9. Capital Structure

Common Stock

As of December 31, 2017, the Company was authorized to issue 200,000,000 shares of common stock at $0.0001 par value per share.

Follow-on Offerings

On July 25, 2017, the Company sold 32,000,000 shares of its common stock and warrants to purchase an additional 16,000,000 shares of its common stock in an underwritten follow-on offering for gross proceeds of $40.0 million. The Company received net proceeds of approximately $37.1 million after underwriting discounts, commissions and offering expenses payable by the Company.

On July 27, 2016, the Company sold 14,000,000 shares of its common stock and warrants to purchase an additional 14,000,000 shares of its common stock in an underwritten Follow-on Offering for gross proceeds of $35.0 million. The Company received net proceeds of approximately $32.0 million after underwriting discounts, commissions and offering expenses payable by the Company.

The Company issued warrants in both follow-on offerings. The 2017 Warrants have an exercise price of $1.55 per share and expire five years from the date of issuance. The 2016 Warrants have an exercise price of $3.00 per share and expire five years from the date of issuance. The 2017 Warrants and 2016 Warrants contain a fundamental transaction provision that obligates the Company to cash settle the warrants under a limited set of conditions not entirely within the Company’s control. Due to this conditional obligation, the Company determined that both the 2017 Warrants and the 2016 Warrants should be classified as liabilities in the Company’s consolidated balance sheet. At issuance, the Company determined the fair value of the 2017 Warrants and 2016 Warrants to be $12.4 million and $18.6 million, respectively, and reclassified these balances from stockholders’ equity to warrant liability. The fair value of these warrants is re-measured at each reporting period and changes in fair value are recognized in the consolidated statement of operations (see Note 4, “Fair Value Measurements”). Additionally, the Company allocated approximately $0.9 million and $1.6 million of issuance costs to the 2017 Warrants and 2016 Warrants, respectively, based on the proportion of the proceeds allocated to the fair value of the warrants. The allocated issuance costs were expensed as other expense in the Company’s consolidated statement of operations.

Private Placement

On June 12, 2015, the Company closed a private placement of its securities with a group of institutional investors (the “PIPE”). Each investor received one share of common stock and a warrant to purchase one-half share of common stock at a price of $4.23 per common share purchased. The closing of the PIPE resulted in the issuance of an aggregate of 4,728,128 common shares and warrants to purchase an additional 2,364,066 shares of common stock at an exercise price of $8.00 per full share, which expire three years form the date of issuance (the “PIPE Warrants”). The Company received net proceeds from the PIPE of $18.3 million, after deducting expenses payable by the Company.

The placement agents in the PIPE received warrants to purchase 4% of the total number of shares of common stock sold in the PIPE (the “Placement Agent Warrants”), for a total of 189,126 shares of common stock underlying the Placement Agent Warrants. The Placement Warrants became exercisable upon issuance at an exercise price of $4.65 per share and expire on June 11, 2020.

The common stock and accompanying PIPE Warrants and Placement Agent Warrants have been classified to stockholders’ equity in the Company’s balance sheet.

Initial Public Offering

In July 2014, the shareholders approved an amended certificate of incorporation that became effectively immediately upon the closing of the Company’s initial public offering (“IPO”). The approved certificate increased the number of authorized shares of common stock to 100,000,000 shares. On August 1, 2014, the Company closed its IPO. Each Unit consisted of one share of common stock, one Class A Warrant to purchase one share of common stock at an exercise price of $4.80 per share and one Class B Warrant to purchase one-half share of common stock at an exercise price of $4.00 per full share. The closing of the IPO resulted in the sale of an aggregate of 6,880,333 Units at a public offering price of $6.00 per Unit, less underwriting discounts and commissions and the underwriter’s expenses, including 880,333 Units issued upon the exercise by the underwriters of their option to purchase additional Units at the public offering price to cover over-allotments of the Company. The Company received net proceeds from the IPO of $35.0 million, after deducting underwriting discounts, commissions, and expenses payable by the Company. Following the IPO, the units separated and the shares of common stock, Class A Warrants and Class B Warrants began to trade separately. The common stock and accompanying Class A and Class B warrants were classified to stockholders’ equity in the Company’s balance sheet.

On November 2, 2015, the Company’s Class B Warrants to purchase common stock expired in accordance with their terms. As of November 2, 2015, holders of the Class B Warrants had exercised 4,812,328 Class B Warrants, resulting in the issuance of 2,406,164 shares of the Company’s common stock and the receipt by the Company of approximately $9.6 million in gross proceeds. The 2,068,005 Class B Warrants that were not exercised prior to expiration have terminated and are no longer exercisable.

 

Representative’s Warrant

The Maxim Group, LLC, the representative of the underwriters in the IPO, received the Representative’s Warrant to purchase 3% of the total number of shares of common stock sold in the IPO, including those shares sold upon the exercise of the over-allotment, for a total of 206,410 shares of common stock underlying the Representative’s Warrant. The Representative’s Warrant became exercisable at an exercise price of $7.50 per share beginning 180 days after the effective date of the Company’s registration statement (January 24, 2015) and expires on August 27, 2019. The Company classified the Representative’s Warrant as a liability since it did not meet the requirements to be included in equity. The fair value of the Representative’s Warrant will be re-measured at each reporting period and changes in fair value will be recognized in the statement of operations (see Note 3, “Fair Value Measurements”).

Convertible Notes

The Company issued approximately $15.0 million aggregate principal amount of its 8.00% Convertible Notes due May 31, 2015 (the “Convertible Notes”) from June 2013 through June 2014. On August 1, 2014, in conjunction with the closing of the Company’s IPO, the principal amount of the Convertible Notes, and all accrued and unpaid interest thereon, automatically converted into 5,109,988 shares of common stock. Each purchaser of the Convertible Notes also received a warrant which included an exercise price “cap” that was analogous to “down round protection” (the “Note Warrants”). Upon the closing of the IPO and based on the terms of the Note Warrants, the Company determined the total number of shares of the Company’s common stock underlying the Note Warrants to be 3,321,416 at an exercise price of $3.00 per share. There were 3,315,878 shares of common stock underlying the outstanding Note Warrants as of December 31, 2017 and 2016. The Note Warrants expire five years from the date of issuance.

Sales Agreement

In January 2016, the Company entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”) to sell shares of the Company’s common stock, with aggregate gross sales proceeds of up to $30 million, through an “at the market” equity offering program under which Cowen was to act as sales agent. On July 21, 2016, the Company terminated the Sales Agreement. The Company did not sell any shares under the program.

Voting

The holders of shares of common stock are entitled to one vote for each share of common stock held at all meetings of stockholders and written actions in lieu of meetings.

Dividends

The holders of shares of common stock are entitled to receive dividends, if and when declared by the board of directors. As of December 31, 2017, no dividends have been declared or paid on the Company’s common stock since inception.

Reserved for Future Issuance

The Company has reserved for future issuance the following number of shares of common stock as of December 31, 2017 and 2016:

 

		December 31,
		2017				2016
Options to purchase common stock			6,200,151				4,691,746
Warrants to purchase common stock			36,270,103				27,214,775
			42,470,254				31,906,521