Stockholders' Equity (Deficit)

3 Months Ended

Mar. 31, 2017

Stockholders' Equity (Deficit) [Abstract]

Stockholders' Equity (Deficit)

8. Stockholders’ Equity

On May 31, 2016, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers providing for the sale and issuance in a registered public offering of an aggregate of 212,766 shares of the Company’s common stock and warrants to purchase 106,383 shares of the Company’s common stock. Each share of common stock was sold together with a warrant to purchase 0.50 of a share of common stock at a combined purchase price of $23.50 per unit, for aggregate gross proceeds to the Company of $5.0 million. The offering closed on June 3, 2016. The warrants have an exercise price of $22.50 per share, were exercisable immediately upon issuance and expire five years following the date of issuance. The Company received net proceeds from the offering of approximately $4.2 million after deducting placement agent fees and other offering expenses payable by the Company.

The Company evaluated the warrants issued in the offering and determined the warrant instruments should be classified as a liability due to certain net cash settlement provisions in the warrant agreement. The Company recorded a derivative liability for the estimated fair value of the warrants issued in connection with the offering in the amount of $1.8 million (based on a Black-Scholes Option Pricing Model assuming no dividend yield, volatility of 123%, and a risk-free interest rate of 1.23%). The remaining balance of $3.2 million, after deducting the fair value of the warrants, was allocated to the value of the common stock. Offering costs directly allocable to the offering totaled $0.8 million, including placement agent fees and legal expenses. Of this amount, $0.2 million was allocable to the warrants and recorded as other expense in the Company’s consolidated statement of operations for the year ended December 31, 2016 based on the relative fair value of the warrants to the common stock.  The derivative liability for the warrants was marked-to-market at $245,000 as of March 31, 2017, with the decrease in fair value of $29,000 recorded as a component of change in fair value of derivative liabilities in the Company’s statement of operations (see Note 4) for the three months ended March 31, 2017.

On November 22, 2016, the Company completed an underwritten public offering of 533,500 shares of its common stock and warrants to purchase up to an aggregate of 533,500 shares of common stock. Each share of common stock was sold together with a warrant to purchase one share of common stock at a combined purchase price of $7.50 per unit, for aggregate gross proceeds to the Company of $4.0 million. The warrants have an exercise price of $7.50 per share, were exercisable immediately upon issuance and expire five years following the date of issuance. The net proceeds to the Company from the offering of approximately $3.3 million after deducting placement agent fees and other offering expenses payable by the Company.

The Company evaluated the warrants issued in the offering and determined the warrant instruments should be accounted for as a liability primarily because the warrant is not indexed to the Company’s common stock due to exercise price adjustment provision and the Company may be required to pay the warrant holders cash under certain circumstances. The Company recorded a derivative liability for the estimated fair value of the warrants issued in connection with the offering in the amount of $2.9 million, based on a valuation using the Monte Carlo valuation model. The remaining balance of $1.1 million, after deducting the fair value of the warrants, was allocated to the value of the common stock. Offering costs directly allocable to the offering totaled $0.7 million, including underwriting discounts and commissions and legal expenses. Of this amount, $0.3 million was allocable to the warrants and recorded as other expense in the Company’s consolidated statements of operations based on the relative fair value of the warrants to the common stock.  The derivative liability for the warrants was marked-to-market at $1,961,000 as of March 31, 2017, with the decrease in fair value of $82,000 recorded as a component of change in fair value of derivative liabilities in the Company’s consolidated statement of operations (see Note 4) for the three months ended March 31, 2017.

The $7.50 exercise price of the 533,500 shares of common stock issuable upon exercise of outstanding warrants will be adjusted in connection with the Company’s April 2017 1-for-10 reverse stock split.  Under the terms of the November 2016 warrants, following a reverse stock split, on the 16th trading day immediately following such reverse stock split, or May 16, 2017, the exercise price of the November 2016 warrants will be reduced to the lowest volume-weighted average price between and including April 25, 2017 and May 15, 2017.

There were no issuances of common stock during the three months ended March 31, 2017.