b) 100 shares of Series E-2 Preferred. The Company allocated $105,000 and $195,000 of its proceeds to the warrants and Series E-2 Preferred, respectively, using the residual method. Such warrants contain down-round protection provisions for the holders and are therefore considered a derivative liability. Such warrants have been valued using a Binomial Lattice Model. The value of each warrant was estimated to be $0.0245 per warrant utilizing the following assumptions, expected volatility of 167.79%, risk-free interest rate of 0.92%, expected term of 5 years, weighted average probability strike price of $0.0635 and a market price of $0.03. The Company analyzed the effective conversion feature of the Series E-2 Preferred and determined that there was no beneficial conversion features upon the issuance. |
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On June 8, 2012, the Company sold an aggregate of 67 units for a total purchase price of $6,700,000, with each unit comprised of (a) warrants to purchase 1,428,572 shares of Common Stock and (b) 100 shares of Series E-2 Preferred. The Company allocated $2,412,000 and $4,288,000 of its proceeds to the warrants and Series E-2 Preferred, respectively, using the residual method. Such warrants contain down-round protection provisions for the holders and are therefore considered a derivative liability. Such warrants have been valued using a Binomial Lattice Model. The value of each warrant was estimated to be $0.0252 per warrant utilizing the following assumptions, expected volatility of 180.74%, risk-free interest rate of 0.71%, expected term of 5 years, weighted average probability strike price of $0.0635 and a market price of $0.03. The Company analyzed the effective conversion feature of the Series E-2 Preferred and determined that there was no beneficial conversion features upon the issuance. |
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On February 28, 2013, the Company sold an aggregate of 20 units for a total purchase price of $2,000,000, with each unit comprised of (a) warrants exercisable for 3,571 shares of common stock of the Company, par value $0.0001 per share, and (b) 100 shares of Series E-2 Convertible Preferred Stock of the Company, par value $0.0001 per share. The Company allocated $282,857 and $1,686,523 of its proceeds to the warrants and Series E-2 Preferred, respectively, using the residual method. Such warrants contain down-round protection provisions for the holders and are therefore considered a derivative liability. Such warrants have been valued using a Binomial Lattice Model. The value of each warrant was estimated to be $3.96 per warrant utilizing the following assumptions, expected volatility of 108.35%, risk-free interest rate of 0.77%, expected term of 5 years, weighted average probability strike price of $28.00 and a market price of $6.40 ($0.016 prior to the reverse stock split). The Company analyzed the effective conversion feature of the Series E-2 Preferred and determined that there was no beneficial conversion features upon the issuance. |
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As of December 31, 2013 there were cumulative undeclared dividends of $2,678,312 with a weighted average price per share amount of $128. |
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Common Stock Issuance |
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On December 14, 2012, the Company issued 1,509 of the Company’s common stock to Convertible Secured Promissory Noteholders, in exchange for the termination of rights to any remaining Contingent Performance Shares under the promissory notes. This resulted in the Company offsetting a liability (with a corresponding increase in common stock and additional paid-in capital) of $18,110. |
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Common Stock Purchase Warrants |
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Warrant activity for the years ending December 31, 2013 and 2012 are as follows: |
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| | Numbers of Warrants | | | Weighted-Average Exercise Price | | | | | | | | | | | | | |
Outstanding at January 1, 2012 | | | 896,092 | | | $ | 32 | | | | | | | | | | | | | |
Issued | | | 250,000 | | | | 24 | | | | | | | | | | | | | |
Cancelled or expired | | | (14,699 | ) | | | (100.00 | ) | | | | | | | | | | | | |
Exercised | | | — | | | | | | | | | | | | | | | | | |
Outstanding at December 31, 2012 | | | 1,131,393 | | | $ | 32 | | | | | | | | | | | | | |
Issued | | | 123,771 | | | | 28 | | | | | | | | | | | | | |
Cancelled or expired | | | (44,981 | ) | | | (28.00 | ) | | | | | | | | | | | | |
Exercised | | | — | | | | — | | | | | | | | | | | | | |
Outstanding at December 31, 2013 | | | 1,210,238 | | | $ | 28 | | | | | | | | | | | | | |
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Weighted average grant date fair value of warrants granted during the year ended December 31, 2013 | | | | | | $ | 3.96 | | | | | | | | | | | | | |
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On June 4, 2013, July 24, 2013 and December 7, 2013, the 18 month down round protection of the warrants expired, which resulted in the reset of the exercise price of the warrants to the base floor price of $28.00. The Company revalued the warrants on the expiration dates using a Binomial Lattice Model. The value of each warrant was estimated to be $1.72, $1.60 and $1.80, respectively per warrant utilizing the following assumptions, expected volatility of ranging from 89.73% to 94.19%, risk-free interest rate ranging from 0.64% to 1.08%, expected term of 3.5 years, strike price of $25.40 - $28.00 and a market price of $6.40 As a result, the warrants were reclassified as equity within the Company’s consolidated financial statements, at an aggregate fair value of $1,201,487. In addition, the Company recorded a gain of $364,135 on the derivative liability which is included in changes in value of derivative financial instruments, in the accompanying consolidated statement of operations. |
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On August 2, 2012, September 4, 2012 and December 21, 2012, the 18 month down round protection of the warrants expired, which resulted in the reset of the exercise price of the warrants to the base floor price of $28.00. The Company revalued the warrants on the expiration dates using a Binomial Lattice Model. The value of each warrant was estimated to be $9.04, $9.04 and $8.52, respectively per warrant utilizing the following assumptions, expected volatility of ranging from 174.30% to 189.02%, risk-free interest rate ranging from 0.46% to 0.57%, expected term of 3.5 years, strike price of $0.07 and a market price of $12.00. As a result, the warrants were reclassified as equity within the Company’s consolidated financial statements, at an aggregate fair value of $3,562,714. In addition, the Company recorded a gain of $91,786 on the derivative liability which is included in changes in value of derivative financial instruments, in the accompanying consolidated statement of operations. |
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Warrants issued to Non-Employees |
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The Company recognized $0 and $73,809 in consulting expense relating to warrants awarded during the years ended December 31, 2013 and 2012, respectively, relating to warrants awarded. |
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Cancellation of warrants |
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On March 6, 2013, the Company entered into and consummated a Cancellation and Issuance Agreement, pursuant to which 52,342 warrants for the purchase of common stock were issued upon execution of a release for the cancellation of 38,507 warrants for the purchase of common stock. The Company recorded a charge of $225,000 at December 31, 2012 for this matter which is included in accounts payable and accrued expenses and other income (expense), net in the accompanying consolidated balance sheet and statements of operations. |
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Preferred Series A Purchase Warrants |
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Series A warrant activity for the years ending December 31, 2013 and 2012 are as follows: |
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| | Numbers of Series A Warrants | | | Weighted-Average Exercise Price | | | | | | | | | | | | | |
Outstanding at January 1, 2012 | | | 446 | | | $ | 2,440.00 | | | | | | | | | | | | | |
Issued | | | — | | | | — | | | | | | | | | | | | | |
Cancelled or expired | | | — | | | | — | | | | | | | | | | | | | |
Exercised | | | — | | | | — | | | | | | | | | | | | | |
Outstanding at December 31, 2012 | | | 446 | | | $ | 2,800.00 | | | | | | | | | | | | | |
Issued | | | — | | | | — | | | | | | | | | | | | | |
Cancelled or expired | | | — | | | | — | | | | | | | | | | | | | |
Exercised | | | — | | | | — | | | | | | | | | | | | | |
Outstanding at December 31, 2013 | | | 446 | | | $ | 2,800.00 | | | | | | | | | | | | | |
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Weighted average fair value granted during the year ended December 31, 2013 | | | | | | $ | — | | | | | | | | | | | | | |
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On August 2, 2012, the 18 month down round protection of the Series A Preferred warrants expired, which resulted in the reset of the exercise price of the Series A Preferred warrants to the base floor price of $2,800.00 ($28.00 in common stock equivalent). The Company revalued the warrants on the expiration dates using a Binomial Lattice Model. The value of each warrant was estimated to be $9.04 per warrant utilizing the following assumptions, expected volatility of 188.58%, risk-free interest of 0.46%, expected term of 3.5 years, strike price of $28.00 and a market price of $12.00. As a result, the warrants were reclassified as equity within the Company’s consolidated financial statements, at an aggregate fair value of $403,572. In addition, the Company and recorded a gain of $5,357 on the derivative liability which is included in changes in value of derivative financial instruments, in the accompanying consolidated statement of operations. |