7. Capital Structure

Common Stock

As of September 30, 2018, the Company was authorized to issue 200,000,000 shares of common stock at $0.0001 par value per share.

Follow-on Offerings

On August 3, 2018, the Company sold 5,750,000 shares of its common stock in an underwritten follow-on offering, including shares sold pursuant to the fully exercised overallotment option granted to the underwriters in connection with the offering, for gross proceeds of $11.5 million. The Company received net proceeds of approximately $10.4 million after underwriting discounts and commissions and offering expenses payable by the Company.

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. No warrants were exercised in the quarter ended September 30, 2018. Warrants to purchase 3,550 shares of common stock were exercised during the nine months ended September 30, 2018.

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 each of the follow-on offerings completed in 2016 and 2017. 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 sold an aggregate of 4,728,128 common shares and warrants to purchase an additional 2,364,066 shares of common stock for gross proceeds of $20.0 million in a private placement (the “PIPE”). The Company received net proceeds from the PIPE of $18.3 million, after deducting expenses payable by the Company. The warrants had an exercise price of $8.00 per share and expired three years from the date of issuance (the “PIPE Warrants”). None of the PIPE Warrants were exercised prior to expiration on June 12, 2018 and therefore have been terminated and are no longer exercisable.

The placement agents in the PIPE received warrants to purchase a total of 189,126 shares of common stock at an exercise price of $4.65 per share which expire on June 11, 2020 (the “Placement Agent Warrants”). The PIPE Warrants and Placement Agent Warrants have been classified as stockholders’ equity in the Company’s consolidated balance sheet.

Initial Public Offering

In August 2014, the Company completed an initial public offering (“IPO”), raising net proceeds of $35.0 million after underwriting discounts, commissions and offering expenses payable by us, through the issuance and sale of our units, which 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 (“Units”). As of November 2, 2015, the date of expiration of the Class B Warrants, 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 Class A Warrants expired on February 1, 2017. As none of the Class A Warrants were exercised prior to expiration, the Class A Warrants have terminated and are no longer exercisable.

Representative’s Warrant

The Maxim Group, LLC, the representative of the underwriter 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 option, for a total of 206,410 shares of common stock underlying the Representative’s Warrant. The Representative’s Warrant is 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 expiring on July 28, 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 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”).

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 with 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 2,209,588 and 413,432 Note Warrants that expired in June 2018 and August 2018, respectively, and therefore have been terminated and are no longer exercisable. There are 692,858 shares of common stock underlying the remaining outstanding Note Warrants as of September 30, 2018. The Note Warrants expire five years from the date of issuance.

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 September 30, 2018, 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 September 30, 2018 and December 31, 2017:

 

		September 30, 2018				December 31, 2017
Options to purchase common stock			7,248,198				6,200,151
Warrants to purchase common stock			31,265,182				36,270,103
			38,513,380				42,470,254