Subsequent Events | 3 Months Ended |
Mar. 31, 2014 |
Subsequent Events [Abstract] | ' |
Subsequent Events [Text Block] | ' |
11 | Subsequent Events | |
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Increase in Authorized Shares of Common Stock |
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On April 17, 2014, our stockholders approved an amendment to our Fifth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our Common Stock from 75,000,000 to 150,000,000. The amendment became effective on April 17, 2014 upon filing with the Delaware Secretary of State. |
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Private Placement Transaction |
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On March 11, 2014, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors (the “Purchasers”) whereby we agreed to sell approximately $10.0 million in aggregate principal amount of subordinated convertible debentures (the “Debentures”), together with warrants (the “Warrants”) to purchase 9,428,000 shares of our Common Stock in a private placement transaction (the “Private Placement Transaction”). The closing of the full amount of securities in the Private Placement Transaction was subject to stockholder approval, which was attained at our 2014 annual meeting of stockholders on April 17, 2014. The Private Placement closed on April 22, 2014 (the “Private Placement Closing Date”). |
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The three-year Debentures will be convertible into shares of Common Stock at an initial conversion price of $1.06 per share, for an aggregate of approximately 9,428,000 shares of Common Stock. The Debentures bear interest at a rate of 6% per annum, payable monthly in cash or, at our discretion provided certain conditions (“Equity Conditions”) are met each payment period, in shares of Common Stock at a price equal to 90% of a calculated market price per share. In connection with the purchase of the Debentures, the selling stockholders received five-year Warrants to purchase an aggregate of approximately 9,428,000 shares of Common Stock, which were exercisable immediately upon issuance at an exercise price of $1.19 per share. |
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The Debentures are subordinated to the Credit Facility and pursuant to a subordination agreement with Hercules (the “Subordination Agreement”), cash payments by us to the Purchasers under the transaction documents related to the Private Placement Transaction are subject to a $1.5 million cap for so long as the Credit Facility remains outstanding (with any amounts in excess of that cap to be held in abeyance for the Purchasers until the Credit Facility is no longer outstanding). In connection with obtaining Hercules’ consent for the Private Placement Transaction, we paid Hercules a one-time non-refundable cash facility fee in the amount of $300,000. |
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In connection with the Private Placement Transaction, we entered into a registration rights agreement (the “Registration Rights Agreement”) with each Purchaser. Pursuant to the Registration Rights Agreement, the Company agreed to file a resale registration statement (the “Registration Statement”) with respect to the resale of the shares of Common Stock issuable in the Private Placement Transaction, not later than ten calendar days following the Closing Date and to use its commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC not later than 30 calendar days after the Closing Day (or 60 calendar days following the Closing Date, if the SEC comments upon the Registration Statement). If the Company is unable to timely satisfy such deadlines, it could incur liquidated damages of up to 12% of the offering proceeds. We filed the Registration Statement on May 2, 2014, to satisfy the filing part of this obligation. |
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The Debentures also contain certain cross default provisions with respect to the Credit Facility. The Debentures contain no financial covenants. For one year after the date of issuance, the conversion price of the Debentures and the exercise price of the Warrants are subject to adjustment upon the issuance of any Common Stock or securities convertible into Common Stock below the then-existing conversion or exercise price, as applicable, subject to certain exceptions. In the event of certain change in control transactions, the holders of the Debentures and Warrants will be entitled to (i) receive upon conversion or exercise the same kind and amount of securities, cash or property which the holders would have received had they converted or exercised their Debentures or Warrants, as applicable, immediately prior to such transaction and (ii) have their securities assumed by the surviving entity. In addition, if such a transaction involves cash consideration, is a going private transaction, or involves securities not listed on the NYSE or NASDAQ, the holders of the Warrants will be entitled to have their Warrants repurchased at a calculated Black-Scholes value of such Warrants at any time within 60 days after the transaction. Subject to limited exceptions, the Company will not permit the conversion of the Debentures or exercise of the Warrants of any Purchaser, if after such conversion or exercise such Purchaser would beneficially own more than 4.99% of the outstanding shares of Common Stock. |
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The Debentures contain customary debt instrument covenants and representations, including limitations on our ability to: |
| · | Incur additional indebtedness, other than specified permitted indebtedness; |
| · | Incur specified liens, other than specified permitted liens; |
| · | Redeem, repurchase or declare cash dividends or cash distributions on our capital stock, subject to certain exceptions; |
| · | Make transfers of our assets in excess of $500,000 in any 12-month period, subject to certain exceptions; and |
| · | Engage in any material line of business substantially different from the lines of business currently conducted by us. |
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Upon the occurrence of an “Event of Default,” the interest rate on the Debentures increases to 15% and we can be required to redeem the Debentures in whole or in part in cash at 110% of the outstanding balance. Events of Default under each Debenture include: |
| · | Failure to file the Registration Statement (as defined below) or for it to be declared effective within specified time periods; |
| · | Lapse of the effectiveness or unavailability of the Registration Statement for specified time periods; |
| · | Suspension or removal from the NASDAQ Global Market or other permissible trading market for specified time periods; |
| · | Failure to timely deliver, or remove restrictive legends from, shares upon conversion of the Debentures or exercise of the Warrants; |
| · | Failure to pay principal, interest, late charges and other amounts due under the Debenture; |
| · | Certain events of bankruptcy or insolvency of the Company; |
| · | Judgments against the Company of over $1.0 million not covered by insurance; |
| · | Failure to make payment with respect to any indebtedness in excess of $500,000 to any third party or the occurrence of a default or event of default under any agreement binding the Company having a material adverse effect on the Company; |
| · | Breaches of representations, warranties or covenants included in any of the transaction documents related to the Private Placement Transaction; and |
| · | Any event occurs that would have a material adverse effect on the Company or its prospects. |
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Avance™ MIS Pedicle Screw System |
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In April 2014, we received U.S. Food and Drug Administration 510(k) clearance (k133743) of our Avance MIS Pedicle Screw System, which may be used as an adjunct to fusion in numerous degenerative and complex spinal pathologies. Avance provides a quick and easy-to-use, percutaneous pedicle screw system to address single, complex and multi-level spinal pathologies with minimal tissue disruption and trauma. The Avance system will be in limited market release in the second and third quarter of 2014 and is planned for full launch in the fourth quarter of 2014. |
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