WARRANTS FOR COMMON STOCK |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants For Common Stock [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
WARRANTS FOR COMMON STOCK | NOTE 12. - WARRANTS FOR COMMON STOCK At September 30, 2017, the Company had outstanding warrants to purchase 12,204,580 shares of common stock of the Company, of which warrants to purchase 94,721 shares contain an anti-dilution feature, and excluding 2,000,000 Tranche 2 and 3 warrants that will never become exercisable, as discussed in Note 6. During the third quarter of 2017, warrants to purchase 240,667 shares of common stock were exercised on a cashless basis resulting in the issuance of 146,320 shares of the Company’s common stock and 5,708,552 warrants to purchase shares of common stock were exercised on a cash basis under the June 2017 Warrant Exercise Agreements discussed in Note 2. During July and August of 2017, the Company issued warrants to purchase 5,708,552 shares of common stock with an exercise price of $2.15 per share. These warrants have a term of sixty-six (66) months, were not exercisable for six months immediately following the date of issuance, do not contain an anti-dilution feature and had a fair value of $9,135,223 at issuance. See Note 2 for additional details. During the second quarter of 2017, warrants to purchase 843,110 shares of common stock were exercised on a cashless basis resulting in the issuance of 525,118 shares of the Company’s common stock and 5,657,157 warrants to purchase shares of common stock were exercised on a cash basis (including 5,584,659 warrants to purchase shares of common stock under the June 2017 Warrant Exercise Agreements discussed in Note 2). On May 15, 2017, warrants to purchase 45,834 shares of common stock expired without being exercised. During June of 2017, the Company issued warrants to purchase 5,584,659 shares of common stock with an exercise price of $2.15 per share. These warrants had a term of sixty-six (66) months, were not exercisable for six months immediately following the date of issuance, do not contain an anti-dilution feature and had a fair value of approximately $6,913,031 at issuance. See Note 2 for additional details. During March of 2017, warrants to purchase 202,500 shares of common stock were exercised on a cashless basis resulting in the issuance of 100,928 shares of the Company’s common stock. On February 8, 2017, warrants to purchase 172,730 shares of common stock expired without being exercised. On January 25, 2016, warrants to purchase 67,042 shares of common stock were exercised, primarily on a cashless basis, resulting in the issuance of 2,618 shares of the Company’s common stock. On January 25, 2016, warrants to purchase 6,831,115 shares of common stock expired without being exercised. Pursuant to the registered direct offering that closed on October 19, 2016, and discussed in Note 3, the Company issued warrants to purchase 4,250,000 shares of common stock with an exercise price of $1.45 per share. These warrants had a term of sixty-six (66) months, were not exercisable for six months immediately following the date of issuance, did not contain an anti-dilution feature, and had a fair value of approximately $3,380,000 at issuance. Pursuant to the June 2017 Warrant Exercise Agreements, as discussed in Note 2, warrants to purchase 4,250,000 shares of common stock were exercised on a cash basis at an exercise price of $1.45 per share (2,354,948 Warrants were exercised in June of 2017 and 1,895,052 Warrants were exercised in July and August of 2017). Pursuant to the registered direct offering that closed on July 27, 2016, and discussed in Note 4, the Company issued warrants to purchase 7,043,211 shares of common stock. The warrants provide for an exercise price of $1.00 per share and 1,543,210 of the warrants were exercisable immediately and had a fair value of approximately $858,000 at issuance and 5,500,001 of the warrants were exercisable six months from the date of issuance and had a fair value of approximately $3,058,000 at issuance. All the warrants had a term of 5.5 years and do not contain an anti-dilution feature. In addition, on July 27, 2016, the Company terminated an aggregate of 5.5 million warrants with exercise prices of $1.21 and $1.25 per share previously issued in conjunction with registered direct offerings in February of 2016 and June of 2015. Pursuant to the June 2017 Warrant Exercise Agreements, as discussed in Note 2, warrants to purchase 7,043,211 shares of common stock were exercised on a cash basis at an exercise price of $1.00 per share (3,229,711 Warrants were exercised in June of 2017 and 3,813,500 Warrants were exercised in July and August of 2017). Pursuant to the registered direct offering that closed on February 5, 2016, and discussed in Note 5, the Company issued warrants to purchase 2,500,000 shares of common stock with an exercise price of $1.21 per share. These warrants had a term of sixty-six (66) months, were not exercisable for six months immediately following the date of issuance, did not contain an anti-dilution feature, and had a fair value of approximately $1,940,000 at issuance. The warrants associated with this transaction were terminated on July 27, 2016 (see Note 4 – July 2016 Registered Direct Offering for additional information). Pursuant to the registered direct offering that closed on June 2, 2015, the Company issued warrants to purchase 3,000,000 shares of common stock with an exercise price of $1.25 per share. These warrants had a term of sixty-six (66) months, were not exercisable for six months immediately following the date of issuance, did not contain an anti-dilution feature, and had a fair value of approximately $2,067,000 at issuance. The warrants associated with this transaction were terminated on July 27, 2016 (see Note 4 – July 2016 Registered Direct Offering for additional information). Outstanding warrants at September 30, 2017 consisted of the following:
(1) Includes anti-dilution features. (2) Excludes 2,000,000 Tranche 2 and Tranche 3 warrants that will never become exercisable, as discussed in Note 6. The Company estimates the value of warrant liability upon issuance of the warrants and at each balance sheet date using the binomial lattice model to allocate total enterprise value to the warrants and other securities in the Company’s capital structure. Volatility was estimated based on historical observed equity volatilities and implied (forward) or expected volatilities for a sample group of guideline companies and consideration of recent market trends. As a result of the previously exercisable exchange rights contained in the Tranche 1A warrants, the financial instrument was previously considered a liability in accordance with FASB Accounting Standards Codification Topic 480 - “Distinguishing Liabilities from Equity” (“ASC 480”). More specifically, ASC 480 requires a financial instrument to be classified as a liability if such financial instrument contains a conditional obligation that the issuer must or may settle by issuing a variable number of its equity securities if, at inception, the monetary value of the obligation is based on a known fixed monetary amount. As a result of the actions by Crede that caused the exchange rights feature to be voided (see Note 6 - Joint Venture, Consulting Agreement and Associated Warrants for additional information), the Company reclassified the Tranche 1A warrant liability to Capital in excess of par. The following table is a roll-forward summary of the warrant liability:
The aggregate loss as a result of the Company’s warrant liability for the three and nine months ended September 30, 2017 amounted to $55,886 and $138,813, respectively (the aggregate net (loss) gain for the three and nine months ended September 30, 2016 amounted to ($46,995) and $14,602, respectively), which are included in Other income (expense) under Warrant liability (loss) gain - net in the accompanying Consolidated Statements of Operations. FASB ASC 820 - “Fair Value Measurements and Disclosures” establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
A financial asset’s or a financial liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The warrant liability is measured at fair value using certain estimated factors such as volatility and probability which are classified within Level 3 of the valuation hierarchy. Significant unobservable inputs that are used in the fair value measurement of the Company’s derivative warrant liabilities include volatility. Significant increases (decreases) in the volatility input would result in a significantly higher (lower) fair value measurement. The following table summarizes the Company’s warrant activity since December 31, 2015:
(1) Tranche 2 and Tranche 3 warrants that will never become exercisable, as discussed in Note 6. (2) Tranche 1A and Tranche 1B warrants expired unexercised on September 29, 2016. |