Note 5—Stockholders’ Equity

Common Stock

On April 4, 2015, we entered into a term sheet with Shenzhen Qianhai Taxus Capital Management Co., Ltd. (“Shenzhen Qianhai Taxus”), a company affiliated with Shanxi Taxus Pharmaceuticals Co. Ltd., whereby we proposed to sell Shenzhen Qianhai Taxus 600,000 shares of common stock in our Angionetics subsidiary in exchange for $3.0 million in cash. The $3.0 million was to be paid in tranches that were to be completed by May 31, 2015. Shenzhen Qianhai Taxus paid $600,000 of the financing, which was recorded as common stock issuable. Shenzhen Qianhai Taxus did not complete this transaction. This subscription is committed and not refundable to Shenzhen Qianhai Taxus. Shenzhen Qianhai Taxus is eligible to apply this amount toward the purchase of common stock of the Company or its subsidiaries based on terms and conditions approved by the Company’s Board of Directors.

Preferred Stock

Taxus Cardium Series A Convertible Preferred Stock.

On April 4, 2013, we entered into a securities purchase agreement with Sabby Healthcare Volatility Master Fund, Ltd. (“Sabby”), pursuant to which we sold 4,012 shares of our newly authorized Series A Convertible Preferred Stock (the “Preferred Stock”) for $4.0 million. The Preferred Stock was convertible into shares of our common stock at an initial conversion price of $0.6437 per share. The conversion price is subject to downward adjustment if we issue common stock or common stock equivalents at a price less than the then effective conversion price. Sabby is limited to hold no more than 10% of Taxus Cardium’s issued and outstanding common stock at any time. As long as the Preferred Stock is outstanding, we have also agreed not to incur specified indebtedness without the consent of the holders of the Preferred Stock. These factors may restrict our ability to raise capital through equity or debt offerings in the future.

On July 22, 2015, we entered into an Exchange and Redemption Agreement with Sabby relating to the 1,176 outstanding shares of Preferred Stock that remained outstanding at that time. Under the terms of the Exchange and Redemption Agreement, we agreed to reduce the conversion price of the Preferred Stock to $0.30 per share from $0.64 per share in exchange for a limited redemption right (which has now expired) and an increase in the limitation on certain indebtedness.

On September 23, 2016, we entered into a second Exchange and Redemption Agreement with Sabby covering the 1,000 shares of Preferred Stock outstanding at the time. Under the terms of the Exchange and Redemption Agreement, Taxus Cardium agreed to reduce the conversion price at which Sabby can convert shares of Preferred Stock to common shares to an effective price of $0.18 per share. The Exchange and Redemption Agreement granted Taxus Cardium a right to redeem any or all of the outstanding Preferred Stock for its Stated Value (approximately $1,000 per share) at any time after the date of the Agreement until November 29, 2016. As a result of the conversion price changing from $0.30 to $0.18 per share, the 1,000 shares of Preferred Stock outstanding are convertible to 5,554,667 shares of Taxus Cardium common stock, an additional 2,221,867 compared to before the conversion price change. At September 30, 2016, there were 964 shares of Preferred Stock outstanding. A hypothetical conversion of all of the outstanding Preferred Stock as of September 30, 2016 into 5,354,674 shares of common stock would increase the common stock outstanding from 13,523,544 shares as of September 30, 2016, to 18,878,218, an increase of 39.6%. As a result of such holder entering into the Agreement, for which the fair value of preferred stock before and after the modification was a substantially different, the modification was accounted for as an extinguishment. Consequently, we recorded a deemed dividend totaling $782,879 in the statement of operations in arriving at net loss to common shareholders.

Angionetics Series A Convertible Preferred Stock

On June 7, 2016, Taxus Cardium and Angionetics entered into a Share Purchase Agreement with an entity affiliated with Huapont Life Sciences Co. Ltd, a China-based pharmaceutical and active pharmaceutical ingredient company (“Huapont”). Pursuant to the Share Purchase Agreement, Angionetics agreed to sell 600,000, shares of its newly authorized Series A Convertible Preferred Stock (the “Shares”) to the Huapont affiliate in exchange for $3,000,000 in cash. The agreement called for the investment from the Huapont affiliate to be made in two tranches—the closing of the initial tranche of 200,000 Shares for $1,000,000 shortly following the execution of the agreement and the closing of the second tranche of 400,000 Shares for $2,000,000 was conditioned upon Angionetics securing FDA clearance to initiate a new U.S.-based Phase 3 clinical study (the AFFIRM study) to evaluate the safety and definitive efficacy of the Generx^TM [Ad5FGF-4] product candidate for the treatment of patients with ischemic heart disease and refractory angina. The closings took place, and the Shares were issued, on July 5, 2016 and September 28, 2016, respectively.

The Angionetics Shares have the following rights, privileges and preferences:

•

Dividends. Holders of the Shares are entitled to receive dividends as, when and if declared by the Angionetics board of directors on the Angionetics common stock, on an as-converted basis.

•

Liquidation. In the event of a liquidation of Angionetics, including a change of control transaction, holders of the Shares are entitled to be paid an amount equal to their investment amount before any payment is made to Taxus Cardium or any other holders of Angionetics common stock.

•

Voting. The Shares generally vote with the Angionetics common stock as a single class on an as-converted basis. Holders of the Shares also have certain special voting rights as a separate class including (a) the right to appoint a member to the Angionetics board of directors, (b) the right to approve any increase or decrease in the number of authorized shares of the Shares or the common stock, any merger or acquisition involving Angionetics, any liquidation or winding up of Angionetics, any increase in the number of directors and any dividend or distribution, and (c) the right to approve any amendment to the Angionetics certificate of incorporation in a manner that adversely affects the rights of the Shares.

•

Conversion. The Shares are convertible into shares of Angionetics common stock at any time at the holder’s election. The Shares automatically convert into common stock upon the closing of a firm commitment underwritten public offering of Angionetics common stock. The Shares are initially convertible on a one to one basis into Angionetics common stock. The Shares are subject to anti-dilution protection, such that in the event of a firm commitment underwritten public offering or a change in control each Share will be convertible into a pro rata portion of 15% of the outstanding Angionetics common stock at the time of the public offering or change in control.

Stock Options and Other Equity Compensation Plans

We have an equity incentive plan that was established in 2005 under which 283,058 shares of the Company’s common stock were reserved for issuance to employees, non-employee directors and consultants of the Company. The 2005 Equity Incentive Plan expired on October 20, 2015, ten years after its adoption, and we are no longer able to issue share or awards under that plan. All options or other awards issued under the 2005 Equity Incentive Plan prior to its expiration remain outstanding in accordance with their terms.

At September 30, 2016, the following shares were subject to option awards outstanding under the 2005 Equity Incentive Plan:

Plan

Outstanding

Available

for Issuance

2005 Equity Incentive Plan

17,000

—

On February 28, 2014, outside of the 2005 Equity Incentive Plan, we issued 1,457,100 common stock warrants to directors, officers and chief medical advisor. The warrants were approved by our Board of Directors, have a ten year term and an exercise price of $0.80 per share, which represented a 57% premium to the closing stock price on the date of issuance. The warrants had a fair value of $0.34 per share and vested immediately.

On March 23, 2015, outside of the 2005 Equity Incentive Plan, we issued 1,125,000 common stock warrants to directors, officers and chief medical advisor. The warrants were approved by our Board of Directors, have a ten year term and an exercise price of $0.60 per share, which represented a 216% premium to the closing stock price on the date of issuance. The warrants had a fair value of $0.10 per share and vested immediately.

On March 23, 2015, we issued 10,000 non-qualified stock options to directors. The options were approved by our Board of Directors, have a seven year term and an exercise price of $0.19 per share, which equaled the closing stock price on the date of issuance. The stock options had a fair value of $0.14 per share.

On May 1, 2015, outside of the 2005 Equity Incentive Plan, we issued 550,000 common stock warrants to directors and employees. The warrants were approved by our Board of Directors, have a ten year term and an exercise price of $0.60 per share, which represented a 20% premium to the closing stock price on the date of issuance. The warrants had a fair value of $0.37 per share. 300,000 vested immediately and 250,000 warrants vested on the one year anniversary of the date of grant.

On May 8, 2015, outside of the 2005 Equity Incentive Plan, we issued 100,000 common stock warrants to a consultant. The warrants were approved by our Board of Directors, have a ten year term and an exercise price of $0.60 per share, which represented a 33% premium to the closing stock price on the date of issuance. The warrants had a fair value of $0.41 per share. 40,000 warrants vested immediately, and the remaining 60,000 warrants vested over three quarters. On August 4, 2015, the consulting agreement was terminated and the remaining 60,000 unvested warrants were cancelled per the terms of the consulting agreement and the warrant.

The following is a summary of stock option and warrant activity under the 2005 Equity Incentive Plan as well as the warrants issued outside of the plan to employees and consultants, during the nine months ended September 30, 2016:

	Number of Options or Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Balance outstanding, December 31, 2015		7,337,598		$	0.94		8.62
Granted		4,823,736			0.71		—
Cancelled (unvested)		—			—		—
Expired (vested)		(45,000	)		32.67		—
Balance outstanding, September 30, 2016		12,116,334		$	0.73		7.92
Balance exercisable, September 30, 2016		12,109,330		$	0.73		7.92

As of September 30, 2016, the Company had $892 of unvested stock-based compensation at fair value remaining to be expensed.

As of September 30, 2016, there was no intrinsic value to the outstanding and exercisable options and warrants as their exercise price exceeded the market price of our common stock.

Warrants

In addition to the warrants that we have issued as a form of compensation above, we have issued warrants to investors in connection with certain financing transactions. The following table summarizes outstanding warrants as of September 30, 2016:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Balance outstanding, December 31, 2015		716,748		$	15.98		0.20
Warrants expired		(716,748	)		15.98		—
Balance outstanding, September 30, 2016		—		$	—		—
Warrants exercisable at September 30, 2016		—		$	—		—

As of September 30, 2016, there were no finance warrants outstanding, each of such warrants having expired in accordance with their terms.