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Preferred Stock
12 Months Ended
Dec. 31, 2017
Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract]  
Preferred Stock
Preferred Stock

Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock. As of December 31, 2017, there were: (i) 100 shares of Perpetual Series B-1 Preferred Stock authorized and no shares issued or outstanding; (ii) 7,500 shares of Series A-2 Convertible Preferred Stock authorized and 32 shares issued and outstanding(the “Series A-2 Preferred Stock”); (iii) 2,800 shares of Series B Preferred Stock authorized and 450 shares issued and outstanding; (iv) 4,000 shares of Series D Convertible Preferred Stock authorized and no shares issued or outstanding; and (v) 100 shares of Perpetual Series B Preferred Stock authorized and no shares issued or outstanding.

Each share of Series A-2 Preferred Stock has a stated value of $7,500 per share (the “A-2 Stated Value”), a liquidation preference equal to the Series A-2 Stated Value, and is convertible at the holder’s election into common stock at a conversion price per share of $2.40 as of December 31, 2017. Therefore, each share of Series A-2 Preferred Stock is convertible into 3,128 shares of common stock as of December 31, 2017. The conversion price is subject to adjustment upon the occurrence of certain events set forth in our Certificate of Incorporation. During the year ended December 31, 2017, the Series B Offering resulted in an adjustment to the Series A-2 Preferred Stock conversion price from $2.98 to $2.40, resulting in a beneficial conversion amount of $58,000 which has been recorded in additional paid-in capital. In January 2018, the Series C Offering (described further below in Note 19) resulted in an adjustment to the Series A-2 Preferred Stock conversion price from $2.40 to $2.16, resulting in a beneficial conversion amount of $24,000 which will be recorded in additional paid-in capital.

The Series A-2 Preferred Stock is subordinate to the Series B-1 Preferred Stock but senior to all other classes of equity, has weighted average anti-dilution protection and, effective January 1, 2013, entitled to cumulative dividends at a rate of 5% per annum, payable quarterly, based on the Series A-2 Stated Value. Once dividend payments commence, all dividends are payable at the option of the holder in cash or through the issuance of a number of additional shares of Series A-2 Preferred Stock with an aggregate liquidation preference equal to the dividend amount payable on the applicable dividend payment date. As of December 31, 2017 and 2016, the Company has recorded $59,000 and $47,000, respectively, in accrued dividends on the accompanying Consolidated Balance Sheets related to the Series A-2 Preferred Stock.

Series B Offering

In October 2017 pursuant to the Series B Offering, the Company closed a registered direct offering of 2,800 shares of its Series B Preferred Stock for total gross proceeds to the Company of $2,800,000. The shares of Series B Preferred Stock were sold at a price equal to their stated value of $1,000 per share and are convertible into shares of the Company’s common stock at a conversion price of $0.28 per share. The net proceeds to us from the sale of our securities in this offering were $2,280,000 after deducting offering expenses paid by us. During the year ended December 31, 2017, 2,350 shares of Series B Preferred Stock were converted to 8,392,857 shares of the Company’s common stock. As of December 31, 2017, 450 shares of Series B Preferred Stock remain issued and outstanding. During February 2018, 50 shares of Series B Preferred Stock were converted to 178,571 shares of the Company’s common stock. As of the filing of this Report, 400 shares of Series B Preferred Stock remain issued and outstanding.

The Company has agreed to provide the Purchasers a right of participation for up to 100% of any future offering of its common stock or other securities or equity linked debt obligations for 24 months following the closing date. In addition, the Company agreed to expand the size of the Company’s board of directors to six members and to appoint a new independent director agreeable to the lead investor in the offering (the “Lead Investor”). Subject to limited exceptions, for as long as at least 333 shares of Series B Preferred Stock remain outstanding and unconverted (subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations and subdivisions or similar events occurring after the date of the Purchase Agreement with respect to the Series B Preferred Stock), the Company may not issue any common stock or convertible securities (or modify any of the foregoing that may be outstanding) to any person, or incur any debt, without the express written consent of the Lead Investor.

In addition, the Company has agreed that it will not enter into certain “fundamental transactions,” including transactions constituting a change of control of the Company, certain reorganization transactions or a sale of all or substantially all of the Company’s assets, except as pursuant to written agreements in form and substance satisfactory to the holders of a majority of the outstanding shares of Series B Preferred Stock including the Lead Investor and on terms with respect to the Series B Preferred Stock as set forth in the Certificate of Designation of Rights, Powers, Preferences, Privileges and Restrictions of the Series B Preferred Stock.

In accordance with ASC Topic 815, we evaluated whether our convertible preferred stock contains provisions that protect holders from declines in our stock price or otherwise could result in modification of the exercise price and/or shares to be issued under the respective preferred stock agreements based on a variable that is not an input to the fair value of a “fixed-for-fixed” option and require a derivative liability. The Company determined no derivative liability is required under ASC Topic 815 with respect to our convertible preferred stock. A contingent beneficial conversion amount is required to be calculated and recognized when and if the adjusted $2.16 conversion price of the Series A-2 Preferred Stock is adjusted to reflect a down round stock issuance that reduces the conversion price below the $1.16 fair value of the common stock on the issuance date of the Series A-2 Preferred Stock.