x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Florida
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26-2792552
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(State or other jurisdiction of incorporation)
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(I.R.S. Employer Identification Number)
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60 Chastain Center Blvd., Suite 60
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Kennesaw, GA
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30144
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company T
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(Do not check if a smaller reporting company)
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Part I FINANCIAL INFORMATION | ||
Item 1
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Condensed Consolidated Financial Statements
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Condensed Consolidated Balance Sheets (unaudited) June 30, 2012 and December 31, 2011 |
3
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4
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5
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6
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8
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Item 2
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23
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Item 3
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31
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Item 4
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31
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Part II OTHER INFORMATION | ||
Item 1
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31
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Item 1A
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31
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Item 2
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32
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Item 3
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32
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Item 4
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32
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Item 5
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32
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Item 6
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32
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33
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June 30,
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||||||||
2012
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December 31,
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|||||||
(unaudited)
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2011
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|||||||
Current assets:
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||||||||
Cash and cash equivalents
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$ | 2,654,694 | $ | 4,112,326 | ||||
Accounts receivable, net
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3,946,333 | 1,891,919 | ||||||
Inventory, net
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961,939 | 712,602 | ||||||
Prepaid expenses and other current assets
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292,223 | 164,664 | ||||||
Total current assets
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7,855,189 | 6,881,511 | ||||||
Property and equipment, net of accumulated depreciation of $2,045,964 and $1,814,473, respectively
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948,720 | 869,411 | ||||||
Goodwill
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4,040,443 | 4,040,443 | ||||||
Intangible assets, net of accumulated amortization of $4,136,469 and $3,468,515, respectively
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14,422,531 | 15,090,485 | ||||||
Deposits and other long term assets
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204,803 | 214,342 | ||||||
Total assets
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$ | 27,471,686 | $ | 27,096,192 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||
Current liabilities:
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||||||||
Accounts payable and accrued expenses
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$ | 1,902,349 | $ | 2,300,638 | ||||
Other current liabilities
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69,981 | 6,620 | ||||||
Convertible line of credit with related party, net of unamortized discount of $398,899 and $46,746, respectively, plus accrued interest of $75,137 and $42,726, respectively
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976,238 | 1,295,980 | ||||||
Convertible debt related to acquisition, net of unamortized discount of $3,821 and $170,509, respectively, plus accrued interest of $69,808 and $49,315, respectively
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1,065,987 | 1,128,806 | ||||||
Current portion of earn-out liability payable In MiMedx common stock
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4,225,280 | 3,185,223 | ||||||
Total current liabilities
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8,239,835 | 7,917,267 | ||||||
Earn-out liability payable in MiMedx common stock, net of current portion
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- | 4,225,280 | ||||||
Convertible Senior Secured Promissory Notes, net of unamortized discount of $1,818,446 and $2,263,145, respectively, plus accrued interest of $61,933 and $7,732, respectively
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3,243,487 | 2,744,587 | ||||||
Other liabilities
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320,055 | 312,493 | ||||||
Total liabilities
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11,803,377 | 15,199,627 | ||||||
Commitments and contingencies (Note 12)
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- | - | ||||||
Stockholders' equity:
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||||||||
Preferred stock; $.001 par value; 5,000,000shares authorized and 0 shares issued and outstanding
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- | - | ||||||
Common stock; $.001 par value; 110,000,000 shares authorized; 81,052,359 issued and 81,002,359 outstanding for 2012 and 74,306,895 issued and 74,256,895 outstanding for 2011
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81,052 | 74,307 | ||||||
Additional paid-in capital
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79,471,324 | 73,868,604 | ||||||
Treasury stock (50,000 shares at cost)
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(25,000 | ) | (25,000 | ) | ||||
Accumulated deficit
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(63,859,067 | ) | (62,021,346 | ) | ||||
Total stockholders' equity
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15,668,309 | 11,896,565 | ||||||
Total liabilities and stockholders' equity
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$ | 27,471,686 | $ | 27,096,192 |
Three Months Ended June 30,
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Six Months Ended June 30, | |||||||||||||||
2012
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2011
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2012
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2011
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|||||||||||||
REVENUES:
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||||||||||||||||
Net sales
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$ | 4,884,256 | $ | 1,929,399 | $ | 8,590,064 | $ | 2,972,886 | ||||||||
OPERATING COSTS AND EXPENSES:
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||||||||||||||||
Cost of products sold
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1,114,926 | 844,941 | 2,073,781 | 1,555,058 | ||||||||||||
Research and development expenses
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503,086 | 791,952 | 910,158 | 1,754,176 | ||||||||||||
Selling, general and administrative expenses
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3,383,760 | 2,708,941 | 6,355,006 | 5,336,435 | ||||||||||||
LOSS FROM OPERATIONS
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(117,516 | ) | (2,416,435 | ) | (748,881 | ) | (5,672,783 | ) | ||||||||
OTHER INCOME (EXPENSE), net
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||||||||||||||||
Financing expense associated with the debt discount recognized in connection with the senior secured promissory notes
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(472,749 | ) | (60,599 | ) | (783,226 | ) | (133,517 | ) | ||||||||
Interest expense, net
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(153,804 | ) | (26,471 | ) | (305,614 | ) | (44,767 | ) | ||||||||
LOSS BEFORE INCOME TAXES
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(744,069 | ) | (2,503,505 | ) | (1,837,721 | ) | (5,851,067 | ) | ||||||||
Income taxes
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- | - | - | - | ||||||||||||
NET LOSS
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$ | (744,069 | ) | $ | (2,503,505 | ) | $ | (1,837,721 | ) | $ | (5,851,067 | ) | ||||
Net loss per common share
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||||||||||||||||
Basic and diluted
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$ | (0.01 | ) | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.08 | ) | ||||
Shares used in computing net loss per common share
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||||||||||||||||
Basic and diluted
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79,952,542 | 71,819,017 | 77,416,073 | 71,098,976 |
Convertible
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||||||||||||||||||||||||||||||||
Preferred Stock
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Additional
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|||||||||||||||||||||||||||||||
Series A
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Common Stock
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Paid-in
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Treasury
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Accumulated
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||||||||||||||||||||||||||||
Shares
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Amount
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Shares
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Amount
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Capital
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Stock
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Deficit
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Total
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|||||||||||||||||||||||||
Balances, December 31, 2011
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- | $ | - | 74,306,895 | $ | 74,307 | $ | 73,868,604 | $ | (25,000 | ) | $ | (62,021,346 | ) | $ | 11,896,565 | ||||||||||||||||
Employee share-based compensation expense
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- | - | - | - | 878,491 | - | - | 878,491 | ||||||||||||||||||||||||
Other share-based compensation expense
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- | - | - | - | 207,709 | - | - | 207,709 | ||||||||||||||||||||||||
Exercise of stock options
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- | - | 324,750 | 325 | 314,970 | - | - | 315,295 | ||||||||||||||||||||||||
Exercise of warrants
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- | - | 3,453,869 | 3,453 | 320,185 | - | - | 323,638 | ||||||||||||||||||||||||
Cashless exercise of warrants
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- | - | 167,183 | 167 | (167 | ) | - | - | - | |||||||||||||||||||||||
Common stock issued for accrued Director fees
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- | - | 167,086 | 167 | 184,486 | - | - | 184,653 | ||||||||||||||||||||||||
Common stock issued for Earn-out liability
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- | - | 2,632,576 | 2,633 | 3,182,590 | - | - | 3,185,223 | ||||||||||||||||||||||||
Discount on benefical conversion feature recognized on line of credit with related party
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- | - | - | - | 514,456 | - | - | 514,456 | ||||||||||||||||||||||||
Net loss for the peiod
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- | - | - | - | - | - | (1,837,721 | ) | (1,837,721 | ) | ||||||||||||||||||||||
Balances, June 30, 2012
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- | $ | - | 81,052,359 | $ | 81,052 | $ | 79,471,324 | $ | (25,000 | ) | $ | (63,859,067 | ) | $ | 15,668,309 |
Six Months Ended June 30,
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||||||||
2012
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2011
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|||||||
Cash flows from operating activities:
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||||||||
Net loss
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$ | (1,837,721 | ) | $ | (5,851,067 | ) | ||
Adjustments to reconcile net loss to net cash flows from operating activities:
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||||||||
Depreciation
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231,491 | 231,862 | ||||||
Amortization of intangible assets
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667,954 | 667,954 | ||||||
Amortization of debt discount and deferred financing costs
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783,226 | 133,517 | ||||||
Employee share-based compensation expense
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878,491 | 809,469 | ||||||
Other share-based compensation expense
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207,709 | 222,208 | ||||||
Increase (decrease) in cash resulting from changes in (net of effects of acquisition):
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||||||||
Accounts receivable
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(2,054,414 | ) | (559,044 | ) | ||||
Inventory
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(249,337 | ) | (103,257 | ) | ||||
Prepaid expenses and other current assets
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(127,559 | ) | (140,508 | ) | ||||
Accounts payable and accrued expenses
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(338,636 | ) | 574,521 | |||||
Accrued interest
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232,107 | 37,698 | ||||||
Other liabilities
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7,878 | 57,127 | ||||||
Net cash flows from operating activities
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(1,598,811 | ) | (3,919,520 | ) | ||||
Cash flows from investing activities:
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||||||||
Purchases of equipment
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(238,498 | ) | (143,427 | ) | ||||
Cash paid for acquisition, net of cash aquired of $33,583
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- | (466,417 | ) | |||||
Net cash flows from investing activities
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(238,498 | ) | (609,844 | ) | ||||
Cash flows from financing activities:
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||||||||
Proceeds from exercise of warrants
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323,638 | - | ||||||
Proceeds from exercise of stock options
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315,295 | 3 | ||||||
Repayment of Convertible Debt related to acquisition
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(250,000 | ) | - | |||||
Repayment of Equipment Lease
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(9,256 | ) | - | |||||
Proceeds from Line of Credit with related party
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- | 1,300,000 | ||||||
Repayment of Line of Credit
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- | (99,000 | ) | |||||
Repayment of Note Payable
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- | (30,932 | ) | |||||
Proceeds from sale of common stock and warrants and common stock with registration rights, net
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- | 3,632,721 | ||||||
Net cash flows from financing activities
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379,677 | 4,802,792 | ||||||
Net change in cash
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(1,457,632 | ) | 273,428 | |||||
Cash, beginning of period
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4,112,326 | 1,340,922 | ||||||
Cash, end of period
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$ | 2,654,694 | $ | 1,614,350 | ||||
Supplemental disclosure of cash flow information:
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||||||||
Cash paid for interest
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$ | 5,435 | $ | 2,833 | ||||
Cash paid for income taxes
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$ | - | $ | - |
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*
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the Company issued 167,086 shares of stock valued at $184,653 for accrued Director's fees
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*
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the Company issued 167,183 shares of stock for cashless exercise of warrants
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*
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the Company recognized $9,537 in deferred financing costs related to placement agent warrants issued in conjunction with the convertible Senior Promissory Notes
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*
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the Company recognized a beneficial conversion feature valued at $514,456 related to the vested contingent warrants on the line of credit with related party
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*
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the Company issued 2,632,576 shares of stock valued at $3,185,223 for payment of the 2011 Earn-out liability related to its acquisition of Surgical Biologics
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*
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the Company acquired equipment under a captial lease in the amount of $72,302
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*
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the Company converted its outstanding convertible debt and accrued interest to equity by issuing 406,664 shares of common stock
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*
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the Company issued 5,250,000 shares of stock valued at $7,087,500 in conjunction with its acquisition of Surgical Biologics, LLC
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*
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the Company recognized a beneficial conversion feature valued at $437,500 related to the convertible debt of $1,250,000 issued with regard to its acquisition of Surgical Biologics
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*
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the Company recognized a beneficial conversion feature valued at $80,000 related to the convertible Line of Credit with a related party
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1.
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Basis of Presentation
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2.
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Significant accounting policies
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Three months ended June 30,
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Six months ended June 30,
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|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Net loss
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$ | (744,069 | ) | $ | (2,503,505 | ) | $ | (1,837,721 | ) | $ | (5,851,067 | ) | ||||
Denominator for basic earnings per share - weighted average shares
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79,952,542 | 71,819,017 | 77,416,073 | 71,098,976 | ||||||||||||
Effect of dilutive securities: Stock options and warrants outstanding and convertible debt (a)
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— | — | — | — | ||||||||||||
Denominator for diluted earnings per share - weighted average shares adjusted for dilutive securities
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79,952,542 | 71,819,017 | 77,416,073 | 71,098,976 | ||||||||||||
Loss per common share - basic and diluted
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$ | (0.01 | ) | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.08 | ) |
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(a)
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Securities outstanding that were excluded from the computation, because they would have been anti-dilutive are as follows:
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June 30, 2012
|
June 30, 2011
|
|||||||
Outstanding Stock Options
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12,794,250 | 10,434,667 | ||||||
Outstanding Warrants
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7,763,817 | 8,023,917 | ||||||
Convertible Debt, promissory notes
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5,186,933 | — | ||||||
Convertible Line of Credit with Related Party
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1,375,137 | 1,300,000 | ||||||
Convertible Debt, Acquisition
|
1,069,808 | 1,250,000 | ||||||
28,189,945 | 21,008,584 |
3.
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Liquidity and management’s plans
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4.
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Acquisition of Surgical Biologics, LLC
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Value of 5,250,000 shares issued at $1.35 per share
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$ | 7,087,500 | ||
Cash paid at closing
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350,000 | |||
Cash retained for working capital
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150,000 | |||
Assumed Debt
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182,777 | |||
Convertible Secured Promissory Note
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1,250,000 | |||
Fair value of earn-out
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7,404,700 | |||
Total fair value of purchase price
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$ | 16,424,977 | ||
Assets purchased:
|
||||
Tangible assets:
|
||||
Debt-free working capital
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$ | 671,880 | ||
Other assets, net
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385 | |||
Property, plant and equipment
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72,866 | |||
745,131 | ||||
Intangible assets:
|
||||
Customer relationships
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3,520,000 | |||
Supplier relationships
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241,000 | |||
Patents and know-how
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5,530,000 | |||
Trade names and trademarks
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1,008,000 | |||
In-process research and development – liquid
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2,160,000 | |||
In-process research and development – other
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25,000 | |||
Licenses and permits
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13,000 | |||
12,497,000 | ||||
Goodwill
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3,182,846 | |||
Total Assets Purchased
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$ | 16,424,977 |
Working capital:
|
||||
Cash
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$ | 33,583 | ||
Prepaid Expenses
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2,738 | |||
Accounts Receivable
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181,087 | |||
License Receivable
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340,000 | |||
Inventory
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347,106 | |||
Accounts payable and accrued expenses
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(196,101 | ) | ||
Deferred rent and customer deposits
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(36,533 | ) | ||
Debt-free working capital
|
671,880 | |||
Current portion of debt
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(62,590 | ) | ||
Long-term debt
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(21,187 | ) | ||
Line of credit
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(99,000 | ) | ||
Net working capital
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$ | 489,103 | ||
Deposits
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$ | 16,582 | ||
Deferred rent (non-current)
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(16,197 | ) | ||
$ | 385 |
Estimated useful
|
|||
Intangible asset:
|
life (in years)
|
||
Customer relationships
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14 | ||
Supplier relationships
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14 | ||
Patents and know-how
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14 | ||
Trade names and trademarks
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indefinite
|
||
In-process research and development – liquid
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indefinite
|
||
In-process research and development – other
|
indefinite
|
||
Licenses and permits
|
3 |
5.
|
Inventories
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June 30, 2012
|
December 31, 2011
|
|||||||
Raw materials
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$ | 186,707 | $ | 95,288 | ||||
Work in process
|
492,017 | 308,763 | ||||||
Finished goods
|
338,070 | 361,007 | ||||||
$ | 1,016,794 | $ | 765,058 | |||||
Reserve for obsolescence
|
(54,855 | ) | (52,456 | ) | ||||
Inventory, net
|
$ | 961,939 | $ | 712,602 |
6.
|
Property and equipment
|
June 30, 2012
|
December 31, 2011
|
|||||||
Leasehold improvements
|
$ | 978,550 | $ | 925,086 | ||||
Lab and clean room equipment (a)
|
1,660,399 | 1,463,144 | ||||||
Furniture and office equipment (a)
|
355,735 | 295,654 | ||||||
2,994,684 | 2,683,884 | |||||||
Less accumulated depreciation
|
(2,045,964 | ) | (1,814,473 | ) | ||||
$ | 948,720 | $ | 869,411 |
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(a)
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The table above includes reclassifications of production equipment previously included in the furniture and office equipment category.
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7.
|
Intangible assets and royalty agreement
|
June 30, 2012
|
December 31, 2011
|
||||||||||||||||||||||||
Weighted
|
|||||||||||||||||||||||||
Average
|
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
Amortization
|
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||
Lives
|
Value
|
Amortization
|
Value
|
Value
|
Amortization
|
Value
|
|||||||||||||||||||
Intangible assets subject to amortization:
|
|||||||||||||||||||||||||
License-Shriners Hsp for Children & USF Research (a)
|
10 years
|
$ | 996,000 | $ | (537,833 | ) | $ | 458,167 | $ | 996,000 | $ | (488,033 | ) | $ | 507,967 | ||||||||||
License - SaluMedica LLC Spine Repair (b)
|
10 years
|
2,399,000 | (1,461,581 | ) | 937,419 | 2,399,000 | (1,313,573 | ) | 1,085,427 | ||||||||||||||||
License - Polyvinyl Alcohol Cryogel (c)
|
10 years
|
2,667,000 | (1,135,091 | ) | 1,531,909 | 2,667,000 | (998,932 | ) | 1,668,068 | ||||||||||||||||
Customer Relationships (d)
|
14 years
|
3,520,000 | (377,143 | ) | 3,142,857 | 3,520,000 | (251,429 | ) | 3,268,571 | ||||||||||||||||
Supplier Relationships (d)
|
14 years
|
241,000 | (25,821 | ) | 215,179 | 241,000 | (17,215 | ) | 223,785 | ||||||||||||||||
Patents & Know-How (d)
|
14 years
|
5,530,000 | (592,500 | ) | 4,937,500 | 5,530,000 | (395,000 | ) | 5,135,000 | ||||||||||||||||
Licenses/Permits (d)
|
3 years
|
13,000 | (6,500 | ) | 6,500 | 13,000 | (4,333 | ) | 8,667 | ||||||||||||||||
15,366,000 | (4,136,469 | ) | 11,229,531 | 15,366,000 | (3,468,515 | ) | 11,897,485 | ||||||||||||||||||
Intangible assets not subject to amortization:
|
|||||||||||||||||||||||||
Trade Names/Trademarks (d)
|
indefinite
|
1,008,000 | — | 1,008,000 | 1,008,000 | — | 1,008,000 | ||||||||||||||||||
In-process Research & Development-Liquid (d)
|
indefinite
|
2,160,000 | — | 2,160,000 | 2,160,000 | — | 2,160,000 | ||||||||||||||||||
In-process Research & Development-Other (d)
|
indefinite
|
25,000 | — | 25,000 | 25,000 | — | 25,000 | ||||||||||||||||||
$ | 18,559,000 | $ | (4,136,469 | ) | $ | 14,422,531 | $ | 18,559,000 | $ | (3,468,515 | ) | $ | 15,090,485 |
|
(a)
|
On January 29, 2007, the Company acquired a license from Shriners Hospitals for Children and University of South Florida Research Foundation, Inc. The acquisition price of this license was a one-time fee of $100,000 and 1,120,000 shares of common stock valued at $896,000 (based upon the estimated fair value of the common stock on the transaction date). Within 30 days after the receipt by the Company of approval by the FDA allowing the sale of the first licensed product, the Company is required to pay an additional $200,000 to the licensor. Due to its contingent nature, this amount is not recorded as a liability. The Company will also be required to pay a royalty of 3% on all commercial sales revenue from the licensed products.
|
|
(b)
|
License from SaluMedica, LLC (SaluMedica) for the use of certain developed technologies related to spine repair. This license was acquired through the acquisition of SpineMedica Corp.
|
|
(c)
|
On March 31, 2008, the Company entered into a license agreement for the use of certain developed technologies related to surgical sheets made of polyvinyl alcohol cryogel. The acquisition price of the asset was 400,000 shares of common stock valued at $2,596,000 (based upon the closing price of the common stock on the transaction date). The agreement also provides for the issuance of an additional 600,000 shares upon the Company meeting certain milestones related to future sales. On December 31, 2009, the Company completed the sale of its first commercial product and met its first milestone under this agreement. As a result, the Company issued an additional 100,000 shares of common stock to the licensor valued at $71,000. At June 30, 2012 and 2011, there are no additional amounts accrued for this obligation due to its contingent nature.
|
|
(d)
|
On January 5, 2011, the Company acquired Surgical Biologics, LLC. As a result, the Company recorded intangible assets for customer and supplier relationships, patents and know-how, licenses/permits, trade names and trademarks and in-process research and development.
|
Year ending December 31,
|
Estimated
Amortization
Expense
|
|||
2012 (a)
|
$ | 667,955 | ||
2013
|
1,335,909 | |||
2014
|
1,331,575 | |||
2015
|
1,225,337 | |||
2016
|
1,024,843 | |||
Thereafter
|
5,643,912 | |||
$ | 11,229,531 |
|
(a)
|
Estimated amortization expense for the year ending December 31, 2012 includes only amortization to be recorded after June 30, 2012.
|
8.
|
Debt
|
Convertible Line
of Credit with
Related Party
|
Convertible
Senior Secured
Promissory Note
|
Total
|
||||||||||
Face Value of Note
|
$ | 1,300,000 | $ | 5,000,000 | $ | 6,300,000 | ||||||
Due date
|
(a)
|
12/31/2012
|
(b)
|
12/31/2013
|
||||||||
Annual Interest rate
|
5 | % | 5 | % | ||||||||
Contingent warrants issued at inception (c):
|
||||||||||||
First Contingent Warrants
|
(d)
|
325,000 |
(e)
|
1,250,000 | 1,575,000 | |||||||
Second Contingent Warrants
|
(f)
|
325,000 |
(f)
|
1,250,000 | 1,575,000 | |||||||
Total Contingent Warrants
|
650,000 | 2,500,000 | 3,150,000 | |||||||||
Vested Warrants as of June 30, 2012:
|
||||||||||||
First Contingent Warrants
|
(d)
|
(325,000 | ) |
(e)
|
(1,250,000 | ) | (1,575,000 | ) | ||||
Second Contingent Warrants
|
— | — | — | |||||||||
Contingent Warrants Outstanding as of June 30, 2012 (g)
|
||||||||||||
First Contingent Warrants
|
— | — | — | |||||||||
Second Contingent Warrants
|
325,000 | 1,250,000 | 1,575,000 | |||||||||
Total Contingent Warrants Outstanding as of June 30, 2012
|
$ | 325,000 | $ | 1,250,000 | $ | 1,575,000 | ||||||
Weighted average exercise price of warrants
|
$ | 0.01 | $ | 0.01 |
(a)
|
The initial termination date of the Credit Agreement is December 31, 2012 and the Company may elect to extend the termination date until December 31, 2013 upon payment of an extension fee of 5% of the outstanding principle balance or $65,000.
|
(b)
|
Unless the Company has repaid the applicable lender’s Notes in full prior to December 31, 2012, the Company must pay to each lender an additional interest payment in the amount of five percent (5%) of the aggregate outstanding principal amount of such lender’s Notes as of December 31, 2012.
|
(c)
|
The Contingent Warrants have a term of five years from the date of issuance; however each is subject to automatic terminations as defined in the First Contingent Warrant and Second Contingent Warrant terms. The shares of Common Stock issuable upon exercise of the Contingent Warrants do not carry registration rights and may be exercised on a “cashless” basis. In the event of a change in control transaction on or prior to the First Measurement Date, then the Contingent Warrants shall be exercisable immediately prior to the closing of such change in control transaction. In the event (i) of a change in control transaction after the First Measurement Date and on or prior to the Second Measurement Date and (ii) the per share value of the consideration received by the holders of Common Stock in such change in control transaction is at least $1.75, the Second Contingent Warrant shall be null and void. If the value of the per share consideration received by the holders of Common Stock in such transaction is less than $1.75, the Second Contingent Warrant shall be exercisable immediately prior to the closing of such change in control transaction.
|
(d)
|
The First Contingent Warrant, (the “First Contingent Warrant”) is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the First Contingent Warrant shall only be exercisable if the Company’s Gross Revenue as reported in the Company’s Audited Financial Statements for the year ended December 31, 2011, do not equal or exceed $11,500,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the “First Measurement Date”) the closing trading price of the Stock is at least $1.50 per share for ten or more consecutive trading days. As of March 31, 2012, the First Contingent Warrants vested due to the Company’s Gross Revenue not exceeding $11,500,000 for the year ended December 31, 2011, and due to the closing trading price of the stock not equaling or exceeding $1.50 per share for ten or more consecutive trading days.
|
(e)
|
The First Contingent Warrant, (the “First Contingent Warrant”) is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the First Contingent Warrant shall only be exercisable if the Company’s Gross Revenue as reported in the Company’s Audited Financial Statements for the year ended December 31, 2011, do not equal or exceed $11,500,000. As of December 31, 2011, the First Contingent warrants vested due to the Company’s Gross Revenue not exceeding $11,500,000 for the year ended December 31, 2011.
|
(f)
|
The Second Contingent Warrant, (the “Second Contingent Warrant”) is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the Second Contingent Warrant shall only be exercisable if the Company’s Gross Revenue as reported in the Company’s Audited Financial Statements for the year ended December 31, 2012, do not equal or exceed $31,150,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the “Second Measurement Date”) the closing trading price of the Stock is at least $1.75 per share for ten or more consecutive trading days.
|
(g)
|
The contingent warrants have not been included in our earnings per share calculation per the guidance in ASC 260-10-45-13 Earnings per share: Treatment of Contingently Issuable Shares in Weighted-Average Shares Outstanding which states that shares issuable for little or no cash consideration upon the satisfaction of certain conditions (contingently issuable shares) shall be considered outstanding common shares and included in the computation of basic EPS as of the date that all necessary conditions have been satisfied (in essence, when issuance of the shares is no longer contingent).
|
9.
|
Common Stock Placements
|
10.
|
Equity
|
Number of
Shares
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
(in years)
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Outstanding at January 1, 2012
|
10,333,583 | $ | 1.17 | |||||||||||||
Granted
|
2,948,000 | $ | 1.26 | |||||||||||||
Exercised
|
(324,750 | ) | $ | 0.98 | ||||||||||||
Forfeited or cancelled/expired
|
(162,583 | ) | $ | 1.11 | ||||||||||||
Outstanding at June 30, 2012
|
12,794,250 | $ | 1.20 | 7.3 | $ | 11,728,020 | ||||||||||
Vested or expected to vest at June 30, 2012
|
7,106,810 | $ | 1.17 | 5.9 | $ | 6,763,936 |
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||
Range of Exercise Prices
|
Number
outstanding
|
Weighted-
Average
Remaining
Contractual
Term
(in years)
|
Weighted-
Average
Exercise Price
|
Number
Exercisable
|
Weighted-
Average
Exercise Price
|
|||||||||||||||||
$ | 0.50 | 566,250 | 2.4 | $ | 0.50 | 554,223 | $ | 0.50 | ||||||||||||||
$ | 0.65 - $1.00 | 2,717,500 | 5.6 | $ | 0.78 | 2,624,179 | $ | 0.78 | ||||||||||||||
$ | 1.04 - $1.80 | 8,960,500 | 8.7 | $ | 1.29 | 3,378,408 | $ | 1.39 | ||||||||||||||
$ | 2.40 | 550,000 | 0.2 | $ | 2.40 | 550,000 | $ | 2.40 | ||||||||||||||
12,794,250 | 7.3 | $ | 1.20 | 7,106,810 | $ | 1.17 |
Number of
Shares
|
Weighted-
Average
Grant Date Fair Value
|
|||||||
Unvested at January 1, 2012
|
4,333,086 | $ | 0.72 | |||||
Granted
|
2,948,000 | $ | 0.67 | |||||
Cancelled/expired
|
(162,583 | ) | $ | 0.68 | ||||
Vested
|
(1,431,063 | ) | $ | 0.74 | ||||
Unvested at June 30, 2012
|
5,687,440 | $ | 0.69 |
Six months ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Expected volatility
|
58.31 - 59.04 | % | 57.3 - 57.6 | % | ||||
Expected life (in years)
|
6 | 6 | ||||||
Expected dividend yield
|
— | — | ||||||
Risk-free interest rate
|
0.62% - 1.22 | % | 1.48% - 2.24 | % |
Number of
Warrants
|
Weighted-
Average
Exercise
Price per
Warrant
|
Number of
Contingent
Warrants
|
Weighted-
Average
Exercise
Price per
Contingent
Warrant
|
|||||||||||||
Warrants outstanding at January 1, 2012
|
9,388,817 | $ | 1.00 | 5,245,484 | $ | 0.01 | ||||||||||
Issued in connection with private placement of common stock
|
1,672,743 | $ | 0.01 | (1,672,743 | ) | $ | 0.01 | |||||||||
Issued in connection with line of credit with related party
|
325,000 | $ | 0.01 | (325,000 | ) | $ | 0.01 | |||||||||
Warrants exercised
|
(3,621,052 | ) | $ | 0.09 | — | — | ||||||||||
Warrants redeemed for cashless exercises
|
(1,691 | ) | $ | 0.09 | — | — | ||||||||||
Warrants outstanding at June 30, 2012
|
7,763,817 | $ | 1.17 | 3,247,741 | $ | 0.01 |
|
·
|
notice given by the holder accompanied by payment of an amount equal to the warrant exercise price multiplied by the number of warrant shares being purchased; or
|
|
·
|
election by the holder to exchange the warrant (or portion thereof) for that number of shares equal to the product of (a) the number of shares issuable upon exercise of the warrant (or portion) and (b) a fraction, (x) the numerator of which is the market price of the shares at the time of exercise minus the warrant exercise price per share at the time of exercise and (y) the denominator of which is the market price per share at the time of exercise.
|
11.
|
Income taxes
|
12.
|
Contractual Commitments
|
12-month period ended June 30,
|
||||
2013
|
$ | 730,000 | ||
2014
|
212,000 | |||
Thereafter
|
102,000 | |||
$ | 1,044,000 |
13.
|
Subsequent Events
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Three Months Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Cost of products sold
|
$ | 38,000 | $ | 26,000 | ||||
Research and development
|
30,000 | 31,000 | ||||||
Selling, general and administrative
|
53,000 | 58,000 | ||||||
$ | 121,000 | $ | 115,000 |
Three Months Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Cost of products sold
|
$ | 29,000 | $ | 30,000 | ||||
Research and development
|
76,000 | 98,000 | ||||||
Selling, General and administrative
|
480,000 | 416,000 | ||||||
$ | 585,000 | $ | 544,000 |
Three Months Ended June 30,
|
||||||||||||||||||||||||||||||||
2012
|
2011
|
|||||||||||||||||||||||||||||||
Debt
Discount
|
Accrued
Interest
|
Interest
Expense,
net
|
Total
|
Debt
Discount
|
Accrued
Interest
|
Interest
Expense,
net
|
Total
|
|||||||||||||||||||||||||
Convertible Line of Credit with Related Party
|
$ | 151,000 | $ | 16,000 | $ | — | $ | 167,000 | $ | 11,000 | $ | 10,000 | $ | — | $ | 21,000 | ||||||||||||||||
Convertible Debt related to acquisition
|
86,000 | 10,000 | — | 96,000 | 50,000 | 12,000 | — | 62,000 | ||||||||||||||||||||||||
Convertible Senior Secured
|
||||||||||||||||||||||||||||||||
Promissory Notes
|
231,000 | 125,000 | — | 356,000 | — | — | — | — | ||||||||||||||||||||||||
Deferred financing related to Senior Secured Promissory Notes
|
5,000 | — | — | 5,000 | — | — | — | — | ||||||||||||||||||||||||
Other
|
— | — | 3,000 | 3,000 | — | — | 4,000 | 4,000 | ||||||||||||||||||||||||
$ | 473,000 | $ | 151,000 | $ | 3,000 | $ | 627,000 | $ | 61,000 | $ | 22,000 | $ | 4,000 | $ | 87,000 |
Six Months Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Cost of products sold
|
$ | 73,000 | $ | 53,000 | ||||
Research and development
|
60,000 | 59,000 | ||||||
Selling, general and administrative
|
98,000 | 120,000 | ||||||
$ | 231,000 | $ | 232,000 |
Six Months Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Cost of products sold
|
$ | 53,000 | $ | 54,000 | ||||
Research and development
|
147,000 | 185,000 | ||||||
Selling, General and administrative
|
886,000 | 793,000 | ||||||
$ | 1,086,000 | $ | 1,032,000 |
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||
2012
|
2011
|
|||||||||||||||||||||||||||||||
Debt
Discount
|
Accrued
Interest
|
Interest
Expense,
net
|
Total
|
Debt
Discount
|
Accrued
Interest
|
Interest
Expense,
net
|
Total
|
|||||||||||||||||||||||||
Convertible Line of Credit with Related Party
|
$ | 162,000 | $ | 32,000 | $ | — | $ | 194,000 | $ | 11,000 | $ | 10,000 | $ | — | $ | 21,000 | ||||||||||||||||
Convertible Debt related to acquisition
|
167,000 | 20,000 | — | 187,000 | 123,000 | 24,000 | — | 147,000 | ||||||||||||||||||||||||
Convertible Senior Secured Promissory Notes
|
445,000 | 248,000 | — | 693,000 | — | — | — | — | ||||||||||||||||||||||||
Deferred financing related to Senior Secured Promissory Notes
|
10,000 | — | — | 10,000 | — | — | — | — | ||||||||||||||||||||||||
Other
|
— | — | 5,000 | 5,000 | — | — | 10,000 | 10,000 | ||||||||||||||||||||||||
$ | 784,000 | $ | 300,000 | $ | 5,000 | $ | 1,089,000 | $ | 134,000 | $ | 34,000 | $ | 10,000 | $ | 178,000 |
Payments due by period
|
||||||||||||||||||||
Contractual Obligations
|
TOTAL
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
|||||||||||||||
Convertible senior secured promissory notes
|
$ | 5,000,000 | — | $ | 5,000,000 | — | — | |||||||||||||
Convertible debt, line of credit with related party
|
1,300,000 | 1,300,000 | — | — | — | |||||||||||||||
Convertible debt, note related to acquisition of SB
|
1,000,000 | 1,000,000 | — | — | — | |||||||||||||||
Employment agreements
|
211,466 | 211,466 | — | — | — | |||||||||||||||
Operating lease obligations
|
737,000 | 423,000 | 314,000 | — | — | |||||||||||||||
Royalty payments
|
95,000 | 95,000 | — | — | — | |||||||||||||||
$ | 8,343,466 | $ | 3,029,466 | $ | 5,314,000 | — | — |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Net Loss (Per GAAP)
|
$ | (744,069 | ) | $ | (2,503,505 | ) | $ | (1,837,721 | ) | $ | (5,851,067 | ) | ||||
Add back:
|
||||||||||||||||
Income Taxes
|
- | - | - | - | ||||||||||||
Financing expense associated with beneficial conversion of note payable issued in conjunction with acquisition
|
86,335 | 60,599 | 166,688 | 133,517 | ||||||||||||
Deferred financing related to Senior of Credit with Related Party
|
150,880 | - | 162,303 | - | ||||||||||||
Financing expense associated with beneficial conversion of Senior Secured Promissory Note
|
230,744 | - | 444,698 | - | ||||||||||||
Other interest expense, net
|
158,594 | 26,471 | 315,151 | 34,809 | ||||||||||||
Depreciation Expense
|
121,103 | 115,682 | 231,491 | 231,862 | ||||||||||||
Amortization Expense
|
333,977 | 333,977 | 667,954 | 667,954 | ||||||||||||
Employee Share Based Compensation
|
478,442 | 429,096 | 878,491 | 809,469 | ||||||||||||
Other Share Based Compensation
|
106,773 | 114,648 | 207,709 | 222,208 | ||||||||||||
Earnings/(Loss) Before Interest, Taxes, Depreciation, Amortization and Share-Based Compensation
|
$ | 922,779 | $ | (1,423,032 | ) | $ | 1,236,764 | $ | (3,751,248 | ) |
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3.
|
Default Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibit
Number
|
Reference
|
Description
|
|
#
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
#
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
#
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
#
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
101.INS
|
Instance Document
|
||
101.SCH |
XBRL Taxonomy Extension Schema Document
|
||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
||
101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document
|
||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
#
|
Filed herewith
|
August 14, 2012
|
|||
By:
|
/s/ Michael J. Senken
|
||
Michael J. Senken
|
|||
Chief Financial Officer
|
Date: August 14, 2012
|
/s/ Parker H. Petit
|
|
Parker H. Petit
|
||
Chief Executive Officer
|
Date: August 14, 2012
|
/s/ Michael J. Senken
|
|
Michael J. Senken
|
||
Chief Financial Officer
|
Date: August 14, 2012
|
/s/ Parker H. Petit
|
|
Parker H. Petit
|
||
Chief Executive Officer
|
Date: August 14, 2012
|
/s/ Michael J. Senken
|
|
Michael J. Senken
|
||
Chief Financial Officer
|
Acquisition of Surgical Biologics, LLC (Details) (USD $)
|
1 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Apr. 30, 2012
|
Jun. 30, 2012
|
Dec. 31, 2011
|
||||
Customer Relationships [Member]
|
||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||
Weighted average useful life (in years) | 14 years | [1] | ||||
Supplier Relationships [Member]
|
||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||
Weighted average useful life (in years) | 14 years | [1] | ||||
Patents and know-how [Member]
|
||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||
Weighted average useful life (in years) | 14 years | [1] | ||||
Licenses and permits [Member]
|
||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||
Weighted average useful life (in years) | 3 years | [1] | ||||
Surgical Biologics [Member]
|
||||||
Business Acquisition [Line Items] | ||||||
Cash Paid | $ 500,000 | |||||
Convertible Promissory Notes, number of shares issuable (in shares) | 1,250,000 | |||||
Convertible Promissory Notes, interest rate (in hundredths) | 4.00% | |||||
Common Stock issued (in shares) | 2,632,576 | 5,250,000 | ||||
Common Stock valued | 3,185,223 | |||||
Common stock held in escrow (in shares) | 525,000 | |||||
Terms Of Conversion Feature | The 4% Convertible Promissory Notes are convertible into up to 1,250,000 shares of the Company's common stock at $1.00 per share (a) at any time upon the election of the holder of the Convertible Notes; or (b) at the election of the Company, at any such time as the closing price per share of the Company's common stock (as reported by the OTCBB or on any national securities exchange on which the Company's shares may be listed, as the case may be) closes at no less than $1.75 per share for not less than 20 consecutive trading days in any period prior to the maturity date. If converted, the Common Stock will be available to be sold following satisfaction of the applicable conditions as set forth in Rule 144. The 4% Convertible Promissory Notes mature in eighteen (18) months and earn interest at 4% per annum on the outstanding principal amount payable in cash on the maturity date or convertible into shares of common stock of the Company as provided for above. | |||||
Convertible Promissory Note, conversion price (in dollars per share) | $ 1 | |||||
Convertible Promissory Note, stock price trigger (in dollars per share) | $ 1.75 | |||||
Beneficial Conversion Feature Recognized | 437,500 | |||||
Convertible Promissory Notes, unamortized discount | 437,500 | |||||
Actual purchase price allocated [Abstract] | ||||||
Value of 5,250,000 shares issued at $1.35 per share | 7,087,500 | |||||
Cash paid at closing | 350,000 | |||||
Cash retained for working capital | 150,000 | |||||
Assumed Debt | 182,777 | |||||
Convertible Secured Promissory Note | 1,250,000 | |||||
Fair value of earn-out | 7,404,700 | 7,410,503 | ||||
Total fair value of purchase price | 16,424,977 | |||||
Common Stock, share price (in dollars per share) | 1.35 | |||||
Tangible assets: | ||||||
Debt-free working capital | 671,880 | |||||
Other assets, net | 385 | |||||
Property, plant and equipment | 72,866 | |||||
Tangible assets purchased | 745,131 | |||||
Acquired Indefinite-lived Intangible Assets [Line Items] | ||||||
Total acquired intangible assets | 12,497,000 | |||||
Goodwill | 3,182,846 | |||||
Total Assets Purchased | 16,424,977 | |||||
Working capital [Abstract] | ||||||
Cash | 33,583 | |||||
Prepaid Expenses | 2,738 | |||||
Accounts Receivable | 181,087 | |||||
License Receivable | 340,000 | |||||
Inventory | 347,106 | |||||
Accounts payable and accrued expenses | (196,101) | |||||
Deferred rent and customer deposits | (36,533) | |||||
Debt-free working capital | 671,880 | |||||
Current portion of debt | (62,590) | |||||
Long-term debt | (21,187) | |||||
Line of credit | (99,000) | |||||
Net working capital | 489,103 | |||||
Deposits | 16,582 | |||||
Deferred rent (non-current) | (16,197) | |||||
Other assets, net | 385 | |||||
Surgical Biologics [Member] | Trade names and trademarks [Member]
|
||||||
Acquired Indefinite-lived Intangible Assets [Line Items] | ||||||
Acquired intangible asset | 1,008,000 | |||||
Surgical Biologics [Member] | In-process research and development - liquid [Member]
|
||||||
Acquired Indefinite-lived Intangible Assets [Line Items] | ||||||
Acquired intangible asset | 2,160,000 | |||||
Surgical Biologics [Member] | In-process research and development - other [Member]
|
||||||
Acquired Indefinite-lived Intangible Assets [Line Items] | ||||||
Acquired intangible asset | 25,000 | |||||
Surgical Biologics [Member] | Customer Relationships [Member]
|
||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||
Acquired intangible assets | 3,520,000 | |||||
Weighted average useful life (in years) | 14 years | |||||
Surgical Biologics [Member] | Supplier Relationships [Member]
|
||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||
Acquired intangible assets | 241,000 | |||||
Weighted average useful life (in years) | 14 years | |||||
Surgical Biologics [Member] | Patents and know-how [Member]
|
||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ||||||
Acquired intangible assets | 5,530,000 | |||||
Weighted average useful life (in years) | 14 years | |||||
Surgical Biologics [Member] | Licenses and permits [Member]
|
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Acquired Finite-Lived Intangible Assets [Line Items] | ||||||
Acquired intangible assets | $ 13,000 | |||||
Weighted average useful life (in years) | 3 years | |||||
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Property and equipment (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2012
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Property and equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment | Property and equipment consist of the following as of June 30, 2012 and December 31, 2011:
|
Debt (Details) (USD $)
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6 Months Ended | 3 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | 3 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||||||||||||||||||||||||||||
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Jun. 30, 2012
|
Dec. 31, 2011
Convertible Senior Secured Promissory Notes [Member]
|
Jun. 30, 2012
Convertible Senior Secured Promissory Notes [Member]
|
Jun. 30, 2012
Convertible Secured Promissory Notes [Member]
|
Jun. 30, 2012
Contingent Warrants [Member]
|
Dec. 31, 2011
Contingent Warrants [Member]
|
Jun. 30, 2012
First Contingent Warrants [Member]
|
Jun. 30, 2012
First Contingent Warrants [Member]
Convertible Senior Secured Promissory Notes [Member]
|
Jun. 30, 2012
Second Contingent Warrants [Member]
|
Jun. 30, 2012
Second Contingent Warrants [Member]
Convertible Senior Secured Promissory Notes [Member]
|
Mar. 31, 2011
Conversion Warrant [Member]
|
Jun. 30, 2012
Placement Fee Warrants [Member]
|
Dec. 31, 2011
Placement Fee Warrants [Member]
Convertible Senior Secured Promissory Notes [Member]
|
Jun. 30, 2012
Placement Fee Warrants [Member]
Convertible Senior Secured Promissory Notes [Member]
|
Jun. 30, 2011
Convertible Line of Credit with Related party [Member]
|
Mar. 31, 2011
Convertible Line of Credit with Related party [Member]
|
Jun. 30, 2012
Convertible Line of Credit with Related party [Member]
|
Jun. 30, 2011
Convertible Line of Credit with Related party [Member]
Contingent Warrants [Member]
|
Mar. 31, 2011
Convertible Line of Credit with Related party [Member]
Contingent Warrants [Member]
|
Feb. 28, 2012
Convertible Line of Credit with Related party [Member]
Contingent Warrants [Member]
|
Jun. 30, 2012
Convertible Line of Credit with Related party [Member]
First Contingent Warrants [Member]
|
Jun. 30, 2012
Convertible Line of Credit with Related party [Member]
Second Contingent Warrants [Member]
|
||||||||||||||||||||||||
Line of Credit Facility [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||
Face Value of Note | $ 1,300,000 | ||||||||||||||||||||||||||||||||||||||||||||
Due date | Dec. 31, 2012 | [1] | |||||||||||||||||||||||||||||||||||||||||||
Annual Interest rate (in hundredths) | 5.00% | ||||||||||||||||||||||||||||||||||||||||||||
Contingent warrants issued at inception (in shares) | 3,150,000 | [2] | 2,500,000 | [2] | 1,575,000 | [2] | 1,250,000 | [2],[3] | 1,575,000 | [2] | 1,250,000 | [2],[4] | 650,000 | [2] | 325,000 | [2],[5] | 325,000 | [2],[4] | |||||||||||||||||||||||||||
Warrants vested (in shares) | (1,575,000) | (1,250,000) | [3] | 0 | 0 | (325,000) | [5] | 0 | [5] | ||||||||||||||||||||||||||||||||||||
Contingent warrants outstanding | 1,575,000 | 1,250,000 | 0 | 0 | 1,575,000 | [6] | 1,250,000 | [6] | 325,000 | [6] | 0 | [6] | 325,000 | [6] | |||||||||||||||||||||||||||||||
Weighted average exercise price of warrants (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | $ 1.00 | $ 1.09 | $ 0.01 | |||||||||||||||||||||||||||||||||||||||
Extension fee, rate (in hundredths) | 5.00% | ||||||||||||||||||||||||||||||||||||||||||||
Extension fee | 65,000 | ||||||||||||||||||||||||||||||||||||||||||||
Terms of Conversion feature | The Contingent Warrants have a term of five years from the date of issuance; however each is subject to automatic terminations as defined in the First Contingent Warrant and Second Contingent Warrant terms. The shares of Common Stock issuable upon exercise of the Contingent Warrants do not carry registration rights and may be exercised on a "cashless" basis. In the event of a change in control transaction on or prior to the First Measurement Date, then the Contingent Warrants shall be exercisable immediately prior to the closing of such change in control transaction. In the event (i) of a change in control transaction after the First Measurement Date and on or prior to the Second Measurement Date and (ii) the per share value of the consideration received by the holders of Common Stock in such change in control transaction is at least $1.75, the Second Contingent Warrant shall be null and void. If the value of the per share consideration received by the holders of Common Stock in such transaction is less than $1.75, the Second Contingent Warrant shall be exercisable immediately prior to the closing of such change in control transaction. | The First Contingent Warrant, (the "First Contingent Warrant") is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the First Contingent Warrant shall only be exercisable if the Company's Gross Revenue as reported in the Company's Audited Financial Statements for the year ended December 31, 2011, do not equal or exceed $11,500,000. As of December 31, 2011, the First Contingent warrants vested due to the Company's Gross Revenue not exceeding $11,500,000 for the year ended December 31, 20 | The Second Contingent Warrant, (the "Second Contingent Warrant") is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the Second Contingent Warrant shall only be exercisable if the Company's Gross Revenue as reported in the Company's Audited Financial Statements for the year ended December 31, 2012, do not equal or exceed $31,150,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the "Second Measurement Date") the closing trading price of the Stock is at least $1.75 per share for ten or more consecutive trading days. | The First Contingent Warrant, (the "First Contingent Warrant") is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the First Contingent Warrant shall only be exercisable if the Company's Gross Revenue as reported in the Company's Audited Financial Statements for the year ended December 31, 2011, do not equal or exceed $11,500,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the "First Measurement Date") the closing trading price of the Stock is at least $1.50 per share for ten or more consecutive trading days. During the three months ended March 31, 2012, the First Contingent Warrants vested due to the Company's Gross Revenue not exceeding $11,500,000 for the year ended December 31, 2011 and due to the closing trading price of the stock not equaling or exceeding $1.50 per share for ten or more consecutive trading days. | The Second Contingent Warrant, (the "Second Contingent Warrant") is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the Second Contingent Warrant shall only be exercisable if the Company's Gross Revenue as reported in the Company's Audited Financial Statements for the year ended December 31, 2012, do not equal or exceed $31,150,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the "Second Measurement Date") the closing trading price of the Stock is at least $1.75 per share for ten or more consecutive trading days. | ||||||||||||||||||||||||||||||||||||||||
Borrowings during the period | 500,000 | 800,000 | |||||||||||||||||||||||||||||||||||||||||||
Contingent warrants issued (in shares) | 250,000 | 400,000 | |||||||||||||||||||||||||||||||||||||||||||
Warrant and beneficial conversion value | 2,278,052 | 550,000 | |||||||||||||||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||
Face Value of Note | 5,000,000 | 1,250,000 | |||||||||||||||||||||||||||||||||||||||||||
Total face value of notes | 6,300,000 | ||||||||||||||||||||||||||||||||||||||||||||
Due date | Dec. 31, 2013 | [7] | |||||||||||||||||||||||||||||||||||||||||||
Annual interest rate (in hundredths) | 5.00% | ||||||||||||||||||||||||||||||||||||||||||||
Contingent warrants issued at inception (in shares) | 3,150,000 | [2] | 2,500,000 | [2] | 1,575,000 | [2] | 1,250,000 | [2],[3] | 1,575,000 | [2] | 1,250,000 | [2],[4] | 650,000 | [2] | 325,000 | [2],[5] | 325,000 | [2],[4] | |||||||||||||||||||||||||||
Warrants vested (in shares) | (1,575,000) | (1,250,000) | [3] | 0 | 0 | (325,000) | [5] | 0 | [5] | ||||||||||||||||||||||||||||||||||||
Contingent warrants outstanding | 1,575,000 | 1,250,000 | 0 | 0 | 1,575,000 | [6] | 1,250,000 | [6] | 325,000 | [6] | 0 | [6] | 325,000 | [6] | |||||||||||||||||||||||||||||||
Weighted average exercise price of warrants (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | $ 1.00 | $ 1.09 | $ 0.01 | |||||||||||||||||||||||||||||||||||||||
Warrants, term | 5 years | 5 years | 5 years | ||||||||||||||||||||||||||||||||||||||||||
Warrants, shares callable, maximum | 25.00% | 25.00% | |||||||||||||||||||||||||||||||||||||||||||
Terms of Conversion feature | The Contingent Warrants have a term of five years from the date of issuance; however each is subject to automatic terminations as defined in the First Contingent Warrant and Second Contingent Warrant terms. The shares of Common Stock issuable upon exercise of the Contingent Warrants do not carry registration rights and may be exercised on a "cashless" basis. In the event of a change in control transaction on or prior to the First Measurement Date, then the Contingent Warrants shall be exercisable immediately prior to the closing of such change in control transaction. In the event (i) of a change in control transaction after the First Measurement Date and on or prior to the Second Measurement Date and (ii) the per share value of the consideration received by the holders of Common Stock in such change in control transaction is at least $1.75, the Second Contingent Warrant shall be null and void. If the value of the per share consideration received by the holders of Common Stock in such transaction is less than $1.75, the Second Contingent Warrant shall be exercisable immediately prior to the closing of such change in control transaction. | The First Contingent Warrant, (the "First Contingent Warrant") is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the First Contingent Warrant shall only be exercisable if the Company's Gross Revenue as reported in the Company's Audited Financial Statements for the year ended December 31, 2011, do not equal or exceed $11,500,000. As of December 31, 2011, the First Contingent warrants vested due to the Company's Gross Revenue not exceeding $11,500,000 for the year ended December 31, 20 | The Second Contingent Warrant, (the "Second Contingent Warrant") is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the Second Contingent Warrant shall only be exercisable if the Company's Gross Revenue as reported in the Company's Audited Financial Statements for the year ended December 31, 2012, do not equal or exceed $31,150,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the "Second Measurement Date") the closing trading price of the Stock is at least $1.75 per share for ten or more consecutive trading days. | The First Contingent Warrant, (the "First Contingent Warrant") is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the First Contingent Warrant shall only be exercisable if the Company's Gross Revenue as reported in the Company's Audited Financial Statements for the year ended December 31, 2011, do not equal or exceed $11,500,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the "First Measurement Date") the closing trading price of the Stock is at least $1.50 per share for ten or more consecutive trading days. During the three months ended March 31, 2012, the First Contingent Warrants vested due to the Company's Gross Revenue not exceeding $11,500,000 for the year ended December 31, 2011 and due to the closing trading price of the stock not equaling or exceeding $1.50 per share for ten or more consecutive trading days. | The Second Contingent Warrant, (the "Second Contingent Warrant") is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the Second Contingent Warrant shall only be exercisable if the Company's Gross Revenue as reported in the Company's Audited Financial Statements for the year ended December 31, 2012, do not equal or exceed $31,150,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the "Second Measurement Date") the closing trading price of the Stock is at least $1.75 per share for ten or more consecutive trading days. | ||||||||||||||||||||||||||||||||||||||||
Conversion price (in dollars per share) | $ 1.00 | ||||||||||||||||||||||||||||||||||||||||||||
Warrant and beneficial conversion value | 2,278,052 | 550,000 | |||||||||||||||||||||||||||||||||||||||||||
Proceeds from issuance of Convertible Senior Secured Promissory Notes | 5,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
Proceeds from issuance of Notes to Chairman of the Board and CEO | 500,000 | ||||||||||||||||||||||||||||||||||||||||||||
Commitment to lend | 1,500,000 | ||||||||||||||||||||||||||||||||||||||||||||
Convertible debt, shares issuable if converted (in shares) | 5,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
Placement fee | 32,800 | ||||||||||||||||||||||||||||||||||||||||||||
Placement fee, warrants issued (in shares) | 42,400 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value of placement fee warrants | 15,000 | ||||||||||||||||||||||||||||||||||||||||||||
Direct costs of sale of notes | $ 47,800 | ||||||||||||||||||||||||||||||||||||||||||||
|
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