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Note 9 - March 2014 Financing
3 Months Ended
Mar. 31, 2014
Disclosure Text Block Supplement [Abstract]  
Preferred Stock [Text Block]

Note 9—March 2014 Financing


In March 2014, the Company had signed agreements to raise $11,720 (“March 2014 Financing”) through the sale of its newly designated Series C 8% Convertible Preferred Stock (the “Preferred C Stock”), convertible into shares of the Company’s common stock, at an initial conversion price per share equal to the lower of $3.40 and 85% of the offering price in a future public equity offering of at least $10,000, a five-year warrant to purchase 50% or 100% (as per the agreement with each investor) of a share of common stock at an exercise price equal to the lower of $4.25 and 125% of the conversion price of the Preferred Stock then in effect, and a five-year warrant to purchase 50% or 100% (as per the agreement with each investor) of its shares of common stock, at an exercise price equal to the lower of $5.10 and 150% of the conversion price of the Preferred C Stock then in effect (collectively, the “March 2014 Warrants”). As of March 31, 2014, one investor defaulted on payments of $1,000 under a short-term promissory note, resulting in rejection by the Company of the investor’s subscription, and two board members who participated in the March 2014 Financing and paid for their securities by fees earned for service as members of the board of directors, reduced their subscriptions by $20 each, resulting in the cancellation of an aggregate of 40 shares of Preferred C Stock and the related warrants.


As of March 31, 2014, the Company received total net proceeds of approximately $10,171 after deduction of related fees and expenses of $180 of which were allocated to the value of Preferred C Stock, and $329 which was offset of existing debt to the Company’s employees, consultants, officers and directors. Additional expenses of $408 were allocated to the March 2014 Warrants and recorded in the statement of operations during the period. Included in net proceeds received, is the deposit for future financing of $500 the Company received in November and December 2013. In addition a total of $29 is being deducted in up to four monthly payments from certain non-officer employees.


The March 2014 Warrants were accounted for as a derivative liability, as both the exercise price and the number of warrants issued is subject to certain anti-dilution adjustments. See Notes 3 and 10. Therefore, on March 10, 2014 (agreement date), the March 2014 Warrants were accounted for at fair value of $7,404. The Preferred C Stock was recorded as the difference between overall consideration and the value of the March 2014 Warrants on grant date. A total amount of $3,096 was accounted for as mezzanine equity according to ASC 480 “Distinguishing Liabilities from Equity, as such shares bear clauses allowing for a future adjustment to the number of shares issued to investors. As per above, such adjustment may only increase the number of shares issued, as the conversion price may only be reduced from the initially set level of $3.40. On the issuance date the value ascribed to Preferred C Stock was the difference between the amount raised and the fair value of the March 2014 Warrants.


For subsequent events see Note 16.