Notes to Condensed
Consolidated
Financial Statements
(Unaudited)
(in thousands, except share and per share amounts)
1.
Basis of Presentation and Summary of Significant Accounting Policies
Organization and Basis of Presentation
Cesca Therapeutics Inc. (“Cesca”, or the “Company”) develops and markets integrated cellular therapies and delivery systems that advance the safe and effective practice of regenerative medicine. Cesca is a leader in developing and manufacturing automated blood and bone marrow processing systems that enable the separation, processing and preservation of cell and tissue therapy products.
Reverse Stock Split
On March 4, 2016, the Company affected a one (1) for twenty (20) reverse split of its issued and outstanding common stock. There were no changes to its authorized number of shares of common stock of 350,000,000.
All historical share amounts disclosed herein have been retroactively recast to reflect the reverse split. No fractional shares were issued; fractional shares of common stock were rounded up to the nearest whole share.
Liquidity and Going Concern
At December 31, 2016, the Company had cash and cash equivalents of $4,899 and working capital of $5,499. The Company has incurred recurring operating losses and as of December 31, 2016 had an accumulated deficit of $182,106. The Company has primarily financed operations through the sale of equity securities, convertible debentures and the sale of certain non-core assets.
The Company will need additional funding to support its phase III Critical Limb Ischemia (“CLIRST III”) trial. As such, management has been exploring additional funding sources, primarily strategic partner relationships. The Company cannot assure that such funding will be available on a timely basis, in needed quantities, or on favorable terms, if at all. If the Company is unable to generate sufficient revenues or obtain additional funds for its working capital needs, the Company will have to further scale-back operations.
Because of recurring and expected operating losses and its cash balance there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Principles of Consolidation
The consolidated financial statements include the accounts of Cesca and its wholly-owned subsidiaries, TotipotentRX Cell Therapy, Pvt. Ltd. and TotipotentSC Scientific Product Pvt. Ltd. All significant intercompany accounts and transactions have been eliminated upon consolidation.
Interim Reporting
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such Securities and Exchange Commission (SEC) rules and regulations and accounting principles applicable for interim periods. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying condensed consolidated financial statements through the date of issuance. Operating results for the six month period ended December 31, 2016, are not necessarily indicative of the results that may be expected for the year ending June 30, 2017. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2016.
2
.
Summary of Significant Accounting Policies
Revenue Recognition
Revenues from the sale of the Company’s products and services are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or services have been rendered), the price is fixed or determinable, and collectability is reasonably assured. The Company generally ships products F.O.B. shipping point. There is no conditional evaluation on any product sold and recognized as revenue. Amounts billed in excess of revenue recognized are recorded as deferred revenue on the balance sheet.
The Company’s sales are generally through distributors. There is no right of return. For sales of products made to distributors, the Company considers a number of factors in determining whether revenue is recognized upon transfer of title to the distributor, or when payment is received. These factors include, but are not limited to, whether the payment terms offered to the distributor are considered to be non-standard, the distributor history of adhering to the terms of its contractual arrangements, the level of inventories maintained by the distributor, whether the Company has a pattern of granting concessions for the benefit of the distributor, and whether there are other conditions that may indicate that the sale to the distributor is not substantive. The Company currently recognizes revenue primarily on the sell-in method with its distributors.
Revenue arrangements with multiple deliverables are divided into units of accounting if certain criteria are met, including whether the deliverable item(s) has (have) value to the customer on a stand-alone basis. Revenue for each unit of accounting is recognized as the unit of accounting is delivered. Arrangement consideration is allocated to each unit of accounting based upon the relative estimated selling prices of the separate units of accounting contained within an arrangement containing multiple deliverables. Estimated selling prices are determined using vendor specific objective evidence of value (VSOE), when available, or an estimate of selling price when VSOE is not available for a given unit of accounting. Significant inputs for the estimates of the selling price of separate units of accounting include market and pricing trends and a customer’s geographic location. The Company accounts for training and installation, service agreements and the collection, processing and testing of the umbilical cord blood and the storage as separate units of accounting.
Service revenue generated from contracts for providing maintenance of equipment is amortized over the life of the agreement. Revenue generated from storage contracts is deferred and recorded ratably over the life of the agreement, up to 21 years.
All other service revenue is recognized at the time the service is completed.
Revenues are net of normal discounts. Shipping and handling fees billed to customers are included in net revenues, while the related costs are included in cost of revenues.
Fair Value Measurements
In accordance with ASC 820, “
Fair Value Measurements and Disclosures
,” fair value is defined as the exit price, or the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.
The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions.
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short duration. The fair value of the Company’s derivative obligation liability is classified as Level 3 within the fair value hierarchy since the valuation model of the derivative obligation is based on unobservable inputs.
Segment Reporting
The Company has one reportable business segment: the research, development and commercialization of autologous cell-based therapies for use in regenerative medicine.
Net Loss per Share
Net loss per share is computed by dividing the net loss to common stockholders by the weighted average number of common shares outstanding. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common stock equivalents is anti-dilutive due to the Company’s net loss position for all periods presented. Anti-dilutive securities consisted of the following at December 31:
|
|
2016
|
|
|
2015
|
|
Common stock equivalents of convertible debentures
|
|
|
--
|
|
|
|
404,412
|
|
Vested Series A warrants
|
|
|
404,410
|
|
|
|
404,410
|
|
Unvested Series A warrants
|
|
|
698,529
|
(1)
|
|
|
698,529
|
(1)
|
Vested Series B warrants
|
|
|
--
|
|
|
|
197,242
|
|
Unvested Series B warrants
|
|
|
--
|
|
|
|
384,191
|
|
Warrants – other
|
|
|
3,725,782
|
|
|
|
252,620
|
|
Stock options
|
|
|
321,868
|
|
|
|
146,838
|
|
Restricted stock units
|
|
|
65,148
|
|
|
|
59,854
|
|
Total
|
|
|
5,215,737
|
|
|
|
2,548,096
|
|
|
(1)
|
The unvested Series A warrants were subject to vesting based upon the amount of funds actually received by the Company in the second close of the August 2015 financing which never occurred. The warrants will remain outstanding but unvested until they expire in February 2021
.
|
Reclassifications
Certain reclassifications have been made from the fiscal 2016 amounts to conform to the fiscal 2017 presentation. These reclassifications did not have any effect on our net loss or stockholders’ equity.
Recently Adopted Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-12, “
Compensation - Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
”. The amendments in ASU 2014-12 apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition that affects the vesting of the award. The Company adopted ASU 2014-12 effective July 1, 2016. The Company applies the amendments in ASU 2014-12 prospectively to all awards granted or modified after the effective date. Adoption of the new update to ASU 2014-12 did not have any impact on the financial statements of the Company.
Recently
Issued
Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04 which removes Step 2 from the goodwill impairment test. It is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment test performed with a measurement date after January 1, 2017. The Company has not yet determined the effect that ASU 2017-04 will have on its results of operations, statement of financial position or financial statement disclosures.
In March 2016 the FASB issued ASU No. 2016-06, “
Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments
” (“ASU 2016-06”). This new standard simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. This new standard will be effective for us on January 1, 2017. The adoption of this standard is not expected to have an impact on the Company’s financial position or results of operations.
In May 2014, the FASB issued ASU 2014-09, “
Revenue from Contracts with Customers (Topic 606)
” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition” and some cost guidance included in ASC Subtopic 605-35, "
Revenue Recognition - Construction-Type and Production-Type Contracts
.” The core principle of ASU 2014-09 is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASU 2014-09 requires the disclosure of sufficient information to enable readers of the Company’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 also requires disclosure of information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 provides two methods of retrospective application. The first method would require the Company to apply ASU 2014-09 to each prior reporting period presented. The second method would require the Company to retrospectively apply ASU 2014-09 with the cumulative effect recognized at the date of initial application. ASU 2014-09 will be effective for the Company beginning in fiscal 2019 as a result of ASU 2015-14, "
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
," which was issued by the FASB in August 2015 and extended the original effective date by one year. The Company is currently evaluating the impact of adopting the available methodologies of ASU 2014-09 and 2015-14 upon its financial statements in future reporting periods. The Company has not yet selected a transition method. The Company is in the process of evaluating the new standard against its existing accounting policies, including the timing of revenue recognition, and its contracts with customers to determine the effect the guidance will have on its financial statements and what changes to systems and controls may be warranted.
There have been four new ASUs issued amending certain aspects of ASU 2014-09, ASU 2016-08, "
Principal versus Agent Considerations (Reporting Revenue Gross Versus Net)
," was issued in March, 2016 to clarify certain aspects of the principal versus agent guidance in ASU 2014-09. In addition, ASU 2016-10, "
Identifying Performance Obligations and Licensing
," issued in April 2016, amends other sections of ASU 2014-09 including clarifying guidance related to identifying performance obligations and licensing implementation. ASU 2016-12, "
Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients
" provides amendments and practical expedients to the guidance in ASU 2014-09 in the areas of assessing collectability, presentation of sales taxes received from customers, noncash consideration, contract modification and clarification of using the full retrospective approach to adopt ASU 2014-09. Finally, ASU 2016-20, “
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,
” was issued in December 2016, and provides elections regarding the disclosures required for remaining performance obligations in certain cases and also makes other technical corrections and improvements to the standard. With its evaluation of the impact of ASU 2014-09, the Company will also consider the impact on its financial statements related to the updated guidance provided by these four new ASUs.
3.
Bill Payment Arrangement
The Company entered into a bill payment arrangement whereby Boyalife Group Ltd. (“Payor”), the Company's largest shareholder, will pay the Company’s legal expenses payable to the Company’s attorney related to certain litigation involving SynGen Inc. (the “Bill Payment Arrangement”), although the Company will remain jointly and severally liable for the payment of such legal fees. The terms of the Bill Payment Arrangement provide that the Company will reimburse Payor for any and all amounts paid by Payor in connection with the Bill Payment Arrangement under certain specified events. Any amounts received from Payor will be recorded as a liability until which time such liability has been adjudicated.
4.
Commitments and Contingencies
Financial Covenants
Effective September 30, 2015, the Company entered into a Fifth Amended and Restated Technology License and Escrow Agreement with Cord Blood Registry Systems, Inc. which modified the financial covenant that the Company must meet in order to avoid an event of default. The Company must maintain a cash balance and short-term investments net of debt or borrowed funds that are payable within one year of not less than $2,000. The Company was in compliance with this financial covenant as of December 31, 2016.
Warranty
The Company offers a warranty on all of its non-disposable products of one to two years. The Company warrants disposable products through their expiration date. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
The warranty liability is included in other current liabilities in the unaudited balance sheet. The change in the warranty liability for the six months ended December 31, 2016 is summarized in the following table:
Balance at July 1, 2016
|
|
$
|
566
|
|
Warranties issued during the period
|
|
|
59
|
|
Settlements made during the period
|
|
|
(67
|
)
|
Changes in liability for pre-existing warranties during the period
|
|
|
(5
|
)
|
Balance at December 31, 2016
|
|
$
|
553
|
|
Employee Agreements
and Company Policy
As of December 31, 2016, certain of the Company’s key executives have rights upon termination under employment agreements or current company policy. The agreements and company policy provide, among other things, for the payment of twelve months of severance compensation for termination under certain circumstances. With respect to these agreements and policy at December 31, 2016, potential severance, including incentive compensation amounted to $506.
On November 3, 2016, the Company’s Chief Executive Officer (“CEO”) was replaced. In accordance with his employment agreement, he was paid approximately $1.4 million for severance and other benefits plus the acceleration of vesting of his stock options and restricted stock (see Note 7). The severance portion of the expense of $1.2 million was recorded during the quarter ended December 31, 2016 and paid in January 2017.
5.
Convertible Debentures
In February 2016 in exchange for aggregate proceeds of $15 million, the Company sold and issued to Boyalife Investment Inc. and Boyalife (Hong Kong) Limited (i) 735,294 shares of common stock at a purchase price of $3.40 per share (the “Stock Price”) for gross proceeds of $2.5 million, (ii) Secured Convertible Debentures for $12.5 million (the “Debentures”) convertible into 3,676,471 shares of common stock and (iii) warrants to purchase 3,529,412 additional shares of common stock at an exercise price of $8.00 per share for a period of five years. The amount of warrants was based on 80% coverage of the shares issued or to be issued for the equity transaction in (i) and the debt transaction in (ii) above. The warrants were exercisable on August 13, 2016 and are outstanding at December 31, 2016.
On August 22, 2016, the Company notified Boyalife Investment Inc., that the Company elected to convert all outstanding principal and interest accrued and otherwise payable under the Debentures, which included the conversion of $12,500 of principal and $8,250 of interest up to and including the maturity date of the Debentures. Upon conversion, 6,102,941 shares of common stock were issued and the Debentures and all security interest and liens were terminated. The common shares of 2,426,470 that were issued for payment of the interest, had a fair market value of $11,404 on August 22, 2016. Accordingly, an additional $3,154 of interest expense was recorded on the date of conversion.
At the time of the conversion, the remaining debt discount of $9,538 and debt issue costs of $155 were fully amortized.
6.
Derivative Obligations
Series A Warrants
Series A warrants to purchase 404,410 common shares were issued and vested during the year ended June 30, 2016. At the time of issuance, the Company determined that as such warrants can be settled for cash at the holders’ option in a future fundamental transaction which constituted a derivative liability. The Company has estimated the fair value of the derivative liability, using a Binomial Lattice Valuation Model and the following assumptions:
|
|
Series A
|
|
|
|
December 31,
2016
|
|
|
June 30,
2016
|
|
Market price of common stock
|
|
$
|
3.45
|
|
|
$
|
2.93
|
|
Expected volatility
|
|
|
106
|
%
|
|
|
99
|
%
|
Contractual term (years)
|
|
|
4.2
|
|
|
|
4.7
|
|
Discount rate
|
|
|
1.73
|
%
|
|
|
1.01
|
%
|
Dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
Exercise price
|
|
$
|
8.00
|
|
|
$
|
8.00
|
|
Expected volatilities are based on the historical volatility of the Company’s common stock. Contractual term is based on remaining term of the respective warrants. The discount rate represents the yield on U.S. Treasury bonds with a maturity equal to the contractual term.
The Company recorded a gain of $153 and $2,180 during the three months ended December 31, 2016 and 2015, respectively and a (loss) gain of ($174) and $3,606 during the six months ended December 31, 2016 and 2015, respectively, representing the net change in the fair value of the derivative liability, which is presented as fair value change of derivative instruments, in the accompanying condensed consolidated statements of operations and comprehensive loss.
The following table represents the Company’s fair value hierarchy for its financial liabilities measured at fair value on a recurring basis as of December 31, 2016 and June 30, 2016:
|
|
Balance at
December 31, 2016
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative obligation
|
|
$
|
844
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
844
|
|
|
|
Balance at
June 30, 2016
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative obligation
|
|
$
|
670
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
670
|
|
The following table reflects the change in fair value of the Company’s derivative liabilities for the six months ended December 31, 2016:
|
|
Amount
|
|
Balance – July 1, 2016
|
|
$
|
670
|
|
Change in fair value of derivative obligation
|
|
|
174
|
|
Balance – December 31, 2016
|
|
$
|
844
|
|
7.
Stockholders’ Equity
Common Stock
On August 3, 2016, the Company sold 600,000 shares of common stock at a price of $4.10 per share. The net proceeds to the Company from the sale and issuance of the shares, after deducting the offering expenses borne by the Company of $369, were $2,091.
In July 2016, the compensation committee of the board of directors granted 118,288 shares of fully vested common stock to employees in partial payment of their earned amounts under the Company’s 2016 short term incentive plan. The election was made by some of the employees to satisfy the applicable federal income tax withholding obligation by a net share settlement, pursuant to which the Company withheld 46,879 shares and used the deemed proceeds from those shares to pay the income tax withholding. The net share settlement is deemed to be a repurchase by the Company of its common stock.
Stock Based Compensation
The Company recorded stock-based compensation of $735 and $1,033 for the three and six months ended December 31, 2016, and ($39) and $304 for the three and six months ended December 31, 2015.
Upon the separation with the Company’s CEO in November 2016, in accordance with his employment agreement, all outstanding options and restricted stock awards immediately vested. As a result, the Company recognized $539 of stock compensation expense in general and administrative as the vesting accelerated on 72,496 options and 79,720 restricted stock awards. Additionally, the terms of the options were modified upon the CEO’s termination such that the options were deemed to be exercisable for the entire period of the option versus expiring 90 days from the date of termination. There was no incremental compensation cost recorded for this modification as the fair-value-based measure of the modified award on the date of modification was less than the fair-value-based measure of the original award immediately before the modification.
The following is a summary of option activity for the Company’s stock option plans:
|
|
Number of
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Life
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2016
|
|
|
104,378
|
|
|
$
|
14.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
223,825
|
|
|
$
|
2.93
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(3,835
|
)
|
|
$
|
16.15
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(2,500
|
)
|
|
$
|
18.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
321,868
|
|
|
$
|
6.52
|
|
|
|
6.3
|
|
|
$
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and Expected to Vest at December 31, 2016
|
|
|
285,743
|
|
|
$
|
6.88
|
|
|
|
6.2
|
|
|
$
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2016
|
|
|
157,553
|
|
|
$
|
9.58
|
|
|
|
5.9
|
|
|
$
|
49
|
|
In December 2016, the compensation committee of the board of directors granted 50,000 options to the Company’s interim CEO. The options have an exercise price of $2.91, the closing price on the date of grant, they vest in five equal installments on each of December 16, 2016, February 4, 2017, May 4, 2017, August 4, 2017 and November 4, 2017 and have a seven year life. As the options were granted out of the 2016 Equity Incentive Plan (“2016 Plan”), they will not be exercisable until the 2016 Plan is approved by the stockholders, which approval must be received by July 7, 2017.
On July 7, 2016, the compensation committee of the board of directors granted 156,100 options to various employees. The options have an exercise price of $2.86, the closing price on the date of grant, they vest ratably every six months over a three year period and have a seven year life. As the options were granted out of the 2016 Equity Incentive Plan (“2016 Plan”), they will not be exercisable until the 2016 Plan is approved by the stockholders, which approval must be received by July 7, 2017.
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. There were no options exercised during the six months ended December 31, 2016 and 2015.
The fair value of the Company’s stock options granted for the six months ended December 31, 2016 was estimated using the following weighted-average assumptions:
Expected life (years)
|
|
|
4.2
|
|
Risk-free interest rate
|
|
|
1.1
|
%
|
Expected volatility
|
|
|
102.7
|
%
|
Dividend yield
|
|
|
0
|
%
|
At December 31, 2016, the total compensation cost related to options granted but not yet recognized was $259 which will be amortized over a weighted-average period of approximately two years.
Common Stock Restricted
Units
The following is a summary of restricted stock activity during the six months ended December 31, 2016:
|
|
|
|
|
|
Weighted
Average
|
|
|
|
Number of
Shares
|
|
|
Grant Date
Fair Value
|
|
Balance at June 30, 2016
|
|
|
63,566
|
|
|
$
|
14.96
|
|
Granted
|
|
|
98,417
|
|
|
$
|
4.97
|
|
Vested
|
|
|
(95,902
|
)
|
|
$
|
10.85
|
|
Forfeited
|
|
|
(933
|
)
|
|
$
|
26.37
|
|
Outstanding at December 31, 2016
|
|
|
65,148
|
|
|
$
|
5.26
|
|
On July 26, 2016, the compensation committee of the board of directors granted 98,417 shares of restricted stock to eight employees. The shares will fully vest on July 1, 2017 provided that the individual is employed by the Company as of such date. If the employee is terminated without cause prior to July 1, 2017 the shares vest immediately. Two of the eight employees were terminated during the quarter ended December 31, 2016, as such, 35,902 shares vested.
Warrants
A summary of warrant activity for the six months ended December 31, 2016 follows:
|
|
Number of
Shares
|
|
|
Weighted-
Average
Exercise Price
Per Share
|
|
Beginning balance
|
|
|
4,828,721
|
|
|
$
|
9.37
|
|
Warrants granted
|
|
|
--
|
|
|
|
--
|
|
Warrants canceled
|
|
|
--
|
|
|
|
--
|
|
Warrants exercised
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
4,828,721
|
|
|
$
|
9.37
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2016
|
|
|
4,130,192
|
|
|
$
|
9.60
|
|
At December 31, 2016, the total intrinsic value of warrants outstanding and exercisable was $0.