Stockholders' Equity

3 Months Ended

Dec. 31, 2013

Stockholders' Equity

NOTE 8. STOCKHOLDERS’ EQUITY

At December 31, 2013, the Company had a total of 150,000,000 shares of capital stock authorized for issuance, consisting of 145,000,000 shares of Common Stock, par value $0.001, and 5,000,000 shares of Preferred Stock, par value $0.001.

At December 31, 2013, 39,002,152 shares of Common Stock were outstanding.  Additionally, 51,291 shares of Preferred Stock were outstanding, including 5,291 shares of Series B Preferred Stock, convertible into 2,891,257 shares of Common Stock, and 46,000 shares of Series C Preferred Stock, convertible into 7,849,829 shares of Common Stock, (collectively, the “Outstanding Preferred Stock”). At December 31, 2013, 3,451,210 shares were reserved for issuance upon exercise of options granted under Arrowhead’s 2000 Stock Option Plan and 2004 Equity Incentive Plan, as well as for inducement grants made to new employees.

The Outstanding Preferred Stock is convertible to Common Stock by its holder at its stated conversion price, though the Outstanding Preferred Stock is not convertible to the extent the holder would beneficially own more than 9.99% of the number of Common Stock immediately after the conversion.  The holders of Outstanding Preferred Stock are eligible to vote with the Common Stock of the Company on an as-converted basis, but only to the extent they are eligible for conversion without exceeding the 9.99% ownership limitation. The Outstanding Preferred Stock does not carry a coupon, but the Outstanding Preferred Stock is entitled to receive dividends on a pari passu basis with Common Stock, when and if declared.  In any liquidation or dissolution of the Company, the holders of Outstanding Preferred Stock are entitled to participate in the distribution of the assets, to the extent legally available for distribution, on a pari passu basis with the Common Stock.

On October 20, 2011, the Company and Lincoln Park Capital Fund, LLC, an Illinois limited liability company (“LPC”) entered into a $15 million purchase agreement (the “Purchase Agreement”), whereby LPC agreed to purchase up to $15 million of Common Stock, subject to certain limitations, from time to time during the three-year term of the Purchase Agreement. The Company has the right, in its sole discretion, over a 36-month period to sell up to $15 million of Common Stock (subject to certain limitations) to LPC, depending on certain conditions as set forth in the Purchase Agreement. As of December 31, 2013, the Company had drawn $1 million from the facility.

On October 21, 2011 and October 24, 2011, the Company entered into Subscription Agreements with certain accredited investors (the “Series A Purchasers”), pursuant to which the Company issued and sold an aggregate of 1,015 shares of Series A Preferred Convertible Stock, $0.001 par value per share, at a purchase price of $1,000 per share. The aggregate purchase price paid for the shares of Series A Preferred was $1,015,000. On February 16, 2012, upon approval by the Company’s shareholders, 1,015 shares of Arrowhead Series A Preferred Convertible Stock, $0.001 par value per share, were converted to 275,782 shares of Common Stock.

On October 21, 2011, the Company entered into a Subscription Agreement with an accredited investor, pursuant to which the Company issued and sold an aggregate of 675,000 shares of Common Stock, $0.001 par value per share, at a purchase price of $3.70 per share. The aggregate purchase price paid by the purchaser for the shares of Common Stock is $2,497,500.

On August 10, 2012 the Company sold 2,260,869 units at a price of $2.76 per unit. Each unit consisted of one share of common stock and a warrant to purchase 0.75 shares of common stock at an exercise price of $3.25. Gross proceeds from the offering were $6.2 million excluding offering fees and expenses.

In December 2012, the Company sold 1,825,079 units at a price of $2.26 per unit. Each unit consisted of one share of common stock and a warrant to purchase 0.5 shares of common stock. Gross proceeds from the offering were $4.1 million excluding offering fees and expenses. The exercise price of these warrants was $1.83 as of September 30, 2013, and may decrease based on certain specified events.  As a result, the Company determined these warrants were ineligible for equity classification.  Refer to Note 11 for further discussion regarding these warrants.

In January 2013, the Company sold 1,667,051 units at a price of $2.12 per unit. Each unit consisted of one share of common stock and a warrant to purchase 0.5 shares of common stock. Gross proceeds from the offering were $3.5 million excluding offering fees and expenses. The exercise price of these warrants was $1.83 as of September 30, 2013, and may decrease based on certain specified events.  As a result, the Company determined these warrants were ineligible for equity classification.  Refer to Note 11 for further discussion regarding these warrants.

In May 2013, the Company sold 14.3 million shares of Arrowhead common stock at a price of $1.83 per share and 9,900 shares of Arrowhead series B convertible preferred stock at a price of $1,000 per share. The series B preferred stock is convertible into common stock at a conversion price of $1.83. Gross proceeds were $36 million. No warrants were issued in the May 2013 financing.

On October 11, 2013, the Company sold 3,071,672 shares of common stock, at a price of $5.86 per share, and 46,000 shares of Series C Convertible Preferred Stock (the “Preferred Shares”), at a price of $1,000 per share. The Preferred Shares are convertible into shares of common stock at a conversion price of $5.86. The aggregate purchase price paid by the Purchasers for the Shares and Preferred Shares was $64,000,000 and the Company received net proceeds of approximately $60,000,000, after advisory fees and offering expenses.

The following table summarizes information about warrants outstanding at December 31, 2013:

Exercise prices		Number of  Warrants		RemainingLife in Years
$	70.60		94,897		3.4
$	5.00		1,118,357		0.9
$	5.09		341,021		0.9
$	1.38		50,836		2.0
$	4.16		1,000		3.0
$	3.25		1,379,571		2.6
$	2.12		75,000		4.0
$	1.83		492,869		4.0
Total warrants outstanding			3,553,551