Stockholders' Equity

6 Months Ended

Jun. 30, 2013

Stockholders' Equity [Abstract]

Stockholders' Equity

Note 4 — Stockholders’ Equity

Preferred Stock — Our board of directors has the authority, without action by the stockholders, to designate and issue up to 100,000 shares of preferred stock in one or more series and to designate the rights, preferences and privileges of each series, any or all of which may be greater than the rights of our common stock. We have designated 1,000 shares as Series B Preferred Stock (“Series B Preferred”) and 90,000 shares as Series A Junior Participating Preferred Stock (“Series A Preferred”). No shares of Series B Preferred or Series A Preferred are outstanding. In March 2014, we designated and issued 1,200 shares of Series C Preferred Stock (“Series C Preferred”) for $6.0 million.

Common Stock — Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the holders of our common stock. Subject to the rights of the holders of any class of our capital stock having any preference or priority over our common stock, the holders of our common stock are entitled to receive dividends that are declared by our board of directors out of legally available funds. In the event of our liquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in our net assets remaining after payment of liabilities, subject to prior rights of preferred stock, if any, then outstanding. Our common stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions, and there are no dividends in arrears or default. All shares of our common stock have equal distribution, liquidation and voting rights, and have no preferences or exchange rights. Our common stock currently trades on the OTC Pink tier of the OTC Markets.

During 2012, we executed compromise and release agreements with certain vendors to whom we owed $1.6 million. We reserved 3.9 million shares of our common stock to settle $1.2 million of the amounts outstanding. In 2012, we issued 3.8 million common shares and, at June 30, 2013, 0.1 million shares remained to be issued, with a fair value of $0.02 million.

In September 2012, as part of the lease termination agreement, we agreed to issue 1.5 million shares of our common stock to a landlord. At June 30, 2013, the shares to be issued had a fair value of $0.4 million. The shares were issued in March 2014 at a value of $1.1 million.

As part of the asset purchase agreement that we entered into with Novosom in July 2012, we are obligated to pay Novosom 30% of any payments received by us for sub-licensed SMARTICLES® technology. The consideration is payable in a combination of cash (no more than 50% of total due) and common stock (between 50% and 100% of total due), at our discretion. For such consideration, we issued a total of 0.34 million shares with a fair value of $.11 million in January and September 2012, and committed an additional 0.51 million shares for future issuance. At June 30, 2013, the pledged shares had a value $0.14 million. In December 2013, the Company committed another 0.5 million shares for future issuance to Novosom. All remaining shares due Novosom, for current sub-licenses, were issued in March 2014.

During 2014, we issued 2.69 million shares of common stock to employees and board members in settlement of amounts due under certain employment agreements and accrued board fees.

Warrants — In February 2012, we received net proceeds of approximately $1.5 million from the issuance of 15% secured promissory notes and Price Adjustable Warrants to purchase up to 3.7 million shares of our common stock. Through a series of note amendments in 2012, we issued additional Price Adjustable Warrants to purchase 3.2 million shares of our common stock.

At March 31, 2013, all of these Price Adjustable Warrants had been adjusted to an exercise price of $0.28 per share and were potentially subject to further downward exercise price adjustments, including as a result of subsequent financings. These Price Adjustable warrants expire between August 2017 and April 2018.

In February 2013, an amendment was executed that extended the maturity date to the end of April 2013, and retained all of the terms of the notes as amended in 2012. For consideration of this amendment, we issued additional warrants to purchase up to 1.0 million shares at a price of $0.28, such price being downward adjustable, including as a result of subsequent financings. In August 2013, an amendment was executed that extended the maturity date to the end of March 2014, and replaced the previously amended features and terms of the notes with a limited claim on cash received as a result of financings or license payments and the balance of principal and accrued interest convertible to financing securities at the effective price paid for the securities by other parties. For consideration of this amendment, we issued additional warrants to purchase up to 4.0 million common shares at a price of $0.28, such price being downward adjustable, including as a result of subsequent financings.

In January 2014, we issued warrants to purchase up to 0.10 million shares of our common stock to a consultant who is our interim chief financial officer. These warrants vest over two years, have a fixed strike price of $0.48, expire in January 2024 and have an immaterial fair value.

During 2014, we issued approximately 1.2 million shares upon net share exercise of warrants.

The following summarizes warrant activity during the six months ended June 30, 2013.

	Warrant Shares		Weighted Average Exercise Price
Outstanding, December 31, 2012		11,916,801	$	1.71
Issued		1,000,000		0.28
Outstanding, June 30, 2013		12,916,801	$	1.61
Expiring in 2014		95,631
Expiring in 2015		285,345
Expiring in 2016		-
Expiring thereafter		12,535,825