Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

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Stockholders' Equity
9 Months Ended
Sep. 30, 2017
Stockholders' equity (deficit):  
Stockholders' Equity
5. Stockholders’ Equity

 

2016 Private Placement

 

On September 2, 2016, the Company completed the 2016 PIPE, pursuant to the terms of a Securities Purchase Agreement dated August 31, 2016 (the “2016 PIPE Purchase Agreement”), by and among the Company and certain investors (collectively, the “2016 PIPE Investors”). At the closing, in accordance with the terms and conditions of the 2016 PIPE Purchase Agreement, the Company sold to the 2016 PIPE Investors an aggregate of 851,000 units (the “2016 PIPE Units”), with each 2016 PIPE Unit consisting of: (i) one share of the Company’s common stock; and (ii) a warrant to purchase 0.90 shares of the Company’s common stock (each, a “2016 PIPE Warrant” and collectively, the “2016 PIPE Warrants”).

 

In connection with the sale of the 2016 PIPE Units, the Company received aggregate gross proceeds of approximately $4.25 million, before deducting placement agents’ fees and offering expenses aggregating approximately $418,000. In addition, the placement agents for the 2016 PIPE received, in the aggregate, warrants (“2016 PIPE Placement Agent Warrants”) to purchase up to 29,680 shares of common stock.

 

Purchase Agreement

 

The 2016 PIPE Purchase Agreement contains representations and warranties by the Company and the 2016 PIPE Investors and covenants of the Company and the 2016 PIPE Investors (including indemnification from the Company in the event of breaches of its representations and warranties), which the Company believes are customary for transactions of this type.

 

Warrants

 

The 2016 PIPE Warrants are exercisable, in full or in part, at any time prior to September 2, 2021, at an exercise price of $5.50 per share, subject to provisions for: (a) adjustments in the case of certain corporate transactions; (b) consideration to be received in lieu of shares of the Company’s common stock in the case of certain fundamental transactions; and (c) a “cashless exercise” feature. The 2016 PIPE Placement Agent Warrants have the same terms and conditions as the 2016 PIPE Warrants.

 

Related Debt Conversion

 

As discussed in Note 4, pursuant to the August 2016 Amendments, in addition to and simultaneously with the sale of the 2016 PIPE Units, on September 2, 2016: (i) the 2014 Principal automatically converted into 350,000 2016 PIPE Units on the same terms and conditions as applied to purchasers of 2016 PIPE Units; and (ii) the exercise price for 13,125 shares of common stock that may be purchased upon exercise of the holders’ 2014 Warrants was reduced to $5.50 per share, which is equal to the per share exercise price of the 2016 PIPE Warrants.

 

2017 Private Placement

 

On May 26, 2017, the Company completed the 2017 PIPE pursuant to a Securities Purchase Agreement dated May 25, 2017 (the “2017 PIPE Purchase Agreement”) with certain accredited investors (collectively, the “2017 PIPE Investors”) for the private placement of 6,625,000 units (the “2017 PIPE Units”) at a purchase price of $2.00 per unit, with each unit consisting of: (i) one share of the Company’s common stock; and (ii) a warrant to purchase one share of the Company’s common stock (each, a “2017 PIPE Warrant” and collectively, the “2017 PIPE Warrants”).

 

In connection with the sale of the 2017 PIPE Units, the Company received aggregate gross proceeds of approximately $13.25 million, before deducting placement agents’ fees and offering expenses aggregating approximately $1.3 million. In addition, the placement agents for the 2017 PIPE received, in the aggregate, warrants (“2017 PIPE Placement Agent Warrants”) to purchase up to 509,200 shares of common stock.

 

Purchase Agreement

 

The 2017 PIPE Purchase Agreement contains representations and warranties by the Company and the 2017 PIPE Investors and covenants of the Company and the 2017 PIPE Investors (including indemnification from the Company in the event of breaches of its representations and warranties), which the Company believes are customary for transactions of this type.

 

Registration Rights Agreement

 

Concurrent with completion of the 2017 PIPE, the Company and the 2017 PIPE Investors entered into a Registration Rights Agreement (the “2017 PIPE Registration Rights Agreement”) pursuant to which the Company is required to prepare and file a registration statement (the “2017 PIPE Registration Statement”) with the SEC under the Securities Act of 1933, as amended, covering the resale of the shares of common stock to be issued to the 2017 PIPE Investors under the 2017 PIPE Purchase Agreement as well as the shares of common stock underlying the 2017 PIPE Warrants and the 2017 PIPE Placement Agent Warrants. The Company was required to file such 2017 PIPE Registration Statement on or before June 26, 2017, and was required to use its best efforts to have the 2017 PIPE Registration Statement declared effective as soon as practicable. The Company filed the 2017 PIPE Registration Statement on June 26, 2017, and the 2017 PIPE Registration Statement was declared effective by the SEC on July 7, 2016, both dates being in conformity with the foregoing requirements. Pursuant to the 2017 PIPE Registration Rights Agreement, if the Company fails to continuously maintain the effectiveness of the 2017 PIPE Registration Statement (with certain permitted exceptions), the Company will incur certain liquidated damages to the 2017 PIPE Investors. The 2017 PIPE Registration Rights Agreement also contains mutual indemnifications by the Company and each 2017 PIPE Investor, which the Company believes are customary for transactions of this type.

  

Warrants

 

The 2017 PIPE Warrants are exercisable, in full or in part, at any time prior to the fifth anniversary of their issuance, at an exercise price of $2.20 per share, subject to provisions for: (a) adjustments in the case of certain corporate transactions; (b) consideration to be received in lieu of shares of the Company’s common stock in the case of certain fundamental transactions; and (c) a “cashless exercise” feature. The 2017 PIPE Placement Agent Warrants have the same terms and conditions as the 2017 PIPE Warrants.

  

Issuance of Common Stock in Lieu of Cash Payments

 

Under the terms of the Amended and Restated Non-Employee Director Compensation Plan, each non-employee member of the Company’s Board of Directors may elect to receive all or part of his or her director fees in shares of the Company’s common stock. Director fees, whether paid in cash or in shares of common stock, are payable quarterly on the last day of each fiscal quarter. The number of shares of common stock issued to directors is determined by dividing the product of: (i) the fees otherwise payable to each director in cash, times (ii) the percentage of fees the director elected to receive in shares of common stock, by (iii) the volume weighted average price per share of common stock over the last five trading days of the quarter. No shares were issued to directors as payment for director fees during the three or nine months ended September 30, 2017. During the three and nine months ended September 30, 2016, 4,431 and 10,805 shares, respectively, were issued to directors as payment for director fees in lieu of cash.

 

Stock Incentive Plans

 

The Company has various share-based compensation plans and share-based compensatory contracts (collectively, the “Plans”) under which it has granted share-based awards, such as stock grants, and incentive and non-qualified stock options, to employees, directors, consultants and advisors. Awards may be subject to a vesting schedule as set forth in individual award agreements. Certain of the Plans also have provided for cash-based performance bonus awards.

 

Since June 2015, the Company has granted share-based awards under the MRI Interventions, Inc. Amended and Restated 2013 Incentive Compensation Plan (the “2013 Plan”). Under the 2013 Plan, a total of 156,250 shares of the Company’s common stock are reserved for issuance. Of this amount, stock grants of 38,294 shares have been awarded and option grants, net of options terminated, expired or forfeited, of 103,625 shares were outstanding as of September 30, 2017. Accordingly, 14,331 shares remained available for grants under the 2013 Plan as of that date.

 

Stock option activity under all of the Company’s Plans during the nine months ended September 30, 2017 is summarized below:

 

      Shares     Weighted -
Average
Exercise
Price
 
Outstanding at December 31, 2016       337,441     $ 42.07  
Granted       13,625       2.90  
Forfeited       (40,117 )     36.06  
Outstanding at September 30, 2017       310,949     $ 41.95  

 

The estimated grant date fair values of options granted during the three months ended September 30, 2017 were calculated using the Black-Scholes valuation model, based on the following assumptions:

 

Dividend yield     0%  
Expected volatility     43.38% - 48.62%  
Risk free interest rates     1.91% - 2.05%  
Expected lives (in years)     6  

 

The Company records share-based compensation expense on a straight-line basis over the related vesting period. For the three and nine months ended September 30, 2017 and 2016, share-based compensation expense related to options was:

 

Three Months Ended September 30,  
2017   2016  
$ 186,982   $ 238,101  

 

Nine Months Ended September 30,  
2017   2016  
$ 616,007   $ 736,982  

 

As of September 30, 2017, there was unrecognized compensation expense of $243,254 related to outstanding stock options, which is expected to be recognized over a weighted average period of 1.12 years.

 

Warrants

  

Warrants have generally been issued for terms of up to five years. Common stock warrant activity for the nine months ended September 30, 2017 was as follows:

 

      Shares     Weighted -
Average Exercise
Price
 
Outstanding at December 31, 2016       1,991,293     $ 13.00  
Issued       7,134,200       2.20  
Exercised       (3,845 )     2.00  
Terminated       (172,070 )     32.77  
Outstanding at September 30, 2017       8,949,578     $ 4.12