Stockholders' Equity and Redeemable Convertible Preferred Stock

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

6. Stockholders' Equity and Redeemable Convertible Preferred Stock

Restated Certificate of Incorporation

On March 4, 2016, the Company implemented a Reverse Stock Split with a ratio of 1-for-19. The par value and other terms of the common stock were not affected by the Reverse Stock Split. In addition, the amendment to the Company’s certificate of incorporation that effected the Reverse Stock Split simultaneously reduced the number of authorized shares of Common Stock from 200,000,000 to 100,000,000 (see Note 1).

Preferred Stock

The Company had designated separate series of its capital stock as of March 31, 2016 and December 31, 2015 as summarized below:

	Number of Shares Issued
	and Outstanding as of
	March 31,  2016		December 31,  2015		Par Value		Conversion Ratio
Series "A"		-		-	$	0.0001	N/A
Series "C"		-		-		0.0001	0.05:1
Series “D"		4,725		4,725		0.0001	0.53:1
Series “D-1"		834		834		0.0001	0.53:1
Series “F-1"		-		-		0.0001	0.05:1
Series “H"		381,967		381,967		0.0001	0.53:1
Series “I”		-		-		0.0001	1.05:1
Series “J”		-		-		0.0001	0.05:1
Series “K”		50		1,240		0.0001	263.16:1

Series K Convertible Preferred Stock

On December 2, 2015, the Company designated 1,240 shares of preferred stock as Series K Preferred Stock.  On December 7, 2015, the Company issued 1,240 shares of Series K Preferred Stock in December 2015 Offering.  Each share of Series K Preferred Stock is convertible into five thousand-nineteenths of a share of Common Stock and has a stated value of $1,000.  The conversion ratio is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Series K Preferred does not generally have any voting rights but are convertible into shares of Common Stock. At no time may shares of Series K Preferred Stock be converted if such conversion would cause the holder to hold in excess of 4.99% of the issued and outstanding Common Stock, subject to an increase in such limitation up to 9.99% of the issued and outstanding Common Stock on 61 days’ written notice to the Company by such holder.  The conversion ratio of the Series K Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions.

During the three months ended March 31, 2016, 1,190 shares of Series K Preferred Stock were converted into 313,157 shares of Common Stock. Upon conversion, the Company recorded an additional deemed dividend of approximately $0.7 million. As of March 31, 2016, 50 shares of Series K Preferred Stock remained issued and outstanding.

Warrants

A summary of warrant activity for the three months ended March 31, 2016 is presented below:

	Warrants			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life  (in years)
Outstanding as of December 31, 2015		2,304,888		$	7.98	$	-		2.83
Expired		(555	)		3,040.00				-
Outstanding as of March 31, 2016		2,304,333		$	7.25				2.58
Exercisable as of March 31, 2016		2,304,333		$	7.25	$	-		2.58

Stock Options

There was no option activity for the three months ended March 31, 2016.

Stock-based compensation associated with the amortization of stock option expense was approximately $1,000 and $76,000 for the three months ended March 31, 2016 and 2015, respectively.  Unamortized stock-based compensation expense amounted to $2,000 at March 31, 2016, and will be amortized over 0.37 years.

Restricted Stock Awards

In December 2015, the Company entered into a consulting agreement with a third party for consulting services. The Company agreed to pay the consultant $50,000 in shares of the Company’s common stock, which shall be issued in two equal parts. The first $25,000 should be issued at the closing price of December 22, 2015, and the second $25,000 will be issued six months later. On January 26, 2016, the Company granted 8,771 shares of restricted stock to the consultant for the first $25,000 services performed, which were recorded during the fourth quarter of 2015.

In December 2015, the Company determined to pay each of Mr. Reiner and Mr. Dotson, in accordance with their respective employment agreements, $60,000 in shares of common stock in respect of their performance for the 2015 fiscal year which, as of the closing price of December 21, 2015, would have constituted a total of 42,106 shares. The shares were issued in March 2016.

On January 26, 2016, the Company issued 652 shares of restricted common stock to a third party for consulting services. The restricted stock award vested immediately. The grant date fair value of restricted stock was $1,487. 

On February 4, 2016, the Company entered into a consulting agreement with a third party. The Company has agreed to pay the consultant three cash retainer payments for a total of $70,000, and granted $100,000 in shares of restricted stock. On February 4, 2016, the Company issued 42,445 restricted shares based on the average closing price for the 10 trading days immediately prior to February 4, 2016. The restricted stock award vested immediately.

On February 26, 2016, the Company granted each of two consultants 7,895 shares of restricted common stock for consulting services. The restricted stock award vested on March 31, 2016 based upon the closing price on February 26, 2016. The grant date fair value of each restricted stock award was $15,000, respectively. 

A summary of the restricted stock award activity for the three months ended March 31, 2016 is as follows:

	Number of Units			Weighted Average Grant Day Fair Value
Nonvested at December 31, 2015		-		$	-
Granted		109,764			2.20
Vested		(109,764	)		2.20
Nonvested at March 31, 2016		-		$	-

Stock-based Compensation

Stock-based compensation for the three months ended March 31, 2016 and 2015 was comprised of the following ($ in thousands):

	For the Three Months Ended March 31,
	2016		2015
Employee restricted stock awards	$	-	$	11
Employee stock option awards		1		76
Non-employee restricted stock awards		130		-
Total compensation expense	$	131	$	87