Note 11—Registered Direct Equity Offerings

In September 2016, the Company entered into securities purchase agreements with certain institutional investors for the sale of 13,333,334 shares of common stock at a purchase price of $0.75 per share in a registered direct equity offering (the “Registered Offering”), pursuant to a registration statement on Form S-3. The investors in this Registered Offering also received warrants to purchase 6,666,667 shares of common stock with a five-year term and an exercise price of $1.00 per share. The Company received net proceeds from the offering of approximately $9.0 million after placement fees of 8% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 1,066,667 shares (or 8% of total shares sold to investors) with a five-year term and an exercise price of $0.825 per share, and included a cashless exercise provision.

A summary of the cash proceeds of the offering is as follows:

 

Gross proceeds from sale of common stock		$	10,000,000
Placement agent fees and expenses			1,010,000
Total net proceeds		$	8,990,000

As fully described in Note 5 above, the investor warrants and the placement agent warrants issued in connection with the Registered Offering are required to be accounted for in accordance with ASC 480 and ASC 815.

A summary of the ASC 480 allocation of the proceeds of the offering is as follows:

 

Allocated to common stock and additional paid in capital		$	6,334,417
Allocated to warrant liabilities			2,655,583
Total net proceeds		$	8,990,000

 

Closing costs included 1,066,667 warrants valued at $819,200 for placement agent fees. Based upon the estimated fair value of the stock and warrants in the units, the Company allocated $241,986 to financing expense and $577,214 as stock issuance costs.

On December 12, 2016, the Company entered into securities purchase agreements with certain investors for the sale of 4,000,000 shares of common stock at a purchase price of $0.75 per share in a registered direct offering (the “December Offering”), pursuant to a registration statement on Form S-3. The investors in the December Offering also received warrants to purchase 2,000,000 shares of common stock with an exercise price of $1.00 per share and a five-year term. The Company received net proceeds from the December Offering of $3.0 million.

On January 31, 2017, the Company entered into subscription agreements with certain investors for the sale of 1,534,999 shares of common stock at a purchase price of $0.75 per share in a registered direct offering (the “January Offering”), pursuant to a registration statement on Form S-3. The investors in the January Offering also received warrants to purchase 767,498 shares of common stock with a five-year term and an exercise price of $1.00 per share. The Company received net proceeds from the January Offering of approximately $1.0 million after placement fees of 9% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 122,799 shares (or 8% of total shares sold to investors) with a five-year term and an exercise price of $0.825 per share, including a cashless exercise provision).

On February 28, 2017, the Company entered into subscription agreements with certain investors for the sale of 5,670,661 shares of common stock at a purchase price of $0.75 per share in a registered direct offering (the “February Offering”), pursuant to a registration statement on Form S-3.The investors in the February Offering also received warrants to purchase 2,835,323 shares of common stock with a five-year term and an exercise price of $1.00 per share term. The Company received net proceeds from the February Offering of approximately $3.8 million after placement fees of 9% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 453,652 shares (or 8% of total shares sold to investors) with a five-year term and an exercise price of $0.825 per share, including a cashless exercise provision.

On September 8, 2017, the Company entered into subscription agreements with certain investors for the sale of 3,336,331 shares of common stock at a purchase price of $0.75 per shares in a registered direct offering (the “September 2017 Offering), pursuant to a registration statement on Form S-3. The investors in this September 2017 Offering also received warrants to purchase 1,668,163 shares of common stock with a five-year term and an exercise price of $1.00 per share. The Company received net proceeds from the September 2017 Offering of approximately $2.3 million after placement fees of 9% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 213,573 shares (or 8% of total shares sold to investors) with a five-year term and an exercise price of $0.825 per share, including a cashless exercise provision. As fully described in Note 10 above, the Company completed the Make-Whole Offering, in which incremental shares of common stock and warrants were issued. Simultaneously, the exercise price of the investor and placement agent warrants related to the September 2017 Offering were reduced to $0.75 and $0.715 per share, respectively.

On October 11, 2017, the Company entered into subscription agreements with certain investors for the sale of 1,880,765 shares of common stock at a purchase price of $0.65 per shares in a registered direct offering (the “October 2017 Offering), pursuant to a registration statement on Form S-3.The investors in this October 2017 Offering also received warrants to purchase 940,380 shares of common stock with a five-year term and an exercise price of $0.75 per share. The Company received net proceeds from the October 2017 Offering of approximately $1.1 million. In addition, the placement agent received warrants covering 150,461 shares (or 8% of total shares sold to investors) with a five-year term and an exercise price of $0.715 per share, including a cashless exercise provision.

On January 23, 2018, the Company entered into subscription agreements with certain investors for the sale of 3,071,014 shares of common stock at a purchase price of $0.50 per shares in a registered direct offering (the “January 23 Offering”), pursuant to a registration statement on Form S-3.The investors in the January 23 Offering also received warrants to purchase 3,071,014 shares of common stock with an exercise price of $0.75 per share and a five-year term. The Company received net proceeds from the January 23 Offering of approximately $1.4 million. In addition, the placement agent received warrants covering 245,681shares of common stock (or 8% of total shares sold to investors) with a five-year term and an exercise price of $0.55 per share, including a cashless exercise provision.

On January 31, 2018, the Company entered into subscription agreements with certain investors who owned the 2017 Notes, more fully described in Note 4, for the sale by the Company of 12,062,728 shares of common stock in a registered direct offering (the “January 31 Offering”). The investors in the January 31 Offering also received warrants to purchase 7,718,010 shares of common stock. The securities were sold at a combined purchase price of $0.50 per share of common stock and related warrants, for aggregate gross proceeds to the Company of approximately $6.0 million. The 2017 Notes matured on January 31, 2018, upon which date the Company became obligated to pay the principal amount of approximately $6.0 million on the 2017 Notes, plus accrued but unpaid interest of approximately $0.3 million, for aggregate payment obligations at maturity of approximately $6.3 million. The common stock and warrants were issued in full satisfaction of approximately $6.0 million of such payment obligations, with one holder of an aggregate principal amount and accrued unpaid interest of approximately $0.3 million electing to be repaid in cash instead of participating in the January 31, 2018 Offering. As a result, all of the proceeds from the Offering were used to satisfy the Company’s payment obligations pursuant to the 2017 Notes. The warrants will be exercisable for a period of five years commencing on their issuance date, at an exercise price of $0.75 per share of common stock, subject to certain ownership limitations and adjustments as provided under the terms of the warrants. The number of shares of common stock underlying the warrant issued to each investor was calculated as the difference between (x) the number of shares of common stock issued to each investor in the January 31, 2018 Offering in respect of the payment obligations relating solely to principal amounts on the 2017 Notes and (y) the number of shares of common stock underlying certain warrants originally issued to such investor in the original 2017 Note offering. The effect was to bring each investor from 50% warrant coverage in the original offering of Notes, assuming conversion of the principal amount thereof at an original conversion price of $0.75 per share, to 100% warrant coverage after the January 31, 2018 Offering, assuming reinvestment of the principal amount on the 2017 Notes at $0.50 per share. The warrants in the January 31, 2018 Offering, had an original exercise price of $1.00 per share, therefore, due to the reduction of exercise price to $0.75 per share, and the reduction in the conversion rate of the 2017 notes form $0.75 to $0.50 per share, the Company recognized a non-cash inducement interest expense of approximately $2.4 million due to these modifications. In connection with this offering, the Company paid a commission of $164,425 to the placement agent.

In connection with the November 24, 2017 Offer to amend and exercise certain eligible warrants at a reduced exercise price of $0.50 per share of common stock, as fully described in Note 6 above, on March 23, 2018, the Company issued 556,678 shares of common stock to warrant holders who participated in the Offer, in exchange for their eligible warrants, pursuant to an effective registration statement.

On May 22, 2018, the Company entered into subscription agreements with certain investors for the sale of 4,640,000 shares of common stock at a purchase price of $0.50 per shares in a registered direct offering (the “May 22 Offering”), pursuant to a registration statement on Form S-3. The investors in the May 22 Offering also received warrants to purchase 4,640,000 shares of common stock with a five-year term and an exercise price of $0.75 per share. The Company received net proceeds from the May 22 Offering of approximately $2.1 million. In addition, the placement agent received warrants covering 315,200 shares of common stock (or 8% of total shares sold to investors, for which they introduced to the May 22 Offering) with a five-year term and an exercise price of $0.55 per share, including a cashless exercise provision.