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COMMON STOCK AND WARRANTS
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2010
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| Stockholders' Equity Note Disclosure [Text Block] |
On
October 6, 2010, as part of the Convertible Note
financing, the Company issued Warrants which are
immediately exercisable and entitle the holders of the
Warrants to purchase up to an aggregate of 2,941,178
shares of the Company’s common stock until
October 6, 2017 at an exercise price of $5.95 per share
(“Warrant Exercise Price”), which price is
subject to adjustment. The Warrants include both cash
and cashless exercise provisions.
The
Warrant Exercise Price is subject to adjustment for stock
splits, combinations or similar events, and, in such
event, the number of shares issuable upon the exercise of
the Warrants will also be adjusted so that the aggregate
Warrant Exercise Price shall be the same immediately
before and immediately after the adjustment. In addition,
the Warrant Exercise Price is also subject to a
“full ratchet” anti-dilution adjustment where
if the Company issues or is deemed to have issued
securities at a price lower than the then applicable
Warrant Exercise Price, the Warrant Exercise Price will
immediately decline to equal the price at which the
Company issues or is deemed to have issued its common
stock.
If
the Company sells or issues any securities with
“floating” conversion prices based on the
market price of its common stock, a holder of a Warrant
has the right to substitute the “floating”
conversion price for the Warrant Exercise Price upon
exercise of all or part of the Warrant.
Similar
to the Convertible Notes, the Warrants require payments
to be made by the Company for failure to deliver the
shares of common stock issuable upon exercise.
The
Warrants may not be converted if, after giving effect to
the conversion, the investor together with its affiliates
would beneficially own in excess of 4.99% or 9.99% (which
percentage has been established at the election of each
selling security holder) of the Company’s
outstanding shares of common stock. The blocker
applicable to the exercise of the Warrants may be raised
or lowered, subject to an advance notice period, to any
other percentage not in excess of 9.99%.
If
the Company issues options, convertible securities,
warrants, stock, or similar securities to holders of its
common stock, each holder of a Warrant has the right to
acquire the same as if the holder had exercised its
Warrant. The Warrants prohibit the Company from entering
into specified transactions involving a change of
control, unless the successor entity is a publicly traded
corporation that assumes all of the Company’s
obligations under the Warrants under a written agreement
approved by all of the holders of the Warrants before the
transaction is completed. When there is a transaction
involving a permitted change of control, a holder of a
Warrant will have the right to force the Company to
repurchase the holder’s Warrants for a purchase
price in cash equal to the Black Scholes value of the
then unexercised portion of the Warrants.
If
at any time after the date the Company has initially
satisfied certain specified conditions, and
(i) its common stock trades at a price equal to or
greater than $14.84 per share for 20 trading days in
any 30 consecutive trading day period (“Mandatory
Exercise Measuring Period”), (ii) the
average daily dollar trading volume of the
Company’s common stock for each trading day
during the Mandatory Exercise Measuring Period exceeds
$250,000 per day, and (iii) all such conditions
are then satisfied, the Company will have the right to
require the holders of the Warrants to fully exercise
all, but not less than all, of the Warrants (subject to
the blocker).
The
initial number of shares of the Company’s common
stock issuable upon exercise of the Warrants is
2,941,178, which is based on the current exercise price
of $5.95 per share. The exercise price is subject to
adjustments as noted above, and therefore, there is no
maximum number of shares of the Company’s common
stock that may be issued, or if any, prior to the end
of the term of the Warrants.
The
Company has determined that the Warrants did not meet the
conditions for classification in stockholders’
equity and as such, has recorded them as a liability at
fair value. The Company must revalue the Warrants at each
reporting period. Accordingly, the Company recorded fair
value adjustments of $7,445,000 for their initial
recognition and a gain of $1,727,000 for subsequent
changes in fair value, which is attributed to term
shortening and reduction in the market value of the
Company’s common stock, resulting in the Warrants
becoming out of the money at December 31, 2010. See Note
13 for the Company’s fair value assumptions.
In
March 2008, the Company issued warrants to purchase an
aggregate of 439,560 shares of common stock at an
exercise price of $49.00 per share, which expire in 2018.
In May 2008, the Company issued warrants to purchase an
aggregate of 63,186 shares of common stock at an exercise
price of $49.00 per share, which expire in 2018. See Note
9—Preferred Stock. In March 2008, the Company also
issued warrants to purchase 14,286 shares of common stock
at an exercise price of $56.00 per share, which expired
unexercised in 2009.
In
May 2008, the Company issued warrants to purchase an
aggregate of 428,571 shares of common stock at an
exercise price of $49.70 per share, which expire in
2013.
The
following table summarizes warrant activity for the years
ended December 31, 2010 and 2009 (number of shares in
thousands):
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