STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2013 |
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract] | ' |
Stockholders' Equity Note Disclosure [Text Block] | ' |
12. STOCKHOLDERS’ EQUITY |
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Common and Preferred Stock |
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During the year ended December 31, 2013, the Company issued an aggregate of 761,125 shares of Common Stock at a price of $2.00 per share for cash proceeds of $1.4 million, net of equity issuance costs of $0.2 million. |
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During the year ended December 31, 2013, the Company issued an aggregate of 363,567 shares of Common Stock to convert $0.7 million of related party notes payable and accrued interest. Also, the Company paid in cash $0.1 million in equity issuance costs in connection with this transaction. |
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During the year ended December 31, 2013, the Company issued an aggregate of 1,500 shares of Common Stock as payment of equity issuance costs. |
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During the year ended December 31, 2013, the Company paid $35 thousand as payment on outstanding liabilities for advisory fees in the amount of $155 thousand to CRG Finance and issued 120,000 shares of Common Stock. The fair value of the shares of Common Stock issued was $42 thousand resulting in a gain on the extinguishment of liabilities of $78 thousand. |
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On July 25, 2012, the Company designated Series B 2012 Redeemable Convertible Preferred Stock (“Series B Preferred Stock”) from our authorized preferred stock. On August 14, 2012, the Certificate of Designations was filed with the State of Nevada regarding the rights and preferences of the Series B Preferred Stock. The Series B Preferred Stock is convertible to Common Stock at the stated value conversion price of $3.00 per share. The Series B Preferred Stock has a dividend rate of 6% per annum and may be redeemed at the sole discretion of the Company at any time after the third anniversary of the date of issuance if the Series B Preferred Stock has not been converted to Common Stock as of such date. The Series B Preferred Stock automatically converts into Common Stock upon the closing of an underwritten public offering of shares of Common Stock having a total gross offering value of not less than $40 million. All Series B Preferred Stock will vote together with Common Stock except with respect to any matters pertaining only to the Series B Preferred Stock as to which the Series B Preferred Stock will vote as a separate class. During the year ended December 31, 2013, the Company issued an aggregate of 1,053,777 shares of the Series B Preferred Stock for cash proceeds of $2.7 million, net of equity issuance costs of $0.5 million. During the year ended December 31, 2012, the Company issued an aggregate of 626,715 shares of the Series B Preferred Stock for cash proceeds of $1.6 million, net of issuance costs of $0.3 million. At December 31, 2013, 1,680,492 shares of the Series B Preferred Stock were issued and outstanding. The Company does not expect to issue any additional Series B Preferred Stock in the future. |
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On January 16, 2013 and July 16, 2013, the Company paid the dividends accrued on the Series B through December 31, 2012 and June 30, 2013 for $18,149 (declared in 2012) and $90,893 (declared in 2013), respectively. The dividends from July 1, 2013 through December 31, 2013 were declared by the Board on January 14, 2014 (see Note 16). |
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Effective November 28, 2012, the Board of Directors of the Company made a determination not to issue any additional shares of the Series A 4% Preferred Stock. On July 26, 2013, the Company filed a Withdrawal of Designation with the Nevada Secretary of State terminating the Series A 4% Preferred Stock. |
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On June 27, 2012, the Company issued an aggregate of 660,226 shares of Common Stock to ENEX Group Management SA in lieu of a repayment of loans and accrued interests of $1,980,678 (see Note 8). In connection with the transaction, the Company paid approximately $128 thousand as equity issuance costs which were charged to additional paid-in capital. |
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On June 27, 2012, the Company issued 80,645 shares of Common Stock to CRG Finance AG in lieu of a payment of open payables totaling $241,935. |
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On May 2, 2012, the Company issued 232,450 shares of Common Stock for cash in the amount of $395 thousand, net of equity issuance costs. |
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Temporary Equity |
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On August 2, 2013, the Company issued 349,707 shares of Series A-1 Non-Convertible Redeemable Preferred Stock, par value $0.00001 per share (the “Series A-1 Preferred Stock”) and 29,297,652 shares of newly created Series A-2 Convertible Redeemable Preferred Stock, par value $0.00001 per share (the “Series A-2 Preferred Stock”) pursuant to the securities purchase agreement dated August 1, 2013 (the “Purchase Agreement”). In connection with this transaction, the Company received $35.0 million in proceeds which were used primarily to fund the acquisitions of STAR and Liberty described in Note 3. On December 18, 2013, the Company issued 60,000 shares of Series A-1 Preferred Stock and 5,139,192 shares of Series A-2 Preferred Stock for an aggregate purchase price of $6.0 million in proceeds which were used primarily to fund the fourteen towers acquired on December 17, 2013 (see Note 3). The Company incurred aggregate issuance costs of $4.2 million associated with the sale of these shares. |
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The certificate of designation, preferences and rights of Series A-1 Non-Convertible Preferred Stock and Series A-2 Convertible Preferred Stock (the “Certificate of Designation”) was filed by the Company with the Nevada Secretary of State on August 1, 2013 and filed as an exhibit to Form 8-K filed with the SEC on August 7, 2013. |
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The Series A-1 Preferred Stock ranks, with respect to dividend payments and distributions of the Company’s assets upon a liquidation event, senior to (i) the Series A-2 Preferred Stock, the Series B Preferred Stock, the Common Stock and the Class A Interests, and all other now or subsequently existing classes and series of capital stock of the Company; and (ii) any other equity or equity-linked securities, unless approved by the Fir Tree Investors. The Series A-2 Preferred Stock ranks with respect to dividend payments and distributions of the Company’s assets upon a liquidation event, (a) junior to the Series A-1 Preferred Stock, (b) senior to the Series B Preferred Stock, the Common Stock, the Class A Interests and all other now or subsequently existing classes and series of capital stock of the Company and (c) except for the Series A-1 Preferred Stock, senior to any other equity or equity-linked securities unless approved by the Fir Tree Investors. |
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The preferences of each share of Series A-1 Preferred Stock and Series A-2 Preferred Stock, respectively, with respect to dividend payments and distributions of the Company’s assets upon a liquidation event, are equal to the preferences of every other share of Series A-1 Preferred Stock and Series A-2 Preferred Stock, respectively. |
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The holders of Series A-1 Preferred Stock are entitled to receive cumulative dividends quarterly in arrears at a rate, based on the Series A-1 Stated Value of (a) 9% per annum, or upon the occurrence of an event of default 15% per annum, for each of the first three one-year periods commencing on the date of issuance of such Series A-1 Preferred Stock by the Company, (b) 11% per annum, or in the event of default 17% per annum, for the one-year period commencing on the third anniversary of the initial issue date and (c) 13% per annum, or in the event of default 19% per annum, for the one-year period commencing on the fourth anniversary of the initial issue date. The dividends are payable in cash or through issuance of an equivalent number of shares of Series A-1 Preferred Stock. The holders of Series A-2 Preferred Stock are not entitled to receive dividends, except that the Series A-2 Preferred Stock shall participate in dividends on the Common Stock on an as-converted basis. |
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The Series A-1 Preferred Stock is redeemable at the holders’ option at any time after the earlier to occur of the fifth anniversary of the initial issue date, and the occurrence of an Event of Default (as defined in the Certificate of Designation), at a price equal to the aggregate Series A-1 Preference Payment (as defined in the Certificate of Designation), and the Company has the right to redeem all (but not less than all) of the outstanding shares of Series A-1 Preferred Stock at any time after the initial issue date at a price equal to the aggregate Series A-1 Preference Payment. |
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The Series A-2 Preferred Stock is convertible at any time from the issuance date. The Series A-2 Preferred Stock is redeemable at the holders’ option at any time during the period beginning on the fifth anniversary of the initial issue date and ending on the seventh anniversary of the initial issue date, or immediately upon the occurrence of a liquidation event at a price equal to the Series A-2 Preference Payment (as hereinafter defined) as of the close of business on the last day of the last fiscal quarter then ended immediately preceding such date. The “Series A-2 Preference Payment” is equal to the quotient of (i) the greatest of (A) the fair market value of the Company, (B) the Threshold TCF as defined in the certificate of designation, preference and rights and (C) 200% of the aggregate dollar amount of consideration actually paid by all of the Fir Tree Investors to the Company in consideration of the Series A-1 Preferred Stock and Series A-2 Preferred Stock issued to the Fir Tree Investors, divided by (ii) the number of shares of Common Stock on a fully diluted basis as of the close of business on the last day of the last fiscal quarter that ended immediately preceding such date. |
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The holders of the Series A-1 Preferred Stock are entitled to receive additional shares of Series A-2 Preferred Stock upon the occurrence of certain events. If the Final LQA TCF, as defined in the Purchase Agreement, is less than $1.7 million per annum, or if the total building cost for certain towers exceeds $4.3 million or upon the occurrence of any other accretion on the Series A-1 Preferred Stock (including the issuance of any Series A-1 Preferred dividends), then the Company will issue to the holders of the Series A-1 Preferred Stock an aggregate number of shares of Series A-2 Preferred Stock which would then be convertible into 1.36% of the Common Stock on a fully diluted basis for each $1.0 million of the Aggregate A-1 Adjustment Amount (as defined in the Certificate of Designation), the Aggregate Additional A-1 Adjustment Amount (as defined in the Certificate of Designation) and any accretion on the Series A-1 Preferred Stock, in each case, prorated for any portion of, or partial amount over, such $1.0 million increment. The holders of Series A-1 Preferred Stock are also entitled to receive shares of Series A-2 Preferred Stock upon each conversion of the Class A Interests into Common Stock, based on their then current pro rata ownership percentage of the fully diluted shares. For additional details on the terms of this provision, refer to the Purchase Agreement filed as an Exhibit on Form 8-K with the SEC on August 7, 2013. |
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The Company analyzed the terms of the Series A-1 Preferred Stock under ASC 480 to determine whether it should be accounted for as a liability and determined that it does not qualify as a liability. The Series A-1 Preferred Stock is non-convertible and is redeemable at the holders’ option after five years or earlier upon the occurrence of an event of default. The Company determined, in accordance with ASC 480-S99-3A, the Series A-1 Preferred Stock is required to be presented outside of permanent equity. |
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The Company analyzed the terms of the Series A-2 Preferred Stock under ASC 480 to determine whether it should be accounted for as a liability and determined that it does not qualify as a liability. The Series A-2 Preferred Stock is convertible at the holders’ option at any time and is redeemable at the holders’ option after five years or earlier upon the occurrence of a liquidation event. The Company determined, in accordance with ASC 480-S99-3A, the Series A-2 Preferred Stock is required to be presented outside of permanent equity. The Company also analyzed the terms of the conversion feature of the Series A-2 Preferred Stock under ASC 815 and determined that it qualifies as a derivative liability that should be bifurcated and accounted for separately from the Series A-2 Preferred Stock (see Note 14). |
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The Company performed a valuation of the Series A-1 Preferred Stock and the Series A-2 Preferred Stock issued in August 2013 and determined the fair value as of the date of issuance of the shares was $23.2 million for the Series A-1 Preferred Stock and $11.8 million for the Series A-2 Preferred Stock. In connection with the Series A-1 Preferred Stock and the Series A-2 Preferred Stock, the Company incurred $2.4 million and $1.2 million in transaction costs which were netted against the cash proceeds for the Series A-1 and Series A-2 Preferred Stock, respectively. |
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The Company performed a valuation of the Series A-1 Preferred Stock and the Series A-2 Preferred Stock issued in December 2013 and determined the fair value as of the date of issuance of the shares was $3.9 million for the Series A-1 Preferred Stock and $2.1 million for the Series A-2 Preferred Stock. In connection with the Series A-1 Preferred Stock and the Series A-2 Preferred Stock, the Company incurred $0.4 million and $0.2 million in transaction costs which were netted against the cash proceeds for the Series A-1 and Series A-2 Preferred Stock, respectively. |
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On December 18, 2013, the Company issued to the holders of the Series A-1 Preferred Stock in lieu of cash dividends 5,362.46 shares of Series A-1 Preferred Stock. In connection with this issuance, the Company issued 444,494 shares of Series A-2 Preferred stock to the holders of the Series A-2 Preferred Stock. The Company recorded the fair value of the 5,362.46 shares of Series A-1 Preferred Stock and 444,494 shares of Series A-2 Preferred Stock at $0.4 million and $0.2 million. On December 31, 2013, the Company issued to the holders of the Series A-1 Preferred Stock in lieu of cash dividends 8,261.08 shares of Series A-1 Preferred Stock. In connection with this issuance, the Company issued 764,288 shares of Series A-2 Preferred stock to the holders of the Series A-2 Preferred Stock. The Company recorded the fair value of the 8,261.08 shares of Series A-1 Preferred Stock and 764,288 shares of Series A-2 Preferred Stock at $0.6 million and $0.3 million, respectively. |
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The Company evaluated the redemption values of the Series A-1 Preferred Stock and Series A-2 Preferred Stock and determined that the carrying values of the Series A-1 Preferred Stock and Series A-2 Preferred Stock should be accreted to their redemption values over the period of five years using the interest method as the Series A-1 Preferred Stock and Series A-2 Preferred Stock will become redeemable at the option of the investors after five years from the date of issuance. As a result, the Company recognized accretion of $0.9 million and $0.9 million related to its Series A-1 Preferred Stock and Series A-2 Preferred Stock, respectively in its consolidated statements of operations for the year ended December 31, 2013. At December 31, 2013, the Company calculated the future redemption values of the Series A-1 and Series A-2 Preferred Stock to be $42.3 million and $36.7 million, respectively. |
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The table below represents the changes in the carrying value of the Series A-1 Preferred Stock and the Series A-2 Preferred Stock during the year ended December 31, 2013: |
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| | | Series A-1 | | | Series A-2 |
Issuances during 2013: | | | Preferred Stock | | | Preferred Stock |
Fair value, net of issuance costs, August 2, 2013 | | $ | 20,758,834 | | $ | 10,556,672 |
Fair value, net of issuance costs, December 18, 2013 | | | 3,594,694 | | | 1,868,967 |
Fair value, third quarter dividends, December 18, 2013 | | | 359,553 | | | 180,909 |
Fair value, fourth quarter dividends, December 31, 2013 | | | 553,905 | | | 311,065 |
Bifurcation of derivative liability | | | - | | | -5,498,383 |
Accretion of preferred stock to redemption value | | | 936,715 | | | 882,064 |
Carrying value, December 31, 2013 | | $ | 26,203,701 | | $ | 8,301,294 |
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As part of the consideration of the purchase price of the Liberty acquisition, the Company issued 8,715,000 shares of the Company’s Common Stock to Liberty’s investors and recorded the shares of Common Stock at their fair value of $3.0 million. The shares of Common Stock contain a put option whereby the Company is required to purchase the shares at the holders’ option beginning on August 1, 2018 at a per share price equal to the quoted price of Common Stock on August 1, 2018 if certain conditions are met as disclosed in, and pursuant to, the rights agreement entered into with Liberty’s investors on August 1, 2013. As a result, the shares of Common Stock are classified outside of permanent equity in accordance with ASC 480-S99-3A. |
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Stock-Based Compensation |
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Stock-based compensation to employees is measured based on the fair value of the award on the date of the grant, and is recognized as an expense over the employee’s requisite service period in accordance with ASC 718 – “Compensation-Stock Compensation.” Stock based compensation to non-employees is accounted for in accordance with ASC 505-50 - “Equity-Based Payments to Non-Employees.” |
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The Company’s Chief Executive Officer, Mr. Paul McGinn, received options to purchase 1,956,895 shares of the Company’s Common Stock at an exercise price of $3.00 per share in accordance with the terms and conditions of his employment related to his appointment on February 6, 2012. All of these options had an expiration date five years from the date of grant. Options to purchase 571,585 shares vested upon grant; options to purchase an additional 571,585 shares vested on January 27, 2013 and options to purchase 571,585 shares and 242,141 shares were scheduled to vest on January 27, 2014 and January 27, 2015. |
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On March 26, 2012, a member of the Company’s Board of Directors, Mr. Akram Baker, received options to purchase 50,000 shares of the Company’s Common Stock at an exercise price of $3.75 per share. These options vested on February 8, 2013 and were scheduled to expire on February 8, 2015. |
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On March 26, 2012, the Company’s Counsel, Wuersch & Gering LLP, received options to purchase 400,000 shares of the Company’s Common Stock at an exercise price of $3.75 per share. These options vested on March 26, 2013 and were scheduled to expire on March 26, 2015. |
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The Company uses the Black-Scholes options pricing model to value its options, using the assumptions in the following table during 2012: |
| | Range | | | | |
Expected dividends | | -% | | | | |
Expected term (years) | | 1.9 – 4.0 | | | | |
Volatility | | 54.5% - 68.6% | | | | |
Risk-free rate | | 0.03% - 0.37% | | | | |
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The grant date fair value of the options granted during the year ended December 31, 2012 was $3.0 million. Stock-based compensation expense for the year ended December 31, 2012 was $2.2 million. |
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On April 19, 2013, the Company issued a stock option grant to a director to purchase 50,000 shares at an exercise price of $3.90 per share. The grant date fair value of the options was determined to be approximately $16,000 using the Black-Scholes pricing model. Significant assumptions used in the valuation include expected term of 2.0 years, expected volatility of 64%, risk free interest rate of 0.24%, and expected dividend yield of 0%. |
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On August 1, 2013, the Company entered into option cancellation agreements with all holders of its outstanding stock options as of August 1, 2013. As such, all outstanding option grants were cancelled on that date. During the period from January 1, 2013 through July 31, 2013, the Company recorded a stock compensation expense of $0.5 million. On August 2, 2013, the Company reversed an amount of $0.8 million of stock compensation expense related to the forfeiture of unvested stock options. As of December 31, 2013, the Company had no outstanding stock grants. Subsequent to the year ended December 31, 2013, the Board of Directors has approved a new 2014 equity incentive plan (See Note 15 for details). |
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The Company uses the Black-Scholes options pricing model to value its options, using the assumptions in the following table. Expected volatilities are based on the historical volatility of its stock. The expected term of options represents the period of time that the options granted are expected to be outstanding. The Company uses the simplified method to estimate the expected term for options as no sufficient historical data regarding exercise of options is available to use as a basis to estimate the expected term value. The risk-free rate of periods during the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is based on expected dividends to be paid over the term of the options. |
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A summary of stock option activity and related information for the years ended December 31, 2013 and 2012 is presented below: |
| | | | | Weighted | |
| | Number of | | | Average | |
| | Options | | | Exercise Price | |
Options | | | | | | |
Outstanding, December 31, 2011 | | 100,000 | | $ | 3.75 | |
Granted | | 2,406,895 | | | 3.14 | |
Forfeited | | - | | | - | |
Exercised | | - | | | - | |
Outstanding, December 31, 2012 | | 2,506,895 | | | 3.16 | |
Granted | | 50,000 | | | 3.9 | |
Forfeited | | -2,556,895 | | | 3.18 | |
Exercised | | - | | | - | |
Total outstanding at December 31, 2013 | | - | | $ | - | |
Total exercisable at December 31, 2012 | | 671,585 | | $ | 3.11 | |
Total exercisable at December 31, 2013 | | - | | | - | |
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