Note 7. Stockholders' Equity

9 Months Ended

Sep. 30, 2015

Notes

Note 7. Stockholders' Equity

Note 7.  Stockholders’ Equity

The Company has 10,000,000 authorized shares of $.001 par value preferred stock.  As of September 30, 2015 and December 31, 2014, there were no shares of preferred stock outstanding.  The Company also has 80,000,000 authorized shares of $.001 par value common stock.   At September 30, 2015, the Company had 9,766,323 shares outstanding.

Reverse Stock Split

We held a special meeting of stockholders on May 12, 2015 to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to effectuate a reverse split of its issued and outstanding shares of common stock at a ratio of between 1-for-6 and 1-for-12, inclusive, which ratio was to be selected at the sole discretion of the Board at any whole number in the above range, with any fractional shares that would otherwise be issued as a result of the reverse split being rounded up to the nearest whole share (the “Reverse Stock Split”); provided, that the Board could abandon the Reverse Stock Split in its sole discretion. 

Over 76% of the outstanding shares voted, and the stockholders voted to approve the amendment, with the results of the voting as follows:

FOR	AGAINST	ABSTAIN	BROKER NON-VOTES
24,026,870	6,006,589	151,847	—

Effective June 23, 2015, the Board determined to set the reverse stock split ratio at 1-for-10.  The Reverse Stock Split has been given retroactive effect in the accompanying condensed financial statements.

Shelf Registration Statement

On September 28, 2012, we filed a universal shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, senior debt, subordinated debt and units up to an aggregate amount of $50.0 million. On October 11, 2012, the universal shelf registration statement was declared effective by the SEC. The shelf registration statement expired for the purpose of issuing new securities on October 11, 2015 but remains effective for the purpose of issuing shares upon the exercise of previously issued warrants.  Prior to the expiration date of the shelf registration, we successfully sold securities in two separate registered direct offerings utilizing this shelf registration statement.

Public Offering

On July 29, 2015, the Company, in connection with a public offering (the “Offering”) of common stock of the Company, $0.001 par value per share (“Common Stock”), together with warrants to purchase shares of common stock of the Company, entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC (“Maxim”) as underwriter, pursuant to which the Company agreed to sell 5,750,000 shares of Common Stock and warrants to purchase 11,500,000 shares of Common Stock (the “Warrants”) at a public offering price of $.90 per share of Common Stock and two Warrants, on a firm commitment basis, for gross proceeds of approximately $5,175,000. The Warrants have an exercise price of $0.99 per share of Common Stock.

The Underwriting Agreement included a 45-day option for the underwriters to purchase up to an additional 862,500 shares of Common Stock and/or Warrants to purchase up to an additional 1,725,000 shares of Common Stock. Prior to the closing of the Offering, the underwriter partially exercised this option and received additional Warrants to purchase 1,725,000 shares of Common Stock for additional gross proceeds of $17,250. This remaining portion of this over-allotment option expired in accordance with its terms.

Pursuant to the Underwriting Agreement, the Company issued to Maxim a warrant for the purchase of 287,500 shares of Common Stock (the “Underwriter’s Warrant”). The Underwriter’s Warrant is exercisable commencing 180 days from July 29, 2015 and expires July 29, 2020.  The Underwriter’s Warrant has an exercise price $0.99 per share of Common Stock.

The Underwriting Agreement also contains representations, warranties, indemnifications and other provisions customary for transactions of this nature.

The Offering was completed in August 2015 with net proceeds to the Company of approximately $4.3 million.

Warrants

               A summary of the outstanding warrants issued in prior stock offerings as of September 30, 2015, and changes during the nine months then ended, is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contract Term (Years)
Outstanding at December 31, 2014	985,736	$	21.14
Issued	13,512,500		0.99
Exercised	-		-
Forfeited or expired	(11,030)		20.40
Outstanding as of September 30, 2015	14,487,206	$	2.35	4.72
Exercisable as of September 30, 2015	14,199,706	$	2.37	4.72

Notice of Failure to Satisfy a Continued Listing Rule

            On July 13, 2015, the Company notified The Nasdaq Stock Market (“NASDAQ”) that as of June 30, 2015, the Company’s stockholders’ equity was below the $2.5 million minimum required by Listing Rule 5550(b)(1) (the “Stockholders’ Equity Rule”).  The Company later received a letter from Nasdaq advising the Company that (i) it was not in compliance the Stockholders’ Equity Rule and (ii) it had 45 days to submit a plan for regaining compliance with the Stockholders’ Equity Rule.  Subsequent to the closing of the Company’s follow-on offering, the Company was notified by NASDAQ that it had regained compliance with the Stockholders’ Equity Rule, pending confirmation of the Company’s stockholders’ equity in this Form 10-Q.

On September 14, 2015, the Company received a letter from the Nasdaq Stock Market stating that the bid price of the Company’s common stock for the last 30 consecutive trading days had closed below the minimum $1.00 per share required for continued listing under Listing Rule 5550(a)(2).  The letter does not result in the immediate delisting of the Company’s common stock and the Company has until March 14, 2016 to demonstrate compliance by maintaining a minimum closing bid price of at least $1.00 for a minimum of ten consecutive business days.