7. Stockholders' Equity |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Equity [Abstract] | |
| Stockholders' Equity |
Common Stock
In November 2015, the Company agreed to issue 111.5 million shares of common stock in connection with the APA. In December 2015, 11 million shares of common stock were issued to Dr. Genkin and Mr. Surkhov pursuant to the APA. As of March 31, 2016, the APA had not closed and 100.5 million shares of common stock remained to be issued pursuant to the APA. See also Note 12. Subsequent Events.
Warrants
In connection with the Company’s issuance of the APA Note in March 2016, the Company issued a warrant to purchase 11.7 million shares of common stock in accordance with the terms of the APA (the “Warrant”). The Warrant has a five-year term and is exercisable commencing March 31, 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, as defined in the APA. If the APA 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 11.7 million shares of common stock under the same terms as the Warrant. The Company determined there is a low probability that the Note will not be repaid or converted within the period six months from the date of issuance and, therefore, did not account for the additional warrant as issued. The fair value of the warrant was calculated using the Black-Scholes option pricing model. The key valuation assumptions used consist of the Company’s stock price, a risk free rate of 1.42% and an expected volatility of 135%. Using an allocation of the APA Note proceeds between the relative fair values of the Warrants and the APA Note, the Company recorded the Warrants at a value of $1.7 million on the condensed consolidated balance sheet as equity paid-in-capital. This created a debt discount of $1.7 million that will amortize from the date of issuance through the term of the APA Note. |