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Stockholders' Equity
 12 Months Ended
Dec. 31, 2016
Stockholders Equity Note [Abstract]  
Stockholders' Equity

11. STOCKHOLDERS’ EQUITY

Private Placement Transaction and Subsequent Financing

On April 14, 2016, the Company completed a Private Placement transaction for the offering of 591,860 units (“Units”) to certain accredited investors (the “Private Placement”). Each Unit was comprised of: (i) one share of common stock, (ii) five shares of Series A Preferred, and (iii) three warrants, each to purchase one share of common stock. The purchase price was $23.94 per Unit (the equivalent of $3.99 per share of common stock, assuming conversion of the Series A Preferred). The closing of the Private Placement was conditioned upon the closing of the Allenex acquisition, the consent of East West Bank to the Allenex acquisition, and certain other customary closing conditions, all of which occurred on April 14, 2016. The aggregate gross proceeds to the Company from the Private Placement were approximately $14.2 million, of which $1.8 million was paid in satisfaction of placement agents, escrow agent, legal fees as well as other direct issuance costs. The Company and certain stockholders representing a majority of the Company’s outstanding shares of common stock entered into voting agreements on April 14, 2016, pursuant to which each stockholder agreed to vote certain of its shares of the Company’s common stock in favor of granting the Company the Requisite Stockholder Approval.

The proceeds from the Private Placement were allocated between the common stock, preferred stock and warrants issued based on their relative fair values. The estimated fair values of the common stock, preferred stock and warrants were $1.9 million, $9.3 million and $3.0 million, respectively, as of the transaction date. The warrants were recorded as a liability and are subject to ongoing remeasurement. The shares of Series A Preferred were initially recorded as temporary equity upon the closing of the Private Placement and subsequently reclassified to common stock after their conversion to common stock on June 16, 2016. See Note 12 for a description of the accounting of for the warrants.

Concurrent to the Private Placement, the Company also entered into Commitment Letters pursuant to which the Majority Shareholders agreed to purchase the Company’s equity securities in the Subsequent Financing, which investment was completed on June 15, 2016. In the Subsequent Financing, the Company issued to the Majority Shareholders 334,169 Units, which consisted of (i) an aggregate of 334,169 shares of common stock, (ii) an aggregate of 1,670,845 shares of Series A Preferred that were all converted into shares of the Company’s common stock upon obtaining the Requisite Stockholder Approval on June 16, 2016, and (iii) 1,002,507 warrants, each of which is exercisable for one share of the Company’s common stock. The aggregate gross proceeds to the Company from the Subsequent Financing were $8.0 million.

The proceeds from the Subsequent Financing were allocated between the common stock, preferred stock and warrants issued based on their relative fair values. The estimated fair values of the common stock, preferred stock and warrants were $1.0 million, $5.3 million and $1.7 million, respectively, as of the transaction date. The warrants were recorded as a liability and are subject to ongoing remeasurement. The shares of Series A Preferred were initially recorded as temporary equity upon the closing of the Subsequent Financing and subsequently reclassified to common stock after their conversion to common stock on June 16, 2016.

Following the closing of the Private Placement, the Company agreed to a number of requirements, including submitting the Private Placement to the Company’s stockholders for approval, which was obtained on June 16, 2016, and granting certain registration rights, including the registration of shares sold in the Private Placement on a registration statement on Form S-3. On May 27, 2016, the Company filed a registration statement on Form S-3 with the SEC to register for resale the shares of common stock issued or issuable upon conversion of the Series A Preferred and upon exercise of the warrants sold in the Private Placement. The registration statement on Form S-3 was declared effective by the SEC on July 12, 2016.

Upon obtaining the Requisite Stockholder Approval on June 16, 2016, each share of Series A Preferred was converted into one share of the Company’s common stock. In addition to the warrants issued to certain accredited investors in the Private Placement, on April 14, 2016, the Company issued warrants to purchase an aggregate of 200,000 shares of common stock to certain of its placement agents (the “Placement Agent Warrants”). All of the warrants issued in the Private Placement and the Placement Agent Warrants became exercisable once the Company obtained the Requisite Stockholder Approval on June 16, 2016.

The Company engaged M.M. Dillon & Co. Group (“M.M. Dillon”), an investment banking firm, to act as one of its financial advisors and placement agents in connection with the Private Placement and Subsequent Financing of the Company’s common stock and the consummation of any private placement of its securities that the Company may choose to pursue. A member of the Company’s board of directors is a managing director of M.M. Dillon, and as such, the Company considered M.M. Dillon to be a related party. As a result of the Private Placement and Subsequent Financing, the Company paid approximately $1.1 million in placement fees to its placement agents, of which $0.2 million pertained to fees paid to M.M. Dillon. Additionally, M.M. Dillon also received Placement Agent Warrants to purchase 100,000 shares of the Company’s common stock.

On September 26, 2016, the Company completed the Public Offering pursuant to which the Company issued and sold an aggregate of 2,250,000 shares of common stock at a public offering price of $4.00 per share. The aggregate gross proceeds were $9.0 million, and $7.8 million net of issuance costs.

In connection with the Public Offering, in accordance with the anti-dilution provisions in the warrants issued in connection with the Private Placement and the Subsequent Financing, the exercise price of the 1,775,580 and 1,002,507 Private Placement and Subsequent Financing warrants, respectively, was adjusted from $4.98 per share to $4.00 per share, which was the price paid by investors in the Public Offering.

Warrant Valuation Assumptions

The fair value of the Private Placement and Placement Agent warrants were estimated using a Monte Carlo Simulation approach using the following assumptions.

 

 

 

December 31, 2016

 

 

 

April 14, 2016

 

 

Private Placement Warrants

 

 

 

 

 

 

 

 

 

 

Stock Price

 

$

2.70

 

 

 

$

4.45

 

 

Exercise Price

 

$

4.00

 

 

 

$

4.98

 

 

Remaining term (in years)

 

 

6.29

 

 

 

 

7.00

 

 

Volatility

 

 

51.40

 

%

 

 

46.90

 

%

Risk-free interest rate

 

 

2.14

 

%

 

 

1.57

 

%

Expected dividend yield

 

—

 

%

 

—

 

%

Placement Agent Warrants

 

 

 

 

 

 

 

 

 

 

Stock Price

 

$

2.70

 

 

 

$

4.45

 

 

Exercise Price

 

$

3.99

 

 

 

$

3.99

 

 

Remaining term (in years)

 

 

4.29

 

 

 

 

5.00

 

 

Volatility

 

 

56.10

 

%

 

 

49.00

 

%

Risk-free interest rate

 

 

1.77

 

%

 

 

1.26

 

%

Expected dividend yield

 

—

 

%

 

—

 

%