Restatement of Prior Period Financial Statements

6 Months Ended

Jun. 30, 2017

Accounting Changes and Error Corrections [Abstract]

Restatement of Prior Period Financial Statements

Restatement of Prior Period Financial Statements

Subsequent to the issuance of the Company's consolidated financial statement for the quarterly period ended September 30, 2016, the Company identified immaterial errors that were the result of an incorrect assessment of the April 1, 2016 debt transaction with Kanis S.A.

On April 1, 2016, the Company executed a promissory note (the “Note”) in favor of Kanis S.A., pursuant to which Kanis S.A. loaned the Company $2.0 million (the “New Loan”). In addition, on April 1, 2016, the Company entered into an amendment to the loan agreement (the “Amendment”) with Kanis S.A., pursuant to which the Company and Kanis S.A. agreed to amend certain prior loans and amendments aggregating a principal balance of $7.5 million (the “Existing Loans”). The Amendment included the addition of a conversion feature to the Existing Loans, providing for their conversion into the Company’s common stock. Certain financial instruments of the Amendment required bifurcation and were determined to be an embedded derivative comprised of a conversion feature and a call option valued at $3.9 million using the Monte Carlo simulation model. The Company recorded the bifurcated derivative as a liability with a corresponding debt discount. During the three months ended June 30, 2016, the Company recognized $0.3 million of debt discount amortization, and on June 30, 2016, the Company marked to market the derivative liability resulting in a gain on the derivative liability of $2.8 million.

During the three months ended September 30, 2016, the Company received stockholder approval to complete the conversion of the Existing Loans into common stock, which conversion occurred on August 30, 2016. The Company accounted for the conversion of the Existing Loans as an extinguishment. The Company subsequently reviewed the accounting treatment of the Amendment and determined that the Amendment resulted in the extinguishment of the Existing Loans, and that the Company should have followed the accounting required for debt extinguishment and recorded the revalued Existing Loans on April 1, 2016.

As a result of its review, the Company determined that an extinguishment loss should have been recorded in other income (expense) with a corresponding decrease to Notes payable, net of debt discount and current portion in the second quarter of 2016 for $1.6 million as a result of the April 1, 2016 Amendment of the Existing Loans

The Company has restated the three and six months ending June 30, 2016 Condensed Consolidated Statement of Comprehensive Loss and Condensed Consolidated Statements of Cash Flows to correct for the extinguishment loss of $1.6 million and $0.1 million of amortization of discount, respectively, within other income (expense).  

The impact of this error in the prior year periods was not material to the consolidated financial statements in any of the periods effected. In addition, the Company properly reflected the extinguishment loss in its consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2016.

The revisions to the Company's Condensed Consolidated Statement of Comprehensive Loss for the three and six months ended June 30, 2016 were as follows:

	Three Months Ended June 30, 2016						Six Months Ended June 30, 2016
	As Reported			As Restated			As Reported			As Restated
Other income (expense):
Interest expense	(756		)	(691		)	(1,148		)	(1,083		)
Gain on bifurcated derivative liability	2,754			2,754			2,754			2,754
Loss on extinguishment of convertible debt	—			(1,630		)	—			(1,630		)
Gain (loss) on warrant liability	792			792			1,588			1,588
Other income, net	1,008			1,008			628			628
Total other income	3,798			2,233			3,822			2,257
Income (loss) from continuing operations before income taxes	646			(919		)	(2,547		)	(4,112		)
Net income (loss)	1,343			(222		)	(1,428		)	(2,993		)
Comprehensive income (loss)	$	810		$	(755	)	$	(1,698	)	$	(3,263	)
Earnings/(loss) per common share:
Basic	$	0.35		$	(0.06	)	$	(0.38	)	$	(0.80	)
Diluted	$	0.13		$	(0.06	)	$	(0.38	)	$	(0.80	)

The revisions to the Company's Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 were as follows:

	Six Months Ended June 30, 2016
	As Reported			As Restated
Cash flows from operating activities:
Net loss	$	(1,428	)	$	(2,993	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on extinguishment of convertible debt	—			1,630
Amortization of debt discount	291			226