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STOCKHOLDERS' EQUITY
9 Months Ended
Sep. 30, 2016
Stockholders' Equity Note [Abstract]  
STOCKHOLDERS’ EQUITY
NOTE 4. STOCKHOLDERS’ EQUITY
 
Series B Preferred Stock
 
In June 2016, the Company created a new class of Preferred Stock designated as Series B Preferred Stock (the “Series B Preferred”). The rights of the Series B Preferred are set forth in the Certificate of Designation of Rights, Preferences and Privileges of Series B Preferred Stock (the “Series B Certificate of Designation”). A total of 11,500,000 shares of Series B Preferred are authorized for issuance under the Certificate of Designation. The shares of Series B Preferred have a stated value of $4.75 per share and are convertible into shares of common stock at an initial conversion price of $4.75 per share.
 
Holders of the Series B Preferred are entitled to dividends on an as-if-converted basis in the same form as any dividends actually paid on shares of our Series A Convertible Preferred Stock or our common stock. So long as any Series B Preferred remains outstanding, the Company may not redeem, purchase or otherwise acquire any material amount of our Series A Preferred Stock or any junior securities.
 
The Company has also evaluated its convertible preferred stock in accordance with the provisions of ASC 815, Derivatives and Hedging, including consideration of embedded derivatives requiring bifurcation. The issuance of the convertible preferred stock could generate a beneficial conversion feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment date, to additional paid-in capital, resulting in a discount on the convertible preferred stock. As the convertible preferred stock may be converted immediately, the Company recognized a BCF of $49.5 million as a deemed dividend in the condensed statements of operations for the three and nine months ended September 30, 2016
 
During the three and nine months ended September 30, 2016, 3,421,960 shares of Series B Preferred Stock that were originally issued in the June 2016 private placement (discussed below) were converted into 3,421,960 shares of common stock.
 
Private Placement
 
On June 2, 2016, the Company entered into a securities purchase agreement with various institutional and individual accredited investors to raise gross proceeds of $100 million in a private placement (the “Private Placement”). On June 7, 2016, the Company completed the Private Placement. In the Private Placement, the Company issued (i)  9,684,000 shares of its common stock and (ii)  11,368,633 shares of its new Series B Preferred Stock. The shares of common stock and Series B Preferred were sold for $4.75 per share. The shares of Series B Preferred initially were not convertible into common stock and, except as required by law, are non-voting. On July 7, 2016 the Company filed a proxy statement with the SEC with respect to a stockholders meeting that was held on August 16, 2016 at which the stockholders were asked to vote on a proposal to permit the Series B Preferred to become convertible into shares of the Company’s common stock and to permit the issuance of shares of common stock upon such conversion. The requisite stockholder approval was obtained and, as a result, the Series B Preferred became convertible into shares of common stock at an initial conversion price of $4.75 per share.
 
The Company recognized a one-time deemed dividend of $49.5 million on August 16, 2016 as a result of the beneficial conversion feature of the Series B Preferred. The deemed dividend was recorded on the date that our stockholders approved the provision in the Series B Preferred that allowed the Series B Preferred to convert into common stock. This one-time, non-cash charge impacted net loss attributable to common stockholder and loss per share for the three and nine months ended September 30, 2016.
 
The Company received net proceeds of approximately $95.7 million from the Private Placement, after paying placement agent fees and estimated offering expenses.
 
In connection with the Private Placement, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the investors pursuant to which the Company agreed to file with the SEC, within 30 days of the closing of the Private Placement, a registration statement covering the resale by the investors of the shares of common stock purchased by them. The Company also agreed in the Registration Rights Agreement to file with the SEC within 30 days of any stockholders meeting approving the conversion feature of the Series B Preferred Stock, a registration statement covering the resale of the shares of our common stock issuable upon conversion of their shares of Series B Preferred by the holders of shares of Series B Preferred. The Company also agreed to use its best efforts to have the respective registration statements declared effective as soon as practicable upon filing, but in any event within 90 days after filing. The Company filed the registration statement to register the Private Placement common stock on July 1, 2016, which registration statement was amended to include the shares underlying the Series B Preferred. The combined registration statement covering both the shares of common stock sold in the Private Placement and the shares underlying the Series B Preferred was declared effective on September 2, 2016, thereby fulfilling the Company’s registration obligations under the Registration Rights Agreement. The Registration Rights Agreement also provides, among other things, that if the foregoing registration statement ceases to be effective under certain circumstances, the Company will pay to the holders on the occurrence of each such event and for each 30-day period thereafter until the applicable event is cured, an amount in cash equal to 1% of the aggregate amount invested (or outstanding, as specified in greater detail in the Registration Rights Agreement) by the holders under the Purchase Agreement for each 30-day period (prorated for any period of less than 30 days) during which such registration statement was not effective.
 
Restricted Stock Awards
 
Shares of restricted stock awards granted below are subject to forfeiture to the Company or other restrictions that will lapse in accordance with a vesting schedule determined by our Board.
 
The following table summarizes restricted common stock award activity:
 
 
 
 
 
 
Weighted Average
 
 
 
Number
 
Grant Date
 
 
 
of Shares
 
Fair Value
 
Non-vested shares, January 1, 2016
 
 
321,252
 
$
6.96
 
Granted
 
 
-
 
 
-
 
Vested
 
 
(272,084)
 
 
6.90
 
Forfeited
 
 
(40,001)
 
 
-
 
Non-vested shares, September 30, 2016
 
 
9,167
 
$
6.49
 
 
Restricted Stock Units
 
On June 1, 2016, we entered into a restricted stock unit agreement with the Company’s new Chief Executive Officer (Maria Fardis, Ph.D.) pursuant to which the Company granted Dr. Fardis 550,000 non-transferrable restricted stock units at fair market value of $5.87 per share as an inducement of employment pursuant to the exception to The NASDAQ Global Market rules that generally require stockholder approval of equity incentive plans.  The 550,000 restricted stock units will vest in installments as follows: (i) 137,500 restricted stock units will vest upon the first anniversary of the effective date of Dr. Fardis’ employment agreement; (ii) 275,000 restricted stock units will vest upon the satisfaction of certain clinical trial milestones; and (iii) 137,500 restricted stock units will vest in equal monthly installments over the 36-month period following the first anniversary of the effective date of Dr. Fardis’ employment, provided that Dr. Fardis has been continuously employed with the Company as of such vesting dates.
 
Stock-based compensation expense for RSUs is measured based on the closing fair market value of the Company's common stock on the date of grant.