8. Stockholders' Equity
|9 Months Ended|
Sep. 30, 2015
On September 30, 2015, the Company filed an Amendment to the Articles of Incorporation with the Secretary of State of the State of Nevada to increase the authorized shares of common stock of the Company and change the par value per share of common stock (the Amendment). The Amendment authorizes the Company to issue 1,500,000,000 shares of Common Stock and changes the par value to $0.001 per share. Prior periods have been reclassified to reflect the change in the par value per share to conform to the presentation in the present period.
In connection with the Companys issuance of the Note on July 1, 2015, the Company issued a warrant to purchase 10 million shares of common stock in accordance with the terms of the SPA (the Warrant). The Warrant has a five-year term and is exercisable commencing January 1, 2016. The exercise price per share under the Warrant is the lessor of $0.20 or 120% of the Public Offering price, in the event there is a Public Offering. If the Note is not repaid or converted on or before six months from the date of issuance, the Holder will be issued an additional warrant to purchase 10 million shares of common stock under the same terms as the Warrant (the Contingent Warrant, or together referred to as the Warrants). The Company determined there is a high probability that the Note will not be repaid or converted within the period six months from the date of issuance, resulting in the issuance of the Contingent Warrant. As such, the Company concluded the Contingent Warrant is considered to be issued and outstanding as of the Note issuance date in accordance with ASC 815. The fair values of the Warrants were calculated using the Black-Scholes option pricing model. The key valuation assumptions used consist of the Companys stock price, a risk free rate of 1.70% and an expected volatility of 125%. Using an allocation of the Note proceeds between the relative fair values of the Warrants and the Note, the Company recorded the Warrants at a value of $1.6 million on the condensed consolidated balance sheet as equity paid-in-capital. This created a debt discount of $1.6 that will amortize from the date of issuance through the term of the Note.
In August 2015, the Company issued a warrant to purchase one million shares of common stock to a consultant upon engagement of services. The warrant has a term of five years and an exercise price of $0.77. The warrant is a standalone instrument that is not puttable or mandatorily redeemable by the holder and is classified as an equity award. The Company determined that the fair value of the warrant is more reliably measureable than the fair value of the services received. As a result, the warrant was fair valued at $272,000 at the time of issuance using the Black-Scholes option pricing model and will be expensed over the expected service period.
In connection with the Companys collaboration agreements, the Company issued warrants to purchase 10,425,000 shares of common stock to its collaborative partners on December 31, 2014. Also on December 31, 2014, a warrant to purchase 1,600,000 shares of common stock was issued to a non-employee director for consulting services provided to the Company. These warrants were fair valued at issuance date using the Black-Scholes option pricing model. The warrants are subject to re-measurement at each reporting period until the measurement date is reached. Expense is recognized on a straight-line basis over the expected service period. Total expense associated with these collaboration agreement warrants recognized during the three and nine months ended September 30, 2015 were approximately $243,000 and $336,000 respectively. There were no warrants to purchase common stock issued during the nine months ended September 30, 2014.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://www.xbrl.org/2003/role/presentationRef