7. Stockholders' Equity |
6 Months Ended |
|---|---|
Jun. 30, 2016 | |
| Equity [Abstract] | |
| Stockholders' Equity |
Reverse Stock Split
On May 16, 2016, our board of directors approved a reduction, on a 1 for 33 basis, in our authorized common stock, par value $0.001, along with a corresponding and proportional decrease in the number of shares issued and outstanding. This reduction was filed with the Nevada Secretary of State on May 18, 2016, but required a review by FINRA before becoming effective in the market. On May 31, 2016, FINRA announced that this change took effect in the over-the-counter securities markets on June 1, 2016.
All share information provided herein reflects the effect of the reverse stock split.
Common Stock
In November 2015, the Company agreed to issue 3.38 million shares of common stock in connection with the APA. In December 2015, 0.33 million shares of common stock were issued to Dr. Genkin and Mr. Surkhov pursuant to the APA.
On April 29, 2016, the Company closed on the APA with an effective date of April 27, 2016, acquiring in-process research and development (“IPR&D”) related to certain intellectual property rights with respect to the immunomodulator product Virexxa held by Kevelt including the grant of the worldwide right to develop, market and license Virexxa for certain uses. In connection with the closing of the APA, the Company issued 3.05 million shares of its common stock to Pharmsynthez and, because there was no alternative use for the IPR&D, the Company recognized $39.5 million of expense based on the fair value of Virexxa IP received, which was determined to be more reliably measured than the related equity consideration. Included in the $39.5 million expense was the $3.74 million prepayment recorded in 2015.
Financing Warrants
In connection with the Company’s issuance of the APA Note in March 2016, the Company issued a warrant to purchase 0.35 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 $6.60 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 0.35 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. |