|12 Months Ended|
Dec. 31, 2016
July 2016 Offering
In July 2016, the Company completed a secondary offering in which the Company sold 5,258,000 Class A Units, including 1,650,000 units sold pursuant to the exercise by the underwriters of their over-allotment option, priced at $1.00 per unit, and 7,392 Class B Units, priced at $1,000 per unit. Each Class A Unit consisted of one share of common stock and one warrant to purchase one share of common stock. Each Class B Unit consisted of one share of preferred stock convertible into 1,000 shares of common stock and warrants to purchase 1,000 shares of common stock. The securities comprising the units were immediately separable and were issued separately. In total, the Company issued 5,258,000 shares of common stock, 7,392 shares of preferred stock convertible into 7,392,000 shares of common stock, and warrants to purchase 12,650,000 shares of common stock at a fixed exercise price of $1.00 per share. The Company received proceeds of approximately $11.4 million, net of underwriting and other offering costs.
The Company raised $4.7 million, net of issuance costs of $0.6 million, associated with the Class A Units which were recorded as common stock and additional paid in capital, with $2.5 million allocated to the common stock and $2.2 million allocated to the warrants. The Company also raised $6.7 million, net of issuance costs of $0.7 million, associated with the Class B Units of which it allocated and recorded $3.6 million to preferred stock and allocated $3.1 million to the warrants which were recorded to additional paid in capital. The 7,392 preferred shares were convertible into 7,392,000 shares of common stock and had an effective conversion rate of $0.50 per share based on the proceeds that were allocated to them. The stock price on July 8, 2016, was $0.88 per share which resulted in a fair value in excess of carrying value of $0.38 per share or $2.5 million in total. The fair value in excess of carrying value, or beneficial conversion feature, was recorded as an adjustments within equity (e.g., deemed dividend). The Company recorded a non-cash, deemed dividend of $6.3 million related to a beneficial conversion feature and accretion of a discount on convertible preferred stock.
Subsequent to the secondary offering, all 7,392 shares of convertible preferred stock have been converted into 7,392,000 shares of common stock. Furthermore, the Company received $447,000 and issued 446,500 shares of common stock upon the exercise of certain warrants issued in the secondary offering.
September 2015 Offering
In September 2015, the Company entered into a Securities Purchase Agreement whereby it issued to certain investors 874,891 shares of common stock at a price of $5.72 per share for gross proceeds of $5.0 million before deducting placement agent fees and related offering expenses of $663,000. Pursuant to the terms of the Securities Purchase Agreement the company also issued to the investors 874,891 each of Series A warrants, Series B warrants and Series C warrants.
Shareholder approval was required for the issuance of the common shares underlying the Series B and Series C warrants. On November 3, 2015, the stockholders approved the proposal to allow the Company to issue the underlying shares upon exercise of the Series B and Series C warrants. In November 2015, the automatic exercise provision of the Series B warrants triggered and the Company received gross proceeds of $5.0 million and issued 3,324,192 shares of common stock in exchange for all 874,891 of the Series B warrants. Furthermore, pursuant to the terms of the warrant agreement, the number of Series A warrants increased by 3,324,192 to 4,199,082 and the exercise price of the Series A warrant was adjusted from $7.05 to $1.50. In December 2015, the Company amended the Series A and Series C warrants, whereby the exercise prices of the Series A and Series C warrants were fixed at $1.50 and the number of Series C warrants was fixed at 1,093,613. The Company received gross proceeds of $1.4 million and issued 962,969 shares of common stock upon exercise of 962,969 Series C warrants. The remaining 130,644 Series C warrants expired on December 30, 2015. Furthermore, pursuant to the terms of the warrant agreement, the number of Series A warrants increased by 962,969. During the year ended December 31, 2015, the Company issued 1,315,781 shares of common stock upon the cashless exercise of 3,924,687 Series A warrants. There were 1,237,365 outstanding Series A warrants at December 31, 2015 that terminate on December 11, 2020. The Company paid $585,000 in offering costs in connection with the proceeds received from the exercise of the Series B and C warrants.
The Series A warrants, Series B warrants and Series C warrants were initially considered to be liabilities and were marked to market at each reporting period until they were exercised, terminated or were no longer classified as liabilities. At December 31, 2015, the remaining Series A warrants were no longer considered liabilities. The Company estimated the fair value of these warrants to be $14.4 million at issuance. The Company recorded $4.9 million of the $5.0 million gross proceeds from the offering to derivative liabilities and $131,000 to equity and recorded a loss of $9.5 million, which was included in the change in fair value of derivative liabilities per the Consolidated Statements of Operations. Furthermore, all of the $821,000 of the September 2015 offering costs were expensed since the value of the warrants exceeded the gross proceeds.
The Company entered into a placement agent agreement in connection with the September 2015 Offering. As part of the placement agent agreement, the Company issued a warrant to the placement agent to purchase 43,745 shares of common stock at an exercise price of $7.05. The warrant was determined to be a liability at issuance and the estimated fair value of $157,000 was included in offering costs.
During the year ended December 31, 2016 536,388 shares of common stock were issued upon the cashless exercise of 1,137,365 Series A warrants issued in September 2015 and 647 shares of common stock were issued upon warrants exercised for cash.
During the year ended December 31, 2015, the Company issued 18,000 shares of common stock to a service provider as consideration for services to be rendered under a consulting agreement. Furthermore, 56,891 shares of common stock were issued upon the conversion of restricted stock units into common stock, of which 13,789 shares of common stock were withheld to satisfy the employees’ tax withholding obligations associated with the conversion of the restricted stock units into common stock. The withheld shares were included in treasury stock at a total value of $120,000, which was based on the market price of the common stock on the date the shares were issued. During June 2015, these treasury shares were issued upon the conversion of restricted stock units into common stock. Additionally, during the year ended December 31, 2015, 17 shares of common stock were issued upon the exercise of other warrants.
On April 1, 2016, Hampshire MedTech Partners II, GP (“Hampshire GP”) filed suit against the Company in the Travis County, Texas 200th Judicial District Court relating to a Warrant to Purchase Shares of Common Stock issued to Hampshire MedTech Partners II, LP (“Hampshire LP”) on November 6, 2014 (the “Warrant”). Hampshire GP alleged that as a result of a subsequent financing the Company breached the anti-dilution provision of the Warrant by failing to increase the number of shares subject to the Warrant as well as failing to reduce the exercise price of the Warrant. In November 2016, the Company and Hampshire GP settled the lawsuit through the execution of a Settlement Agreement and Release. Pursuant to the terms of settlement, the Company issued 962,380 shares with a fair value of $794,000 and the pre-existing warrants held by Hampshire GP were cancelled. The value of the shares issued were recognized as loss on settlement in the consolidated statements of operations.
1,882,718 shares of common stock were issued related to the Riverside Debt discussed in Note 7.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://www.xbrl.org/2003/role/presentationRef