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Stockholders' Equity
9 Months Ended
Sep. 30, 2019
Equity [Abstract]  
Stockholders' Equity

Note 14 – Stockholders’ Equity

 

Reverse Stock Split

 

On July 9, 2019, the Company effected a reverse stock split, in which every nine shares of its common stock issued and outstanding immediately prior to the effective time, which was 5:30 p.m. ET on July 9, 2019, were combined into one share of common stock. Fractional shares were not issued and stockholders who otherwise would have been entitled to receive a fractional share as a result of the reverse stock split received an amount in cash equal to $5.58 per share for such fractional interests. The number of shares of Company common stock issued and outstanding was reduced from approximately 69,000,000 to approximately 7,700,000.

 

May 2019 Private Placement

 

On May 15, 2019, the Company entered into a Stock Purchase Agreement with certain accredited investors identified therein pursuant to which the Company issued and sold in a private placement 493,827 shares of the Company’s common stock resulting in gross proceeds to the Company of approximately $2,000,000. The purchase price for each share was $4.05. Proceeds, net of equity issuance costs of $8,000, recorded as a result of the private placement were approximately $1,992,000. Of the 493,827 shares of the Company’s common stock issued, 12,346 shares, resulting in proceeds of approximately $50,000, were sold to a member of management.

 

April 2018 Private Placement

 

On April 10, 2018, the Company entered into a Stock Purchase Agreement with certain accredited investors identified therein pursuant to which the Company issued and sold in a private placement 726,735 shares of the Company’s common stock resulting in gross proceeds to the Company of approximately $2,943,000. The purchase price for each share was $4.05. Proceeds, net of equity issuance costs of $19,000, recorded as a result of the private placement were approximately $2,924,000. Of the 726,735 shares of the Company’s common stock issued, 24,331 shares, resulting in proceeds of $98,550, were sold to members of management, including immediate family members.

 

July 2015 Purchase Agreement and Registration Rights Agreement

 

On July 24, 2015, the Company entered into both a securities purchase agreement and registration rights agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”). Under the terms and subject to the conditions of the securities purchase agreement, the Company had the right to sell to Lincoln Park, and Lincoln Park was obligated to purchase, up to $10.0 million in shares of the Company’s common stock, subject to certain limitations, from time to time, over the 36-month period commencing on September 4, 2015. Pursuant to the securities purchase agreement, during the nine months ended September 30, 2018, the Company issued and sold approximately 200,000 shares of its common stock to Lincoln Park. The issuance of the common shares to Lincoln Park resulted in gross proceeds of $854,000 for the nine months ended September 30, 2018. The securities purchase agreement expired on September 4, 2018.

 

Noncontrolling Interest

 

In July 2018, the Company formed a new, wholly-owned subsidiary, SRP, to drive the development of its second-generation HDF system and other products focused on improving therapies for patients with renal disease.

 

On September 5, 2018, SRP entered into a Series A Preferred Stock Purchase Agreement with certain purchasers pursuant to which SRP sold 600,000 shares of its Series A Preferred Stock (“Series A Preferred”) for $5.00 per share, or aggregate gross proceeds of $3,000,000. SRP incurred transaction-related expenses of approximately $30,000, which were included in selling, general and administrative expenses on the accompanying consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2018. The net proceeds from the issuance of the Series A Preferred are restricted to SRP expenses, and may not be used for the benefit of the Company or other affiliated entities, except to reimburse for expenses directly attributable to SRP. Following the Series A Preferred transaction, the Company retained a 62.5% ownership interest in SRP, holding 100% of the outstanding common shares, and holders of Series A Preferred retained a 37.5% interest in SRP on a fully diluted basis, holding 100% of the outstanding preferred shares. Of the 600,000 shares of Series A Preferred issued, the shares purchased by related parties comprised of persons controlled by members of management and by Lambda Investors, LLC, the Company’s largest stockholder, amounted to 18,000 and 400,000 shares, respectively.

 

Each share of Series A Preferred is initially convertible into one share of SRP common stock, subject to adjustment for stock splits and recapitalization events. Subject to customary exempt issuances, in the event SRP issues additional shares of its common stock or securities convertible into common stock at a per share price that is less than the original Series A Preferred price, the conversion price of the Series A Preferred will automatically be reduced to such lower price.

 

In the event of any voluntary or involuntary liquidation, dissolution or winding up of SRP, the holders of the Series A Preferred are entitled to be paid out of the assets of SRP available for distribution to its stockholders or, in the case of a deemed liquidation event, out of the consideration payable to stockholders in such deemed liquidation event or the available proceeds, before any payment is made to the holders of SRP common stock by reason of their ownership thereof, an amount per share equal to one times (1x) the Series A Preferred original issue price, plus any accruing dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon (the “Series A Liquidation Preference”). If upon any such liquidation, dissolution or winding up of SRP or deemed liquidation event, the assets of SRP available for distribution to its stockholders are insufficient to pay the Series A Liquidation Preference in full, the holders of Series A Preferred will share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. After the full payment of the Series A Liquidation Preference, the holders of the Series A Preferred and the holders of common stock will share ratably in any remaining proceeds available for distribution on an as-converted to common stock basis.

 

Each share of Series A Preferred accrues dividends at the rate per annum of $0.40 per share. The accruing dividends accrue from day to day, whether or not declared, and are cumulative and are payable only when, as, and if declared by the Board.

 

Holders of Series A Preferred are entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred held by such holder are convertible as of the record date for determining stockholders entitled to vote. Except as provided by law or by the other provisions, the holders of Series A Preferred vote together with the holders of common stock as a single class. Notwithstanding the foregoing, for as long as at least 150,000 shares of Series A Preferred are outstanding, SRP is required to obtain the affirmative vote or written consent of a majority of the Series A Preferred in order to effect certain corporate transactions, including without limitation, the issuance of any securities senior to or on parity with the Series A Preferred, a liquidation or deemed liquidation of SRP, amendments to SRP’s charter documents, the issuance of indebtedness in excess of $250,000, any annual budget for the Company’s operations, and the hiring or firing of any executive officers of SRP. In addition, the holders of the Series A Preferred are entitled to elect two members of SRP’s board of directors.

 

The noncontrolling interest in SRP held by holders of the Series A Preferred has been classified as equity on the accompanying condensed consolidated balance sheet, as the noncontrolling interest is redeemable only upon the occurrence of events that are within the control of the Company.

 

Warrants

 

During the three and nine months ended September 30, 2019, warrants to purchase 108,149 shares of the Company’s common stock were exercised, resulting in proceeds of approximately $292,000 and the issuance of 108,147 shares of the Company’s common stock. Of the warrants exercised during the three and nine months ended September 30, 2019, warrants to purchase 4,444 shares of the Company’s common stock were exercised by members of management, resulting in proceeds of approximately $12,000.

 

There were no warrant exercises during the three months ended September 30, 2018. During the nine months ended September 30, 2018, warrants to purchase 50,739 shares of the Company’s common stock were exercised, resulting in proceeds of approximately $138,000 and the issuance of 50,739 shares of the Company’s common stock. Of the warrants exercised during the nine months ended September 30, 2018, warrants to purchase 8,147 shares of the Company’s common stock were exercised by members of management, resulting in proceeds of approximately $22,000.