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4. WARRANTS AND NON-EMPLOYEE OPTIONS
 12 Months Ended
Sep. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
4. WARRANTS AND NON-EMPLOYEE OPTIONS

The following chart represents the warrants and non-employee options outstanding at September 30, 2016:

Warrant Issue Date Shares Issuable upon Exercise of Warrant Exercise Price Expiration Date Refer-ence
           
Series R 12/6/12 105,000 $100.00 12/6/16 1
Series S 10/11/13 -10/24/14 1,037,010 $31.25 10/11/18 1
Series U 4/17/14 17,821 $3.75 10/17/17 1
Series V 5/28/15 810,127 $19.75 5/28/20 1
Series W 10/28/15 688,930 $16.75 10/28/20 1
Series X 1/13/16 120,000 $9.25 1/13/21 2
Series Y 2/15/16 26,000 $12.00 2/15/21 2
Series Z 5/23/16 264,000 $13.75 11/23/21 1
Series ZZ 5/23/16 20,000 $13.75 5/18/21 1
Series AA 8/26/16 20,000 $13.75 2/22/22 1
Series BB 8/26/16 16,000 $13.75 8/22/21 1
Series N 8/18/08 113,785 $0.53 8/18/17 2
Series P 2/10/12 23,600 $4,112.50 3/6/17 2
Consultants 12/2/11- 7/1/16 25,600 $9.25-  $87.50 10/27/16- 6/30/19 3

 

The following chart represents the warrants and non-employee options outstanding at September 30, 2015:

Warrants Issue Date Shares Issuable upon Exercise of Warrants Exercise Price Expiration Date Refer-ence
           
Series N 8/18/08 113,785 $13.18 8/18/17 1
Series Q 6/21/12 1,200,000 $125.00 12/22/15 1
Series R 12/6/12 2,625,000 $100..00 12/6/16 1
Series S 10/11/13- 10/24/14 25,928,010 $31.25 10/11/18 1
Series U 4/17/14 445,514 $43.75 10/17/17 1
Series V 5/28/15 20,253,164 $19.75 5/28/20 1
Series P 2/10/12 590,001    $112.50 3/6/17 2
Consultants 10/14/05 – 7/1/15 238,000 $16.50 – $500.00 10/14/15 - 6/30/18 3

 

1.Warrant Liabilities

 

The table below presents the warrants accounted for as derivative liabilities at September 30.

 

  2016 2015
Series S warrants $ 3,111,361   $ 7,363,555
Series U warrants -   44,551
Series V warrants 1,620,253   6,278,481
Series W warrants   1,799,858   -
Series Z warrants   970,604   -
Series ZZ warrants 70,609   -
Series AA warrants 763,661   -
Series BB warrants   58,588   -
       
Total derivative liabilities       $ 8,394,934   $ 13,686,587

The table below presents the gains and (losses) on the warrant liabilities for the years ended September 30:

 

Warrant Series    2016      2015               2014  
Series A - E $ -   $ 6,105 $ 1  
Series F and G -   - 12,667  
Series H -   12,000 24,000  
Series N -   - (1,404,027)  
Series Q -   12,000 36,000  
Series R   -   157,500 131,250  
Series S   4,252,193             (1,705,466) 1,098,787  
Series T   -   - 276,122  
Series U   44,552   75,738 73,967  
Series V 4,658,228   1,724,739 -  
Series W 3,260,913   - -  
Series Z 997,226   - -  
Series ZZ 75,229   - -  
Series AA 672,246   - -  
Series BB 53,139   - -  
           
Net gain $ 14,013,726   $ 282,616 $ 248,767  

 

The Company reviews all outstanding warrants in accordance with the requirements of ASC 815. This topic provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The warrant agreements provide for adjustments to the exercise price for certain dilutive events. Under the provisions of ASC 815, the warrants are not considered indexed to the Company’s stock because future equity offerings or sales of the Company’s stock are not an input to the fair value of a “fixed-for-fixed” option on equity shares, and equity classification is therefore precluded.

 

In accordance with ASC 815, derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration. Any change in fair value between the respective reporting periods is recognized as a gain or loss in the statement of operations.

 

Expired warrants

 

As of September 30, 2015, all Series A, B, C, E, F, G, H, and Q warrants had expired.

 

Series R Warrants

 

On December 4, 2012, the Company sold 140,000 shares of its common stock for $10,500,000, or $75.00 per share, in a registered direct offering. The investors in this offering also received Series R warrants which entitle the investors to purchase up to 105,000 shares of the Company’s common stock. The Series R warrants may be exercised at any time before December 6, 2016 at a price of $4,100.00 per share. The fair value at issuance of the warrants of $4.2 million was recorded as a warrant liability.

 

Series S Warrants

 

On October 11, 2013, the Company closed a public offering of 713,043 units of common stock and warrants at a price of $25.00 per unit for net proceeds of approximately $16.4 million, net of underwriting discounts and commissions and offering expenses of the Company. Each unit consisted of one share of common stock and one Series S warrant to purchase one share of common stock. The Series S warrants were immediately exercisable, expire on October 11, 2018, and have an exercise price of $31.25. In November 2013, the underwriters purchased an additional 105,957 warrants pursuant to the overallotment option, for which the Company received net proceeds of $24,370. The fair value at issuance of the Series S warrants of $6.1 million was recorded as a warrant liability.

 

On December 24, 2013, the Company closed a public offering of 190,746 units of common stock and warrants at a price of $15.75 per unit for net proceeds of approximately $2.8 million, net of underwriting discounts and commissions and offering expenses of the Company. Each unit consisted of one share of common stock and one Series S warrant to purchase one share of common stock. The underwriters purchased an additional 19,048 units of common stock and warrants pursuant to the overallotment option, for which the Company received net proceeds of approximately $279,000. The fair value at issuance of the Series S warrants of approximately $1.2 million was recorded as a warrant liability. On February 7, 2014, the Series S warrants began trading on the NYSE MKT under the symbol CVM WT.

 

On October 24, 2014, the Company closed an underwritten public offering of 315,789 shares of common stock and 78,947 Series S warrants to purchase shares of common stock. Additionally, on October 21, 2014, the Company sold 52,800 shares of common stock and 13,200 Series S warrants to purchase shares of common stock in a private offering. The common stock and Series S warrants were sold at a combined per unit price of $19.00 for net proceeds of approximately $6.4 million, net of underwriting discounts and commissions and offering expenses. The fair value at issuance of the Series S warrants of approximately $461,000 was added to the existing Series S warrant liability.

 

During the years ended September 30, 2016 and 2015, no Series S warrants were exercised. During the year ended September 30, 2014, 83,551 Series S Warrants were exercised, and the Company received proceeds of approximately $2.6 million.

 

Series T and U Warrants

 

On April 17, 2014, the Company closed a public offering of 285,129 shares of common stock at a price of $35.00 and 71,282 Series T warrants to purchase one share of common stock for net proceeds of approximately $9.2 million, net of underwriting commissions and offering expenses. The Series T warrants were immediately exercisable and had an exercise price of $39.50. On October 17, 2014, all of the Series T warrants expired. The underwriters received 17,821 Series U warrants to purchase one share of common stock. The Series U warrants were exercisable beginning October 17, 2014, expire on October 17, 2017, and have an exercise price of $43.75. The fair value at issuance of the Series T and U warrants of approximately $470,000 was recorded as a warrant liability.

 

Series V Warrants

 

On May 28, 2015, the Company closed an underwritten public offering of 810,127 shares of common stock and 810,127 Series V warrants to purchase shares of common stock. The common stock and Series V warrants were sold at a combined per unit price of $19.75 for net proceeds of approximately $14.7 million, net of underwriting discounts and commissions and offering expenses. The Series V warrants were immediately exercisable at a price of $19.75 and expire on May 28, 2020. The fair value at issuance of the Series V warrants of approximately $8.0 million was recorded as a warrant liability.

 

Series W Warrants

 

On October 28, 2015, the Company closed an underwritten public offering of 688,930 shares of common stock and 688,930 Series W warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $16.75 for net proceeds of approximately $10.5 million, net of underwriting discounts and commissions and offering expenses. The Series W warrants are immediately exercisable at a price of $16.75 and expire on October 28, 2020. The fair value at issuance of the Series W warrants of approximately $5.1 million was recorded as warrant liability.

 

Series Z and ZZ Warrants

 

On May 23, 2016, the Company closed a registered direct offering of 400,000 shares of common stock and 264,000 Series Z warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $12.50 for net proceeds of approximately $4.6 million, net of placement agent’s commissions and offering expenses. The Series Z warrants may be exercised at any time on or after November 23, 2016 and on or before November 23, 2021 at a price of $13.75 per share. The Company also issued 20,000 Series ZZ warrants to the placement agent as part of its compensation. The Series ZZ warrants may be exercised at any time on or after November 23, 2016 and on or before May 18, 2021 at a price of $13.75 per share. The fair value of the Series Z and Series ZZ warrants of approximately $2.1 million on the date of issuance was recorded as a warrant liability.

 

Series AA and BB Warrants

 

On August 26, 2016, the Company closed a registered direct offering of  400,000 shares of common stock and 200,000 Series AA warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $12.50 for proceeds of approximately $4.5 million, net of placement agent’s commissions and offering expenses. The series AA warrants may be exercised at any time after February 22, 2017 and on or before February 22, 2022 at a price of $13.75 per share. The Company also issued 16,000 Series BB warrants to the placement agent as part of its compensation. The Series BB warrants may be exercised at any time on or after February 22, 2017 and on or before August 22, 2021 at a price of $13.75 per share. The fair value of the Series AA and Series BB warrants of approximately $1.5 million on the date of issuance was recorded as a warrant liability.

 

2.Equity Warrants

 

Series X Warrants

 

In January 2016, the Company sold 120,000 shares of its common stock and 120,000 Series X warrants to the de Clara Trust for approximately $1.1 million. The de Clara Trust is controlled by Geert Kersten, the Company's Chief Executive Officer and a director. Each Series X warrant allows the de Clara Trust to purchase one share of the Company's common stock at a price of $9.25 per share at any time on or before January 13, 2021. The Series X warrants qualify for equity treatment in accordance with ASC 815. The relative fair value of the warrants was calculated to be approximately $417,000.

 

Series Y Warrants

 

On February 15, 2016, the Company sold 52,000 shares of its common stock and 26,000 Series Y warrants to a private investor for $624,000. Each Series Y warrant allows the holder to purchase one share of the Company's common stock at a price of $12.00 per share at any time on or before February 15, 2021. The Series Y warrants qualify for equity treatment in accordance with ASC 815. The relative fair value on the date of issuance of the warrants was calculated to be approximately $144,000.

 

Series N Warrants

 

Series N warrants were previously issued in connection with a financing. On October 11, 2013 and December 24, 2013, in connection with public offerings of common stock on those dates, the Company reset the exercise price of the 120,751 outstanding Series N warrants from $75.00 to $13.18 and issued the Series N warrant holders 97,306 additional warrants exercisable at $13.18, as required by the warrant agreements. In January 2014, the Company offered the investors the option to extend the Series N warrants by one year and allow for cashless exercise in exchange for cancelling the reset provision in the warrant agreement. One investor, holding 113,785 Series N warrants accepted this offer. Accordingly, these warrants are no longer considered a derivative liability due to the cancelation of the reset provision. The fair value of the warrants on that date totaled approximately $1.3 million and was reclassified from derivative liabilities to additional paid-in capital. On March 21, 2014, the other investor exercised 4,272 Series N warrants. The Company received cash proceeds of approximately $7,000 for 563 of the warrants exercised. The remaining 3,709 warrants were exercised in a cashless exercise. The fair value of the warrants on the date of exercise was $137,000 and was reclassified from derivative liabilities to additional paid-in capital.

 

On October 28, 2014, the outstanding 113,785 Series N Warrants were transferred to the de Clara Trust, of which the Company’s CEO, Geert Kersten, is the trustee and a beneficiary. On June 29, 2015, the Company extended the expiration date of the Series N warrants to August 18, 2017. The incremental cost of this modification was approximately $475,000. The modification was concurrent with the extinguishment and reissuance of a note payable also held in the de Clara Trust, and was recorded as a loss on debt extinguishment.

 

As of September 30, 2016, the remaining 113,785 Series N warrants entitle the holder to purchase one share of the Company's common stock at a price of $13.18 per share at any time prior to August 18, 2017. On September 30, 2016 and 2015, no derivative liability was recorded because the warrants no longer were considered a liability for accounting purposes.

 

Series L and Series M Warrants

 

Series L and Series M warrants were previously issued in connection with a financing. In April 2014, 1,000 Series L warrants, with an exercise price of $187.50, expired. In April 2015, the remaining 2,800 of the Series L warrants, which had been repriced to $62.50 in April 2013, expired.

 

In October 2013, the Company reduced the exercise prices of the Series M warrants from $85.00 to $25.00 in exchange for a reduction in the number of warrants from 24,000 to 20,000. The additional cost of $76,991 was recorded as non-employee stock expense. In March 2014, 20,000 Series M warrants were exercised at a price of $25.00, and the Company received proceeds of $500,000.

 

Series P Warrants

 

On February 10, 2012, the Company issued 23,600 Series P warrants to purchase up to 23,600 shares of the Company’s common stock at a price of $112.50 per share as an inducement for the exercise of previously issued warrants. The Series P warrants are exercisable at any time prior to March 6, 2017.

 

3.Options and Shares Issued to Consultants

 

The Company typically enters into consulting arrangements in exchange for common stock or stock options. During the years ended September 30, 2016 and 2015, the Company issued 49,953 and 29,599 shares of common stock, respectively, to consultants, of which 31,360 and 7,200, respectively, were restricted shares. Under these arrangements, the common stock was issued with stock prices ranging between $9.25 and $27.75 per share.

Additionally, during the years ended September 30, 2016 and 2015, the Company issued to consultants 16,400 and 3,600 options, respectively, to purchase common stock with exercise prices ranging from $9.25 to $25.50 per share and fair values ranging from $3.00 to $12.50 per share. The aggregate values of the issuances of restricted common stock and common stock options are recorded as prepaid expenses and are charged to general and administrative expenses over the periods of service.

 

During the years ended September 30, 2016 and 2015, the Company recorded total expense of approximately $752,000 and $566,000, respectively, relating to these consulting agreements. At September 30, 2016 and 2015, approximately $48,000 and $30,000, respectively, are included in prepaid expenses. As of September 30, 2016, 25,600 options issued to consultants as payment for services remained outstanding, 17,600 of which are fully vested, and all of which were issued from the Non-Qualified Stock Option plans.