STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2014 |
Stockholders Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | 10. STOCKHOLDERS’ EQUITY |
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Common Stock |
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The Company amended its Amended & Restated Certificate of Incorporation to effect a combination of its common stock at a ratio of 1-for-8 as of October 29, 2013 (the “Reverse Split”). The Reverse Split was effective immediately prior to the entry into the 2013 Purchase Agreement described below. The Reverse Split was authorized by the stockholders of the Company on November 10, 2010. |
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As a result of the Reverse Split, all references to common stock, stock options and warrants and other securities convertible into common stock, and per share amounts for all prior periods presented have been retroactively restated to reflect the 1-for-8 reverse stock split of common stock. |
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On March 27, 2013, in accordance with the amendment to the Registration Rights Agreement, the Company issued an aggregate of approximately 123,809 shares of common stock to the investors in lieu of an aggregate cash payment of $297,144, representing the first installment of liquidated damages under the Registration Rights Agreement, as amended. |
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On April 29, 2013, in accordance with the amendment to the Registration Rights Agreement, the Company issued an aggregate of approximately 136,536 shares of common stock to the investors in lieu of an aggregate cash payment of $327,688, representing the second installment of liquidated damages under the Registration Rights Agreement, as amended. |
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On May 27, 2013, in accordance with the amendment to the Registration Rights Agreement, the Company issued an aggregate of approximately 120,280 shares of common stock to the investors in lieu of an aggregate cash payment of $288,674, representing the third and final installment of liquidated damages under the Registration Rights Agreement, as amended. |
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On October 29, 2013, the Company entered into a Securities Purchase Agreement (the “2013 Purchase Agreement”) with certain purchasers identified therein (the “Purchasers”) pursuant to which the Company sold and the Purchasers purchased, an aggregate of 12,868,585 units of the Company’s securities (the “Units”), with each Unit consisting of the following: |
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| (i) | either (a) one share of common stock (each a “Share,” and collectively, the “Shares”), or (b) a five-year common stock warrant to purchase one share of common stock (collectively, the “Series C Warrant Shares”) at an exercise price of $0.01 per share (collectively, the “Series C Warrants”); | | | | | | | | | | | | | | | | | |
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| (ii) | a five-year warrant to purchase one share of common stock (collectively, the “Series D Warrant Shares”) at an exercise price of $4.00 per share (collectively, the “Series D Warrants”); and | | | | | | | | | | | | | | | | | |
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| (iii) | a warrant, expiring on October 31, 2014, to purchase one share of common stock (collectively, the “Series E Warrant Shares,” and together with the Series C Warrant Shares and the Series D Warrant Shares, the “Warrant Shares”) at an exercise price of $2.40 per share (collectively, the “Series E Warrants,” and together with the Series C Warrants and the Series D Warrants, the “2013 Warrants”). | | | | | | | | | | | | | | | | | |
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The Company sold and issued 8,413,354 Units consisting of Shares, Series D Warrants and Series E Warrants at a purchase price of $2.40 per Unit, and 4,455,231 Units consisting of Series C Warrants, Series D Warrants and Series E Warrants at a purchase price of $2.39 per Unit, for total gross proceeds to the Company of $30.84 million, before deducting fees and other transaction related expenses of approximately $760,000. A closing of the sale of 12,826,752 Units was completed on October 29, 2013, and the sale of the remaining 41,833 Units was completed on October 30, 2013. |
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As of December 31, 2014, the Company had 20,408,616 shares of common stock issued and outstanding and approximately 55,322,870 shares of common stock reserved for issuance upon the exercise of outstanding options and warrants. |
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The Purchase Agreement contains customary representations, warranties and covenants by each of the Company and the Purchasers. In addition, the Purchase Agreement provides that each Purchaser has a right, subject to certain exceptions described in the agreement, to participate in future issuances of equity and debt securities by the Company for a period of 18 months following the effective date of the Registration Statement (defined below). |
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Contemporaneously with the entry into the Purchase Agreement, and as contemplated thereby, the Company entered into a Registration Rights Agreement with the Purchasers. Pursuant to the terms of the Registration Rights Agreement, the Company agreed to file, on or before December 30, 2013 (the “Filing Date”), a registration statement under the Securities Act covering the resale of the Shares and Warrant Shares (the “Registration Statement”), and to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter, but not later than 120 days following the date of the Registration Rights Agreement (the “Effectiveness Date”). The Registration Statement was declared effective on January 27, 2014. The Company is required to maintain the effectiveness of the Registration Statement until all of the shares covered thereby are sold or may be sold pursuant to Rule 144 under the Securities Act without volume or manner of sale restrictions and without the requirement that the Company be in compliance with the current public information requirements of Rule 144. |
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Warrants |
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In accordance with the 2010 sale and issuance of Series A preferred stock, the Company issued two-and-one-half-year “Class A” warrants to purchase an aggregate of 152,740 shares of Series A Preferred Stock at an initial exercise price of $8.00 per share (the “2010 Class A Warrants”) and five-year Class B warrants to purchase an aggregate of 801,885 shares of Series A Preferred Stock at an initial exercise price of $9.20 per share, the “2010 Class B Warrants,” and together with the 2010 Class A Warrants, the “2010 Warrants”). Upon the automatic conversion of the Series A Preferred Stock in January 2011, the 2010 Warrants automatically converted to the right to purchase an equal number of shares of common stock. The terms of the warrants contain an anti-dilutive price adjustment provision, such that, in the event the Company issues common shares at a price below the current exercise price of the 2010 Warrants, the exercise price will be decreased pursuant to a customary “weighted-average” formula. In accordance with this provision and as a result of the issuances made pursuant to the 2012 Purchase Agreement and 2013 Purchase Agreement, the exercise price of the 2010 Class B warrants has been adjusted to $3.55 per share. Because of this anti-dilution provision and the inherent uncertainty as to the probability of future common share issuances, the Black-Scholes option pricing model the Company uses for valuing stock options could not be used. Management used a Monte Carlo simulation model and, in doing so, utilized a third-party valuation report to determine the warrant liability to be approximately $0.0 million and approximately $0.4 million at December 31, 2014 and December 31, 2013, respectively. The Monte Carlo simulation is a generally accepted statistical method used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of the Company’s future expected stock prices and minimizes standard error. This valuation is revised on a quarterly basis until the warrants are exercised or they expire with the changes in fair value recorded in other income (expense) on the statement of operations. The 2010 Class A warrants, representing the right to purchase an aggregate of 152,704 shares of common stock, expired unexercised during the year ended December 31, 2013. |
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Pursuant to the 2012 Purchase Agreement, the Company issued five-year Series A warrants to purchase an aggregate of approximately 6,190,500 shares of common stock at an initial exercise price of $4.00 per share and 18-month Series B warrants to purchase an aggregate of approximately 6,190,500 shares of common stock at an initial exercise price of $2.40 per share. On October 28, 2014, the warrant holders were notified that the expiration date of the Series B Warrants had been extended until December 31, 2014. On December 31, 2014, warrant holders were notified that the expiration date for the Series B Warrants was further extended to January 31, 2015. The terms of the 2012 Warrants contain a “full-ratchet” anti-dilutive price adjustment provision. In accordance with such full-ratchet anti-dilution provision, in the event that the Company sells or issues additional shares of common stock, including securities convertible or exchangeable for common stock (subject to customary exceptions), at a per share price less than the applicable 2012 Warrant exercise price, such warrant exercise price will be reduced to an amount equal to the issuance price of such subsequently issued shares; after such time as the Company has raised at least $12 million in additional equity financing, the 2012 Warrants are subject to further anti-dilution protection based on a weighted-average formula. Further, the anti-dilution provisions of the 2012 Warrants provide that, in addition to a reduction in the applicable exercise price, the number of shares purchasable thereunder is increased such that the aggregate exercise price of the warrants (exercise price per share multiplied by total number of shares underlying the warrants) remained unchanged. Because of this anti-dilution provision and the inherent uncertainty as to the probability of future common share issuances, the Black-Scholes option pricing model the Company uses for valuing stock options could not be used. Management used a Monte Carlo simulation model and, in doing so, utilized a third-party valuation report to determine the warrant liability to be approximately $3.5 million and $16.7 million at December 31, 2014 and December 31, 2013, respectively. |
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In connection with the 2012 offering of the Debentures and 2012 Warrants, the Company engaged Maxim Group LLC, or Maxim Group, to serve as placement agent. In consideration for its services, the Company paid Maxim Group a placement fee of $1,035,000. In addition, the Company issued to Maxim Partners LLC, or Maxim Partners, an affiliate of Maxim Group, 7,500 shares of common stock and five-year warrants to purchase an additional 283,750 shares of common stock at an initial exercise price of $2.64 per share. The warrants issued to Maxim Partners are in substantially the same form as the Warrants issued to the investors, except that they do not include certain anti-dilution provisions contained in the Warrants. However, the placement warrants do contain a provision that could require the Company to repurchase the warrants from the holder under certain conditions. Management used a Monte Carlo simulation model and, in doing so, utilized a third-party valuation report to determine the warrant liability to be approximately $0.1 million and $0.4 million at December 31, 2014 and December 31, 2013, respectively. |
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Under the terms of the 2013 Purchase Agreement, each Purchaser had the option to elect to receive a Series C Warrant in lieu of a Share in connection with each Unit it purchased. The Series C Warrants have a five-year term and are exercisable at an initial exercise price of $0.01 per share. The Series D Warrants have a five-year term and are exercisable at an initial exercise price of $4.00 per share, subject to adjustment for stock splits, combinations, recapitalization events and certain dilutive issuances (as described below). The Series E Warrants were initially exercisable until October 31, 2014 at an initial exercise price of $2.40 per share, subject to adjustment for stock splits, combinations, recapitalization events and certain dilutive issuances (as described below). On October 28, 2014, the warrant holders were notified that the expiration date of the Series E Warrants had been extended until December 31, 2014. On December 31, 2014, warrant holders were notified that the expiration date for the Series E Warrants was further extended to January 31, 2015. The applicable exercise price of the Series D Warrants and Series E Warrants (but not the Series C Warrants) is subject to a weighted-average price adjustment in the event the Company makes future issuances of common stock or rights to acquire common stock (subject to certain exceptions) at a per share price less than the applicable warrant exercise price. Because of this anti-dilution provision and the inherent uncertainty as to the probability of future common share issuances, the Black-Scholes option pricing model the Company uses for valuing stock options could not be used. Management used a Monte Carlo simulation model and, in doing so, utilized a third-party valuation report to determine the warrant liability for the Series D and Series E Warrants to be approximately $3.0 million and $18.3 million at December 31, 2014 and December 31, 2013. |
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The 2013 Warrants are required to be exercised for cash, provided that if during the term of the warrants there is not an effective registration statement under the Securities Act covering the resale of the shares issuable upon exercise of the warrants, then the warrants may be exercised on a cashless (net exercise) basis. |
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Below is a table that summarizes all outstanding warrants to purchase shares of the Company’s common stock as of December 31, 2014. |
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Grant Date | | Warrants | | Exercise | | Weighted | | Expiration | | Exercised | | Warrants | |
Issued | Price | Average | Date | Outstanding |
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9/3/10 | | | 801,885 | | $ | 3.55 | | $ | 3.55 | | | 9/3/15 | | | - | | | 801,885 | |
9/3/10 | | | 132,116 | | $ | 8.8 | | $ | 8.8 | | | 9/3/15 | | | - | | | 132,116 | |
11/26/12 | | | 5,293,738 | | $ | 2.4 | | $ | 2.4 | | | 1/31/15 | | | - | | | 5,293,738 | |
12/18/12 | | | 896,748 | | $ | 2.4 | | $ | 2.4 | | | 1/31/15 | | | - | | | 896,748 | |
11/26/12 | | | 8,822,887 | | $ | 2.4 | | $ | 2.4 | | | 11/26/17 | | | - | | | 8,822,887 | |
11/26/12 | | | 261,250 | | $ | 2.64 | | $ | 2.64 | | | 11/26/17 | | | - | | | 261,250 | |
12/18/12 | | | 1,494,577 | | $ | 2.4 | | $ | 2.4 | | | 12/18/17 | | | - | | | 1,494,577 | |
12/18/12 | | | 22,500 | | $ | 2.64 | | $ | 2.64 | | | 12/18/17 | | | - | | | 22,500 | |
10/29/13 | | | 4,455,231 | | $ | 0.01 | | $ | 0.01 | | | 10/29/18 | | | - | | | 4,455,231 | |
10/29/13 | | | 12,868,585 | | $ | 2.4 | | $ | 2.4 | | | 1/31/15 | | | - | | | 12,868,585 | |
10/29/13 | | | 12,868,585 | | $ | 4 | | $ | 4 | | | 10/29/18 | | | - | | | 12,868,585 | |
10/29/13 | | | 65,650 | | $ | 2.64 | | $ | 2.64 | | | 10/29/18 | | | - | | | 65,650 | |
| | | 47,983,752 | | | | | $ | 2.65 | | | | | | - | | | 47,983,752 | |
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