Quarterly report pursuant to Section 13 or 15(d)

Capital Stock

v3.6.0.2
Capital Stock
9 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Capital Stock

Series B Preferred Unit Offering

 

Prior to the consummation of our May 2016 Public Offering, we sold to accredited investors in self-placed private placement transactions an aggregate of $278,000 of units in our Series B Preferred Unit offering in April and May 2016, which units consisted of Series B Preferred and Series B Warrants (together Series B Preferred Units). We issued 39,714 shares of Series B Preferred and Series B Warrants to purchase 39,714 shares of our common stock.  From May 2015 through the termination of the Series B Preferred Unit offering in May 2016, we received an aggregate of $5,303,800 in cash proceeds from our self-placed private placement and sale of the Series B Preferred Units.

 

We allocated the proceeds from the sale of the Series B Preferred Units during April and May 2016 to the Series B Preferred and the Series B Warrants based on their relative fair values on the dates of the sales. We determined that the fair value of a share of Series B Preferred was equal to the quoted market value of a share of our common stock on the date of a Series B Preferred Unit sale. We calculated the fair value of the Series B Warrants using the Black Scholes Option Pricing Model and the weighted average assumptions indicated in the table below. The table below also presents the aggregate allocation of the Series B Preferred Unit sales proceeds based on the relative fair values of the Series B Preferred and the Series B Warrants as of their respective Series B Preferred Unit sales dates. The difference between the relative fair value per share of the Series B Preferred, approximately $4.20 per share, and its Conversion Price (or stated value) of $7.00 per share represents a deemed dividend to the purchasers of the Series B Preferred Units. Accordingly, we have recognized a deemed dividend in the aggregate amount of $111,100 in arriving at net loss attributable to common stockholders in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Loss for the nine months ended December 31, 2016.

 

 Unit Warrants        
    Weighted Average Issuance Date Valuation Assumptions    

Aggregate Allocation

of Proceeds

Warrant        

Risk

free

     

Per Share

Fair

Aggregate

Fair Value

 

Aggregate

Proceeds

Based on Relative

Fair Value of:

Shares   Market Exercise Term Interest   Dividend   Value of of Unit   of Unit Unit Unit
Issued   Price Price (Years) Rate Volatility Rate   Warrant Warrants   Sales Stock Warrant
                             
        39,714    $          8.45  $    7.00             5.00 1.27% 78.43% 0.0%    $                    5.63  $                  223,500    $                  278,000  $   166,900  $                61,100

 

 

May 2016 Public Offering and Listing of our Common Stock on The NASDAQ Capital Market

 

Effective on May 16, 2016, we consummated an underwritten public offering of our securities, pursuant to which we issued units consisting of an aggregate of 2,570,040 registered shares of our common stock at a public sales price of $4.24 per share and five-year warrants exercisable at $5.30 per share to purchase an aggregate of 2,705,883 shares of our common stock at a public sales price of $0.01 per warrant share, including shares and warrants issued in June 2016 pursuant to the exercise of the underwriters’ over-allotment option. We received gross proceeds of approximately $10.9 million and net proceeds of approximately $9.5 million from the May 2016 Public Offering, after deducting underwriters’ commissions and other offering expenses. The warrants issued in the May 2016 Public Offering have no anti-dilution or other exercise price or share reset features, except as is customary with respect to a change in our capital structure in the event of a stock split or dividend, and, accordingly, we have accounted for them as equity warrants.

 

The securities included in the May 2016 Public Offering Warrants were offered, issued and sold under a prospectus filed with the Commission pursuant to an effective registration statement (Registration Statement) filed with the Commission on Form S-1 (File No. 333-210152) pursuant to the Securities Act of 1933, as amended (Securities Act). The Registration Statement was first filed with the Commission on March 14, 2016, and was declared effective on May 10, 2016.

 

In connection with the completion of our May 2016 Public Offering, NASDAQ approved our common stock for listing on The NASDAQ Capital Market. Our common stock began trading on The NASDAQ Capital Market under the symbol “VTGN” on May 11, 2016.

 

Conversion of Series B Preferred into Common Stock

 

During April 2016, prior to the consummation of the May 2016 Public Offering, holders of an aggregate of 7,500 shares of Series B Preferred voluntarily converted such shares into an equivalent number of registered shares of our common stock.  In connection with such conversions, we issued an aggregate of 510 shares of our unregistered common stock as payment in full of $4,000 in accrued dividends on the Series B Preferred that was voluntarily converted.

 

On May 19, 2016, upon the consummation of the May 2016 Public Offering, an aggregate of 2,403,051 shares of Series B Preferred were automatically converted into an aggregate of 2,192,847 registered shares of our common stock and an aggregate of 210,204 shares of our unregistered common stock. Additionally, we issued an aggregate of 416,806 shares of our unregistered common stock as payment in full of $1,642,100 in accrued dividends on the Series B Preferred that was automatically converted on May 19, 2016, at the rate of one share of common stock for each $3.94 of accrued Series B Preferred dividends.  On June 15, 2016, pursuant to the underwriters’ exercise of their over-allotment option, an additional 44,500 shares of Series B Preferred were converted into 44,500 shares of our registered common stock.  We issued an additional 9,580 shares of our unregistered common stock as payment in full of $37,400 of accrued dividends on the Series B Preferred that was automatically converted on June 15, 2016, at the rate of one share of common stock for each $3.90 in accrued dividends.

 

In August 2016, one of the remaining holders of our Series B Preferred voluntarily converted 87,500 shares of Series B Preferred into an equivalent number of registered shares of our common stock.  In connection with this conversion, we issued 26,258 shares of our unregistered common stock as payment in full of $85,300 in accrued dividends on the Series B Preferred that was voluntarily converted, at the rate of one share of common stock for each $3.25 in accrued dividends.

 

Common Stock and Warrants Issued in Private Placement

 

In December 2016, in self-placed private transactions, we accepted subscription agreements from two individual accredited investors, pursuant to which we sold to such investors units, at a purchase price of $3.70 per unit, consisting of an aggregate of 67,000 unregistered shares of our common stock and warrants, exercisable through November 30, 2019, to purchase an aggregate of 16,750 unregistered shares of our common stock at an exercise price of $6.00 per share. The purchasers of the units have no registration rights with respect to the shares of common stock, warrants or the shares of common stock issuable upon exercise of the warrants comprising the units sold. We received aggregate cash proceeds of $247,900 in connection with this private placement of the units, of which the entire amount was credited to stockholders’ equity.

 

Issuance of Common Stock to Professional Services Providers

 

In September 2016, we issued an aggregate of 170,000 shares of our unregistered common stock having an aggregate fair value on the date of issuance of $737,800 as compensation to certain entities previously engaged as professional services providers. Of that amount, we issued 120,000 shares having a fair value of $520,800 on the date of issuance for services to be rendered from October 2016 to December 2016. The value of these shares was recorded as a prepaid expense at September 30, 2016 and was fully expensed as a component of general and administrative expense during the quarter ended December 31, 2016. In November and December 2016, we issued an aggregate of 135,000 shares of our unregistered common stock having an aggregate fair value on the respective dates of issuance of $479,800 as compensation to professional services providers.

 

Warrant Exchanges and Other Warrant Modifications

 

During the nine months ended December 31, 2016, we entered into Warrant Exchange Agreements with certain holders of outstanding warrants to purchase an aggregate of 224,693 shares of our common stock pursuant to which the holders agreed to cancel such warrants in exchange for the issuance of an aggregate of 156,246 unregistered shares of common stock.

 

We accounted for the exchanges of these warrants as warrant modifications, comparing the fair value of the warrants immediately prior to the exchanges with the fair value of the unregistered common stock issued. We calculated the weighted average fair value of the warrants prior to the respective exchanges using the Black Scholes Option Pricing Model and the weighted average assumptions indicated in the table below. We determined the post-modification fair value based on the quoted market price of our common stock on the effective date of each exchange and the number of unregistered shares issued in the exchange, as also indicated in the table below. We recognized the amount of the incremental fair value of the unregistered common stock issued in excess of the fair value of the warrants cancelled, $293,300 and $350,700 for the three and nine months ended December 31, 2016, respectively, as warrant modification expense, which is included as a component of general and administrative expenses in our Condensed Consolidated Statement of Operations and Comprehensive Loss for the three and nine months ended December 31, 2016.

 

 

    April - May 2016     August 2016     October 2016     December 2016  
    Pre-     Post-     Pre-     Post-     Pre-     Post-     Pre-     Post-  
    modification     modification     modification     modification     modification     modification     modification     modification  
                                                 
Market Price per share   $ 8.44     $ 8.45     $ 3.33     $ 3.33     $ 4.05     $ 4.05     $ 3.73     $ 3.73  
Exercise price per share   $ 7.37             $ 8.00             $ 8.15             $ 10.00          
Risk-free interest rate     1.23 %             1.10 %             0.77 %             0.44 %        
Contractual term (years)     4.77               4.58               2.4               0.003          
Volatility     79.0 %             87.0 %             93.0 %             100.3 %        
Dividend Rate     0 %             0 %             0 %             0 %        
                                                                 
Weighted average fair value per share   $ 5.37             $ 1.64             $ 1.27             $ -          
                                                                 
Warrant shares cancelled and exchanged     41,649               20,000               113,944               49,100          
                                                                 

Common shares issued in exchange 

        31,238             15,000             85,458             24,550  
                                                                 
Fair Value   $ 223,700     $ 264,000     $ 32,900     $ 50,000     $ 144,400     $ 346,100     $ -     $ 91,600  
                                                                 

Incremental fair value recognized 

    $ 40,300       $ 17,100       $ 201,700         $ 91,600  

 

In December 2016, the Board authorized the modification of an outstanding warrant to both alter the exercise terms and increase the number of shares for which the warrant was exercisable. We calculated the fair value of the warrant immediately before and after the modification using the Black Scholes Option Pricing Model and the assumptions indicated in the table below. As indicated, we recognized the additional fair value, $76,900, as warrant modification expense, included as a component of general and administrative expenses, in our Condensed Consolidated Statement of Operations and Comprehensive Loss for the quarter ended December 31, 2016.

 

    Pre-     Post-  
    modification     modification  
             
Market Price per share   $ 3.51     $ 3.51  
Exercise price per share   $ 8.00     $ 3.51  
Risk-free interest rate     1.88 %     2.07 %
Contractual term (years)     4.26       5.03  
Volatility     87.1 %     85.8 %
Dividend Rate     0 %     0 %
                 
Weighted average fair value per share   $ 1.71     $ 2.39  
                 
Number of warrant shares     25,000       50,000  
                 
Fair Value   $ 42,700     $ 119,600  
                 

 

Incremental fair value recognized

 

    $ 76,900  

 

Warrants Outstanding

 

Following the warrant issuances in the May 2016 Public Offering, the Series B Warrant issuances and the warrant exchanges and modification described above, at December 31, 2016, we had outstanding warrants to purchase shares of our common stock at a weighted average exercise price of $6.31 per share as follows: 

 

         

Exercise Price

per Share

  Expiration Date  

Shares Subject to Purchase

at December 31, 2016

                 
$ 3.51     12/31/2021     50,000  
$ 4.50     9/26/2019     25,000  
$ 5.30     5/16/2021     2,705,883  
$ 6.00     9/26/2019 to 11/30/2019     97,750  
$ 7.00     12/11/2018 to 3/3/2023     1,346,931  
$ 8.00     3/25/2021     185,000  
$ 10.00     2/28/2017 to 1/11/2020     25,758  
$ 20.00     9/15/2019     110,448  
$ 30.00     11/20/2017     3,600  
              4,550,370  

 

With the exception of 2,705,883 shares of common stock underlying the warrants issued in the May 2016 Public Offering, all of the common shares issuable upon exercise of our outstanding warrants are unregistered.