Quarterly report pursuant to Section 13 or 15(d)

Capitalization and Equity Structure

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Capitalization and Equity Structure
 6 Months Ended
Jun. 30, 2016
Stockholders' Equity Note [Abstract]  
Capitalization and Equity Structure
10. Capitalization and Equity Structure
 
Reverse Stock Split:
 
After the close of the stock market on May 4, 2016, the Company effected a 1-for-7 reverse split of its common stock. As a result, all common stock share amounts included in this filing have been retroactively reduced by a factor of seven, and all common stock per share amounts have been increased by a factor of seven, with the exception of our common stock par value. Amounts affected include common stock outstanding, including those that have resulted from the conversion of preferred stock, stock options, and warrants that convert to common stock.
 
Summary:
 
The Company’s authorized capital stock at June 30, 2016 consisted of 71,429 shares of common stock and 10,000 shares of  convertible preferred stock. At June 30, 2016, 16,383 shares of common stock were issued and outstanding and 4 shares of convertible preferred stock were issued and outstanding.
 
Convertible Preferred Stock:
 
In December 2015, the Company issued 15 shares of Series A Convertible Preferred Stock (the “Preferred Shares”) and warrants to purchase 2,122 shares of the Company’s common stock for which the Company received gross proceeds of $15,000. Each Preferred Share is convertible into .141 shares of common stock at any time at the election of the investor, which at the time of conversion, triggers the amortization of a discount related to a beneficial conversion feature and to the warrants that were issued in the December 2015 transaction.
 
At December 31, 2015, 13 Preferred Shares were outstanding. During the three month period ended June 30, 2016, 5 Preferred Shares were converted into  763 shares of common stock and during the six month period ended June 30, 2016, 9  Preferred Shares were converted into 1,329 shares of common stock, all at a conversion price of $7.07 per share. The conversions triggered the amortization of the warrant discount of $4,205 and $7,329 during the three and six month periods ended June 30, 2016, respectively, which were recorded in the condensed consolidated statements of operations and comprehensive loss  as non-cash preferred deemed dividends. As of June 30, 2016, 4 Preferred Shares remain outstanding, as well as $3,016 of non-cash warrant discounts that will be recognized as preferred deemed dividends at such time that the Preferred Shares are converted to common stock.
 
Warrants:
 
Warrant share activity for the six month period ended June 30, 2016 is as follows:
 
Source
 
Exercise
Price
 
Term
(Years)
 
At December 31,
2015
 
At June 30,
2016
 
December 2015 warrants
 
$
8.75
 
5
 
 
2,122
 
 
2,122
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014 PPO and Merger
 
 
 
 
 
 
 
 
 
 
 
 
Placement agent warrants
 
$
7.00
 
5
 
 
426
 
 
426
 
Bridge warrants
 
$
7.00
 
3
 
 
371
 
 
371
 
PPO warrants
 
$
14.00
 
5
 
 
1,078
 
 
1,078
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre 2014 warrants
 
$
9.66
 
various
 
 
88
 
 
88
 
 
 
 
 
 
 
 
 
4,085
 
 
4,085
 
 
In connection with the December 2015 issuance of convertible preferred stock discussed above, the Company issued warrants to purchase up to an aggregate of 2,122 shares of common stock. The warrants have a 5 year term and an exercise price of $8.75 per share. The Company estimates the fair value of the warrant liability by using a Binomial Lattice Option Pricing Model. The warrant liability is measured at fair value using certain estimated inputs, which are classified within Level 3 of the valuation hierarchy. The following assumptions were used in the Binomial Lattice Option Pricing Model to measure the fair value of the embedded anti-dilution feature in the warrants as of June 30, 2016:
 
Current share price
 
$
4.15
 
Conversion price
 
$
8.75
 
Risk-free interest rate
 
 
0.93
%
Periodic rate
 
 
0.42
%
Term (years)
 
 
4.48
 
Volatility of stock
 
 
75
%
  
The warrants were valued at $9,195 at December 31, 2015. Due to a decrease in the Company’s common stock price from December 31, 2015 to June 30, 2016, the fair value of the warrants decreased by $4,650, which resulted in a non-cash gain recorded in the Company’s consolidated statements of operations and comprehensive loss for the six months ended June 30, 2016. For the three months ended June 30, 2016, the fair value of the warrants decreased by $1,665, also due to a decrease in the Company’s common stock price from March 31, 2016 to June 30, 2016 that was recorded as a gain in the Company’s consolidated statements of operations and comprehensive loss for the period.