| Stockholders' Equity | 8. Stockholders’ Equity This summarizes the activity in Stockholders’ Equity discussed
below:
Additional Total
Common Stock Paid-In Accumulated Stockholders’
Shares Amount Capital Deficit Deficit
Balances at December 31, 2017 14,946,712 $ 15 $ 238,246 $ (262,597 ) $ (24,336 )
Conversion of notes payable and related accrued interest and fees to common stock 76,007,754 76 18,356 - 18,432
Issuance of common stock 18,653,320 19 2,762 - 2,781
Issuance of stock options in lieu of cash compensation - - 303 - 303
Stock-based compensation expense - - 3,455 - 3,455
Issuance of common stock in exchange for services 88,333 - 51 - 51
Comprehensive loss - - - (7,755 ) (7,755 )
Balances at June 30, 2018 109,696,119 $ 110 $ 263,173 $ (270,352 ) $ (7,069 ) Restructuring Transactions On December 21, 2017, the Company entered
into a Securities Purchase and Loan Satisfaction Agreement (the “Purchase Agreement”) and a Forbearance and Loan Modification
Agreement (the “Forbearance Agreement” and, together with the Purchase Agreement, the “Agreements”), each
with the Lenders. The Agreements provided for a series of transactions (the “Restructuring Transactions”) pursuant
to which, at the closing of the Restructuring Transactions (the “Transaction Closing”), which occurred on February
27, 2018, the Company would: (i) in exchange for the satisfaction and extinguishment of the entire balance of the Term Loans, (a)
issue to the Lenders an aggregate of 59,786,848 shares of Common Stock (the “New Lender Shares”), and (b) transfer
and assign to Madison Joint Venture LLC (“Madison”), an affiliate of Nomis Bay, all of the assets of the Company related
to benznidazole (the “Benz Assets”), the Company’s former drug candidate; and (ii) issue to Cheval an aggregate
of 32,028,669 shares of Common Stock (the “New Black Horse Shares” and, collectively with the New Lender Shares, the
“New Common Shares”) for total consideration of $3.0 million. Issuance of the New Lender Shares Under the Purchase Agreement, at the Transaction
Closing, the Company issued to the Lenders the New Lender Shares, of which 29,893,424 shares of Common Stock were issued to the
Black Horse Entities and 29,893,424 shares of Common Stock were issued to Nomis Bay. The issuance of the New Lender Shares to the
Lenders and the assignment of the Benz Assets to Madison resulted in the satisfaction and extinguishment of the Company’s
outstanding obligations under the Credit Agreement and the cancellation of the Term Loans, including the Bridge Loan and the Claims
Advances Loan, described below and all security interests of the Lenders in the Company’s assets were released. The conversion
of the Term Loans, Bridge Loan and Claims Advances Loan was accounted for as a decrease to Long-term debt and an increase to Common
stock and Additional paid-in capital in the amount of the liabilities outstanding at the time of conversion. Transfer of the Benz Assets; Claims Advances Under the Purchase Agreement, at the Transaction
Closing, the Company transferred and assigned the Benz Assets to Madison. The Company also agreed to retain, but provide Madison
the benefits of, any Benz Assets which are not permitted to be assigned absent receipt of third-party consents. Madison (at the
election of Nomis Bay, which controls Madison) has 180 days from the Transaction Closing to decide, in its sole discretion, whether
to elect to keep the Benz Assets (a “Positive Election”). The Benz Assets will revert back to the Company in the event
that Madison (at the election of Nomis Bay) elects not to make a Positive Election. In connection with the transfer of the Benz
Assets to Madison, Nomis Bay paid certain amounts incurred by the Company and Madison after December 21, 2017 and prior to the
Transaction Closing in investigating certain causes of action and claims related to or in connection with the Benz Assets (the
“Claims Advances Loan”), including the right to pursue causes of action and claims related to potential misappropriation
of the Company’s trade secrets by a competitor in connection with such competitor’s submissions to the U.S. Food and
Drug Administration (the “Claims”). In addition, if Madison (at the election of Nomis Bay) makes a Positive Election:
(i) Nomis Bay will assume certain legal fees and expenses owed by the Company to its litigation counsel, and (ii) the Company will
be entitled to receive 30% of any amounts realized from the successful prosecution of the Claims or otherwise from the Benz Assets,
after Nomis Bay is reimbursed for certain expenses in connection with funding the Claims Advances Loan and after giving effect
to any payments that Madison may be required to make to any third parties. Nomis Bay will have full control, in its
sole discretion, over the management of Madison, any development of or realization on the Benz Assets and the prosecution of the
Claims. Since the Benz Assets had no carrying value on the Company’s Condensed Consolidated Balance Sheet, the initial investment
in Madison was recorded at $0. Issuance of the New Black Horse Shares; Bridge Loan Under the Purchase Agreement, at the Transaction
Closing, the Company issued to Cheval the New Black Horse Shares for total consideration of $3.0 million, including extinguishment
of the Bridge Loan. The Company used the proceeds from the issuance of the New Black Horse Shares for working capital and other
costs incurred in the ordinary course of business. At the Transaction Closing, the entire amount of the Bridge Loan was credited
to Cheval’s $3.0 million payment obligation and was converted into New Black Horse Shares and all security interests of Cheval
in the non-benznidazole assets was released. Equity Financings On March 12, 2018, the Company issued 2,445,557
shares of its common stock for total proceeds of $1.1 million to accredited investors. On June 4, 2018, the Company issued 400,000
shares of its common stock for total proceeds of $0.2 million to an accredited investor. Amendments to Articles of Incorporation Effective February 26, 2018, the Company
amended its Amended and Restated Certificate of Incorporation, as amended (the “Charter”), to amend Article IV of the
Charter to (i) increase the number of authorized shares of Common Stock from 85,000,000 to 225,000,000, and (ii) authorize the
issuance of 25,000,000 shares of preferred stock of the Company, par value $0.001 (the “Preferred Stock”), with such
powers, rights, terms and conditions as may be designated by the Company’s board of directors upon the issuance of shares
of Preferred Stock at one or more times in the future (the “Charter Amendment”). The Charter Amendment was approved
and adopted by the written consent of a majority of the stockholders of the Company in accordance with the applicable provisions
of the Delaware General Corporation Law, the Charter, and the Company’s Second Amended and Restated Bylaws. Termination of Equity Financing Facility On August 24, 2017, the Company entered
into a Common Stock Purchase Agreement, dated as of August 23, 2017 (the “ELOC Purchase Agreement”), with Aperture
Healthcare Ventures Ltd. (“Aperture”) pursuant to which the Company may, subject to certain conditions and limitations
set forth in the ELOC Purchase Agreement, require Aperture to purchase up to $15 million worth of newly issued shares (the “Put
Shares”) of the Company’s common stock, over the 36-month term. The Company terminated the ELOC Purchase
Agreement on March 12, 2018. No Put Shares were issued pursuant to the ELOC Purchase Agreement prior to such termination. 2012 Equity Incentive Plan Under the Company’s 2012 Equity Incentive
Plan, the Company may grant shares, stock units, stock appreciation rights, performance cash awards and/or options to employees,
directors, consultants, and other service providers. For options, the per share exercise price may not be less than the fair market
value of a Company common share on the date of grant. Awards generally vest and become exercisable over three to four years and
expire 10 years from the date of grant. Options generally become exercisable as they vest following the date of grant. On March 9, 2018, the Board of Directors
of the Company approved an amendment to the Company’s 2012 Equity Incentive Plan (the “Equity Plan”) to increase
the number of shares of the Company’s common stock authorized for issuance under the Equity Plan by 16,050,000 shares, and
to increase the annual maximum aggregate number of shares subject to stock option awards that may be granted to any one person
under the Equity Plan during a calendar year to 7,500,000. A summary of stock option activity for the
six months ended June 30, 2018 under all of the Company’s options plans is as follows:
Options Weighted Average Exercise Price
Outstanding at December 31, 2017 2,448,383 $ 3.67
Granted 13,575,038 0.66
Cancelled (forfeited) (331,269 ) 3.21
Cancelled (expired) (41,129 ) 37.82
Outstanding at June 30, 2018 15,651,023 $ 0.98 The weighted average fair value of options
granted during the six months ended June 30, 2018 was $0.51 per share. The
Company valued the options granted using the Black-Scholes options pricing model and the following weighted-average assumption
terms for the six months ended June 30, 2018:
Six
months ended June 30,
2018
Exercise price $0.45 - $0.67
Market value $0.45 - $0.67
Risk-free rate 2.74% - 2.80%
Expected term 6 years
Expected volatility 92.6% - 96.9%
Dividend yield - Stock-Based Compensation The Company recorded stock-based compensation
expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss as follows:
Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
General and administrative $ 780 $ 276 $ 3,254 $ 1,199
Research and development - 66 201 229
Total stock-based compensation $ 780 $ 342 $ 3,455 $ 1,428 At June 30, 2018, the Company had $4.2 million
of total unrecognized stock-based compensation expense, net of estimated forfeitures, related to outstanding stock options that
will be recognized over a weighted-average period of 1.3 years. |
