Stockholders' Equity | 9 Months Ended |
Sep. 30, 2014 |
Equity [Abstract] | ' |
Stockholders' Equity | ' |
STOCKHOLDERS’ EQUITY |
Common Stock |
At September 30, 2014, the Company had 250,000,000 shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right to one vote. As of September 30, 2014, the Company had 14,137,138 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through September 30, 2014. |
Preferred Stock |
At September 30, 2014, the Company had 25,000,000 shares of preferred stock, $0.0001 par value, authorized for issuance. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors. 750,000 shares have been designated as Series A preferred stock, 2,000 shares have been designated for Series B-1 and B-2 preferred stock, and 690 shares have been designated as Series C preferred stock. As of September 30, 2014, the Company had 212,390 shares of Series A preferred stock, no shares of Series B-1 preferred stock and no shares of Series B-2 preferred stock and 70 shares of Series C preferred stock outstanding. The Company has no declared unpaid dividends related to the preferred stock as of September 30, 2014. |
Series A Preferred Stock |
In June 2013, the Company entered into a Securities Purchase Agreement with an investor to sell an aggregate of 750,000 shares of Series A Preferred Stock at a price of $8.00 per share, resulting in gross proceeds of $6,000,000. This purchase agreement included warrants to purchase up to 262,500 shares of common stock of the Company. The transfer of cash and securities took place incrementally, the first closing occurring on June 17, 2013 with the transfer of 125,000 shares of Series A Preferred Stock and a warrant to purchase 43,750 shares of common stock for $1,000,000. The final closings took place in August 2013, with the transfer of 625,000 shares of Series A Preferred Stock and a warrant to purchase 218,750 shares of common stock for $5,000,000. |
Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8.0% per annum when and if declared by the Board of Directors in its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment. In addition, the Series A Preferred Stock contains a make-whole provision whereby, conversion or redemption of the preferred stock within 4 years of issuance will require dividends for the full four year period to be paid by the Company in cash or common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period). |
The Series A Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $11.60, as adjusted, for 20 consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A Preferred Stock at a price of $8.00 per share, plus any accrued and unpaid dividends, plus the make-whole amount (if applicable). At September 30, 2014, the preferred shares were not eligible for conversion to common shares at the option of the Company. The holder of the preferred shares may convert to common shares at any time, at no cost, at a ratio of 1 preferred share into 1 common share (as adjusted for the Reverse Stock Split, subject to standard ratable anti-dilution adjustments). Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends and also any make-whole amount (if applicable). See Note 8. Make-Whole Dividend Liability. |
During the nine months ended September 30, 2014, the holder of the Series A Preferred Shares converted 150,000 preferred shares into 150,000 shares of common stock (as adjusted for the Reverse Stock Split). As a result of this conversion, the Company paid a make-whole dividend on the conversion of Series A preferred stock in the amount of 104,075 shares of common stock (as adjusted for the Reverse Stock Split) in lieu of a cash payment of $520,000. As of October 31, 2014 there were 212,390 Series A Preferred Shares outstanding. |
Except as otherwise required by law (or with respect to approval of certain actions), the Series A Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Preferred Stock shall be entitled to receive, pari passu with any distribution to the holders of common stock of the Company, an amount equal to $8.00 per share of Series A Preferred Stock plus any accrued and unpaid dividends. |
The warrants offered as part of the Securities Purchase Agreement have a three year term and require payment of an exercise price of $9.00 per common share to the Company. |
The Securities Purchase Agreement for the Series A Preferred Stock required that the registration statement, filed on August 16, 2013, must be declared effective within 90 days of the filing date. If the registration statement was not declared effective by this date, damages of 1% of the total investment amount, or $60,000, plus interest, would have been owed by the Company to the Holder for each month until registration statement effectiveness is reached or the investment amount is repaid in full. The registration statement became effective on August 30, 2013, therefore any potential registration rights liability owed to the Holder by the Company was eliminated as of September 30, 2013. |
Series B Preferred Stock |
In October 2013, the Company entered into a Securities Purchase Agreement with an investor to offer up to 1,000 shares of Series B-1 or Series B-2 preferred stock at a price of $10,000 per share, and gross proceeds of up to $10,000,000. The Company offered the Series B preferred stock in two tranches. The first tranche closed on November 1, 2013, with the Company selling 500 shares of Series B-1 preferred stock in exchange for gross proceeds of $5,000,000. On January 20, 2014, at a special meeting of the stockholders, the Company obtained stockholder approval for the offering. Delivery of the second tranche of $5,000,000 in exchange for 500 shares of Series B-1 preferred shares occurred on February 7, 2014. With the closing of both tranches resulting in the issuance of Series B-1 preferred shares, the Company will not offer Series B-2 preferred shares. |
Holders of Series B preferred stock were entitled to cumulative dividends at a rate of 5.75% per annum when, and if, declared by the Board of Directors in its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 8% below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series B preferred stock is indexed to the Company's stock price and subject to adjustment. In addition, the Series B preferred stock contains an embedded dividend provision whereby, conversion or redemption of the preferred stock within 5 years of issuance will require dividends for the full five year period to be paid by the Company in cash or common stock (valued at 8% below market price, but not to exceed the lowest closing price during the applicable measurement period). |
The Series B preferred stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $20.00, as adjusted, for 20 consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series B preferred stock at a price of $10,000 per share, plus any accrued and unpaid dividends, plus the embedded dividend liability amount (if applicable). The holder of the Series B-1 preferred stock may convert to common shares at any time, at no cost, at a conversion price of $11.50 and a ratio of 1 preferred share into 870 common shares. Conversions by the holder are subject to standard ratable anti-dilution adjustments. Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends and also any embedded dividend amount (if applicable). See Note 8. Make-whole dividend liability. |
During the nine months ended September 30, 2014, the holder of the Series B preferred stock converted all remaining 850 preferred shares into 739,130 shares of common stock (as adjusted for the Reverse Stock Split). As a result of these conversions, the Company paid make-whole dividends in the amount of 1,238,680 shares of common stock (as adjusted for the Reverse Stock Split) in lieu of a cash payment of $6,483,000. |
Series C Preferred Stock |
On April 1, 2014, the Company entered into a Securities Purchase Agreement to issue 600 shares of Series C Preferred Stock to an investor in exchange for $6.0 million. |
The Series C Preferred Stock is convertible into common stock at a fixed conversion price of $11.50 per share of common stock. Holders of Series C Preferred Stock are entitled to cumulative dividends at a rate of 5.75% per annum when and if declared by the Board of Directors in its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 8% below market price, but not to exceed 92% of the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series C Preferred Stock is indexed to the Company's stock price and subject to adjustment. In addition, the Series C Preferred Stock contains an embedded dividend provision whereby, conversion or redemption of the preferred stock within 5 years of issuance will require dividends for the full five year period to be paid by the Company in cash or common stock (valued at 8% below market price, but not to exceed 92% of the lowest closing price during the applicable measurement period). |
The Series C Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $22.30, as adjusted, for 20 consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series C Preferred Stock at a price of $10,000 per share, plus any accrued and unpaid dividends, plus the embedded dividend amount (if applicable). The holder of the Series C Preferred Stock may convert to common shares at any time, at no cost, at a conversion price of $11.50 and a ratio of 1 preferred share into 870 common shares. Conversions by the holder are subject to standard ratable anti-dilution adjustments. Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends and also any embedded dividend amount (if applicable). |
Except as otherwise required by law (or with respect to approval of certain actions), the Series C Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, holders of Series C Preferred Stock will be entitled to be paid out of the Company's assets, on a parity with holders of the Company's common stock and the Company's Series A preferred stock, an amount equal to $10,000 per share plus any accrued but unpaid dividends thereon. |
In connection with the Securities Purchase Agreement, the Company entered into a Registration Rights Agreement (“RRA”). The RRA provided that if a resale registration statement was not declared effective on or before (i) the 30th day after April 1, 2014, the Company would be required to issue 30 additional shares of Series C Preferred Stock to the investor; (ii) the 60th day after April 1, 2014, the Company would be required to issue 30 additional shares of Series C Preferred Stock to the investor; and (iii) before the 90th day after April 1, 2014, the Company would be required to issue 30 additional shares of Series C Preferred Stock to the investor. Because the resale registration statement was not declared effective until May 27, 2014, the Company issued 30 additional shares of Series C Preferred Stock to the investor on May 1, 2014. |
During the nine months ended September 30, 2014, the holder of the Series C preferred stock converted 560 preferred shares into 486,957 shares of common stock (as adjusted for the Reverse Stock Split). As a result of these conversions, the Company paid make-whole dividends in the amount of 2,312,591 shares of common stock (as adjusted for the Reverse Stock Split) in lieu of a cash payment of $6,022,434. Subsequent to September 30, 2014, the holders of Series C Preferred Stock converted 70 preferred shares into a total of 683,362 common shares, which includes make-whole dividends. As of October 31, 2014, there were 0 shares of Series C Preferred Stock outstanding. |