Equity | 6 Months Ended |
Jun. 30, 2014 |
Stockholders' Equity [Abstract] | ' |
Stockholders' Equity | ' |
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7. Equity |
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Share-based compensation expense is based on the estimated grant date fair value of the portion of share-based payment awards that are ultimately expected to vest during the period. The grant date fair value of stock-based awards to employees and directors is calculated using the Black Scholes valuation model. |
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Forfeitures of share-based payment awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The estimated average forfeiture rate for the three months ended June 30, 2014 and 2013, was approximately 9.85% and 9.73%, respectively, based on historical data. |
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Valuation and Expense Information: |
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The weighted-average fair value of stock-based compensation is based on the single option valuation approach. Forfeitures are estimated and it is assumed no dividends will be declared. The estimated fair value of stock-based compensation awards to employees is amortized using the accrual method over the vesting period of the options. The fair value calculations are based on the following assumptions: |
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| Six Months Ended | Six Months Ended | | | | | | |
30-Jun-14 | 30-Jun-13 | | | | | | |
Risk free interest rate | 0.04% - 4.89% | 0.39% - 5.11% | | | | | | |
Expected life (years) | 3.26 - 7.00 | 2.82 - 7.00 | | | | | | |
Expected volatility | 91.99% - 198.38% | 91.99% - 198.38% | | | | | | |
Expected dividends | None | None | | | | | | |
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The Company granted 2,500 stock options during the three and six months ended June 30, 2014. There were no stock options exercised during the three and six months ended June 30, 2014. |
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The Company granted 26,554 stock options during the three and six months ended June 30, 2013. There were no stock options exercised during the three and six months ended June 30, 2013. |
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The following table summarizes the allocation of stock-based compensation expense related to stock option grants for the three and six months ended June 30, 2014 and 2013. |
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| Three Months Ended June 30, | Six Months Ended June 30, | | | | |
2014 | 2013 | 2014 | 2013 | | | | |
Research and development | $ | $ | $ | $ | | | | |
21 | 49 | 48 | 245 | | | | |
Sales and marketing | 24 | 17 | 37 | 117 | | | | |
General and administrative | 37 | 100 | 83 | 42 | | | | |
Director options | 4 | 10 | 9 | 25 | | | | |
Stock-based compensation | $ | $ | $ | $ | | | | |
expense | 86 | 176 | 177 | 429 | | | | |
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A summary of option activity under the Company's plans as of June 30, 2014 and 2013 is as follows: |
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Options | 2014 | 2013 |
Shares | Weighted | Weighted | Aggregate | Shares | Weighted | Weighted | Aggregate |
Average | Average | Intrinsic | Average | Average | Intrinsic |
Exercise | Remaining | Value | Exercise | Remaining | Value |
Price | Contractual | | Price | Contractual | |
| Term | | | Term | |
Outstanding | 69,537 | $ | | $ | 44,529 | $ | | $ |
at January 1, | 0.05 | - | 0.05 | 2,230 |
Granted | 2,500 | $ | | $ | 26,554 | $ | | $ |
0.03 | 7 | 0.04 | 1,188 |
Exercised | - | $ | | $ | - | $ | | $ |
- | - | - | - |
Forfeited or | -50 | $ | | $ | -610 | $ | | $ |
expired | 0.22 | - | 0.14 | -85 |
Outstanding | 71,987 | $ | 4.6 | $ | 70,473 | $ | 5.51 | $ |
at June 30 | 0.05 | 7 | 0.05 | 3,333 |
Vested and | 46,864 | $ | 4.24 | $ | 63,615 | $ | 5.51 | $ |
expected to | 0.05 | - | 0.05 | 3,009 |
vest at June | | | | |
30 | | | | |
Exercisable at | 51,984 | $ | 4.24 | $ | 33,083 | $ | 4.94 | $ |
30-Jun | 0.05 | - | 0.05 | 1,638 |
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The following table identifies the range of outstanding and exercisable options as of June 30, 2014: |
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Range of Exercise Prices | Options Outstanding | Options Exercisable | | | |
Number | Weighted | Weighted | Number | Weighted | | | |
Outstanding | Average | Average | Outstanding | Average | | | |
| Remaining | Exercise | | Exercise | | | |
| Contractual | Price | | Price | | | |
| Life (in years) | | | | | | |
$ 0.02 - $0.50 | 71,987 | 4.6 | $ | 51,984 | $ | | | |
0.05 | 0.05 | | | |
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A summary of the status of the Company's non-vested shares as of June 30, 2014, is as follows: |
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Nonvested Shares | Shares | Weighted Average | | | | | | |
Grant-Date | | | | | | |
Fair Value | | | | | | |
Non-vested at January 1, 2014 | 26,158 | $ | | | | | | |
0.04 | | | | | | |
Granted | 2,500 | $ | | | | | | |
0.03 | | | | | | |
Forfeited | - | $ | | | | | | |
- | | | | | | |
Vested | -8,655 | $ | | | | | | |
0.04 | | | | | | |
Non-vested at June 30, 2014 | 20,032 | $ | | | | | | |
0.04 | | | | | | |
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As of June 30, 2014, there was a total of $317 unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the plans. The unrecognized compensation expense is expected to be realized over a weighted average period of 2.8 years. |
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Preferred Shares |
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Information with respect to the class of Preferred Stock at June 30, 2014 is as follows: |
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Class of | Annual | Annual | Liquidation | Conversion | YTD | Total | Common | |
Preferred | Dividend | Dividend | Preference | Price | Dividend | Preferred | Shares to be | |
Stock | | Payable, in | | | Shares in | Shares | issued if | |
| | Cash or In | | | Kind | Outstanding | Fully | |
| | Kind | | | | | Converted | |
Series A-1 | 8% | Quarterly in | $ | $ | 41 | 1,073 | 7,664 | |
Arrears | 1 | 0.14 | |
Series B | 10% | Quarterly in | $ | $ | 558 | 11,660 | 269,105 | |
Arrears | 1.5 | 0.0433 | |
Series C | 10% | Quarterly in | $ | $ | 226 | 4,734 | 210,412 | |
Arrears | 1.5 | 0.0225 | |
Series D-1 | 10% | Quarterly in | $ | $ | 201 | 4,409 | 195,956 | |
Arrears | 1 | 0.0225 | |
Series D-2 | 10% | Quarterly in | $ | $ | 255 | 5,436 | 108,713 | |
Arrears | 1 | 0.05 | |
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Information with respect to dividends issued on the Company's Preferred stock for the three and six month periods ended June 30, 2014 and June 30, 2013 is as follows: |
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| Dividends | Beneficial Conversion Feature Related to dividends |
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, |
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
Series A-1 | $ | $ | $ | $ | $ | $ | $ | $ |
21 | 19 | 41 | 37 | - | - | - | - |
Series B | $ | $ | $ | $ | $ | $ | $ | $ |
284 | 257 | 558 | 504 | - | - | - | - |
Series C | $ | $ | $ | $ | $ | $ | $ | $ |
115 | 107 | 226 | 210 | 13 | 83 | 50 | 126 |
Series D-1 | $ | $ | $ | $ | $ | $ | $ | $ |
107 | 31 | 201 | 59 | 12 | 183 | 297 | 195 |
Series D-2 | $ | $ | $ | $ | $ | $ | $ | $ |
132 | 96 | 255 | 177 | - | - | 52 | - |
Total | $ | $ | $ | $ | $ | $ | $ | $ |
659 | 510 | 1,281 | 987 | 25 | 266 | 399 | 321 |
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Series A-1 Preferred Stock |
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The shares of Series A-1 Preferred Stock are convertible any time and are subordinate to the Series B, Series C and Series D Preferred Stock. |
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Series B Preferred Stock |
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The shares of Series B Preferred Stock are convertible at any time and are subordinate to the Series C and Series D Preferred Stock. |
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Series C Preferred Stock |
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The shares of Series C Preferred Stock are convertible into Common Stock at any time and are subordinate to the Series D Preferred Stock. |
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Series D Preferred Stock |
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The material terms of the Series D-1 and Series D-2 Preferred Stock, other than the initial conversion price, are essentially the same. The shares of Series D Preferred Stock are convertible at any time and rank senior to the Company's outstanding shares of Series A-1, Series B and Series C Preferred Stock, and of Common Stock with respect to dividend rights and liquidation preferences. |
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In May 2013, the Company completed a private placement of 230 units of Series D Preferred Stock consisting of one (1) share of Series D-1 Preferred Stock and four (4) shares of Series D-2 Preferred Stock. The private placement provided $1,150 in proceeds to the Company. |
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On December 31, 2013, the Company converted approximately $1,179 of short-term debt plus accrued interest into 786 shares of Series D-1 Preferred Stock and 393 shares of Series D-2 Preferred Stock. The investors can receive up to one hundred percent (100%) warrant coverage. These warrants are immediately exercisable and expire three (3) years from the date of issuance. See the warrant table below for more detail. The warrants are exercisable in whole or in part and contain a cashless exercise provision. |
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On December 31, 2013, the Company sold for $870 in cash, net of $40 administrative fee paid to SG Phoenix, 607 Shares of Series D-1 preferred Stock and 303 shares of Series D-2 Preferred Stock. The investors can receive up to one hundred percent (100%) warrant coverage. These warrants are immediately exercisable and expire three (3) years from the date of issuance. See the warrant table below for more detail. The warrants are exercisable in whole or in part and contain a cashless exercise provision. |
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In connection with the December 31, 2013, offering, the Company adjusted the number of shares of Series D-1 Preferred Stock and Series D-2 Preferred Stock issued to investors in the May 2013 offering described above, in order to give such investors shares of Series D-1 Preferred Stock and Series D-2 Preferred Stock in the same ratio as offered to Investors in the December 31, 2013, offering. This resulted in an exchange of 537 shares of Series D-2 Preferred into Series D-1 Preferred. The Company also issued warrants to purchase Common Stock in the same manner as offered to investors in the December 31, 2013, offering. |
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On February 7, 2014, the Company sold for $733 in cash, net of $47 administrative fee paid in cash to SG Phoenix and a nonrelated third party, 520 Shares of Series D-1 preferred Stock and 260 shares of Series D-2 Preferred Stock. The investors can receive up to one hundred percent (100%) warrant coverage. These warrants are immediately exercisable and expire December 31, 2016. See the warrant table below for more detail. The warrants are exercisable in whole or in part and contain a cashless exercise provision. |
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On March 6, 2014, the Company sold for $406 in cash, net of $4 in administrative fees paid in cash to an unrelated third party, 273 Shares of Series D-1 preferred Stock and 137 shares of Series D-2 Preferred Stock. The investors can receive up to one hundred percent (100%) warrant coverage. These warrants are immediately exercisable and expire December 31, 2016. See the warrant table below for more detail. The warrants are exercisable in whole or in part and contain a cashless exercise provision. |
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SG Phoenix received warrants to purchase 3,000 shares of Common stock, and two unrelated parties received warrants to purchase an aggregate of 1,600 shares of Common Stock in payment of administrative and finder's fees associated with the financings, in addition to the cash payments discussed above. These warrants are immediately exercisable and expire three (3) years from the date of issuance. The warrants are exercisable in whole or in part and contain a cashless exercise provision. |
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Preferred Stock Voting and Other Rights |
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Generally, the Company's Preferred Stock votes together on an as converted basis with the holders of Common Stock. In addition, the Company's Preferred Stock enjoys certain protective provisions, a liquidation preference and anti-dilution protection that are similar to one another. |
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Warrants |
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A summary of the warrant activity is as follows: |
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| 30-Jun-14 | 30-Jun-13 | | | | |
Warrants | Weighted | Warrants | Weighted | | | | |
Average | Average | | | | |
Exercise Price | Exercise Price | | | | |
Outstanding at beginning of period | 77,155 | $ | 151,722 | $ | | | | |
0.0289 | 0.0269 | | | | |
Issued | 72,589 | $ | - | $ | | | | |
0.0275 | - | | | | |
Exercised | - | $ | -1,300 | $ | | | | |
- | 0.0225 | | | | |
Expired | -4,333 | $ | -15,063 | $ | | | | |
0.0225 | 0.0343 | | | | |
Outstanding at end of period | 145,411 | $ | 135,359 | $ | | | | |
0.0289 | 0.0252 | | | | |
Exercisable at end of period | 145,411 | $ | 135,359 | $ | | | | |
0.0289 | 0.0252 | | | | |
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A summary of the status of the warrants outstanding and exercisable as of June 30, 2014, is as follows: |
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Number of Warrants | Weighted Average | Weighted Average | | | | | | |
Remaining Life | Exercise Price per | | | | | | |
| share | | | | | | |
13,069 | 0.22 | $ | | | | | | |
0.0225 | | | | | | |
123,699 | 2.28 | $ | | | | | | |
0.0275 | | | | | | |
8,643 | 1.06 | $ | | | | | | |
0.05 | | | | | | |
145,411 | 2.14 | $ | | | | | | |
0.0289 | | | | | | |
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On May 6, 2014, the Company entered into a $2 million Credit Agreement with Venture Champion Asia Limited, an affiliate of ICG Global Limited (the "Lender"). In connection with the Company's entry into the Credit Agreement, the Company issued the Lender a warrant to purchase approximately 10,909 shares of Common Stock. The warrant has a three year life and is exercisable at $0.0275 per share. The Company ascribed a value of $245, booked as interest expense, to the warrant using the Black Scholes Pricing Model, (See Note 6). |
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Contingent warrants |
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Investors that received warrants in connection with the Company's financing transaction in closings that occurred on December 13, 2013, February 7, 2014 and March 6, 2014, may receive additional warrants to purchase up to an aggregate of 120,782 shares of Common Stock, if the Company does not achieve certain revenue targets in the first three quarters of 2014. The Company ascribed a value of $566 to the warrants issued at closing, including the contingent warrants, using a Black Sholes valuation model. The Company also recorded a beneficial conversion feature of $305 related to the shares of Series D Preferred Stock issued in the February 7, 2014 and March 6, 2014 closing, based on the accounting conversion price of the shares of Series D Preferred Stock issued in those closings. |
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On May 14, 2014 the Company issued 40,262 contingent warrants in connection with the Company's financing transactions referenced above as a result of the Company not achieving its revenue targets in the first quarter ending March 31, 2014. |
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Since the Company did not achieve the revenue target for the three-month periods ended June 30, 2014, the Company will issue warrants to purchase 40,262 shares of common stock promptly after filing of this Form 10-Q. |
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At June 30, 2014, 145,411 shares of common stock were reserved for issuance upon exercise of outstanding warrants. |