Executive Compensation Overview
Historically, our executive compensation program has reflected our growth and corporate goals. To date, the compensation of Thomas R. Mika, our President and Chief Executive Officer, and the other executive officers identified below in the summary compensation table, who we refer to as the named executive officers, has consisted of a combination of base salary, bonuses and long-term incentive compensation in the form of restricted common stock and stock options. Our executive officers and all salaried employees are also eligible to receive health and welfare benefits.
At a minimum, we expect to review executive compensation every three years with input from the compensation committee. The Committee has the authority to engage its own independent advisors to assist in carrying out its responsibility. In fiscal 2014, the Committee did not retain a compensation consultant. As part of this review process, we expect the board of directors and the compensation committee to apply our compensation philosophy when considering the compensation levels needed to ensure our executive compensation program remains competitive.
Oversight of Executive Compensation
Our executive compensation program is overseen and administered by the Committee, which is comprised entirely of independent directors as determined in accordance with various Nasdaq Stock Market, Securities and Exchange Commission and Internal Revenue Code rules.
The Committee meets regularly with CollabRx’s President and Chief Executive Officer, Mr. Mika, to obtain recommendations with respect to our compensation programs, practices and packages for executives, other employees and directors. Mr. Mika makes recommendations to the Committee on the base salary, bonus targets and equity compensation for the executive team and other employees. The Committee considers, but is not bound to and does not always accept, Mr. Mika’s recommendations with respect to executive compensation. The Committee seriously considers proposals made by Mr. Mika, and executive compensation levels established for fiscal 2013 were generally based upon recommendations made by Mr. Mika.
Mr. Mika attends some of the Committee’s meetings, but the Committee also regularly holds executive sessions not attended by any members of management or non-independent directors. The Committee discusses Mr. Mika’s compensation package with him, but makes decisions with respect to Mr. Mika’s compensation without him present. The Committee has the ultimate authority to make decisions with respect to the compensation of our named executive officers. All grants of stock options to newly-hired employees and to existing employees are made by the Committee or the Board of Directors at regularly scheduled quarterly meetings. The Committee also has authorized Mr. Mika to make salary adjustments and bonus decisions for all employees other than executive officers.
The Committee reviews the compensation program on an as-needed basis. In setting compensation levels for a particular executive, the Committee takes into consideration the proposed compensation package as a whole and each element individually, as well as the executive’s past and expected future contributions to our business.
In determining the particular elements of compensation that will be used to implement CollabRx’s overall compensation policies, the Committee reviews our financial performance, the continued improvement expected in the coming fiscal year in operating budgets, achievement of targeted revenue, gross profit and operating expense levels, as well as the competitive environment in which we operate.
Compensation Tables
The following table shows, for the fiscal years ended March 31, 2014 and March 31, 2013, the cash compensation paid by us and our subsidiaries as well as certain other compensation paid or accrued for those years for services in all capacities to the person serving as the Chief Executive Officer during fiscal 2013 and our only other executive officers whose total annual salary and bonus exceeded $100,000 in fiscal 2013, which executives are referred to as the “named executive officers”.
Summary Compensation Table
Name and Principal Position
|
Fiscal
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($) (1)
|
|
|
All Other
Compensation
($) (2)
|
|
|
Total
($)
|
|
Thomas Mika
|
2014
|
|
|
285,135
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,200
|
|
|
|
295,335
|
|
President & Chief Executive Officer, Acting Chief Financial Officer, Secretary and Treasurer
|
2013
|
|
|
285,135
|
|
|
|
0
|
|
|
|
132,600
|
|
|
|
10,000
|
|
|
|
427,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Karis
|
2014
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Former Co-Chief Executive Officer
|
2013
|
|
|
104,711
|
|
|
|
100,000
|
|
|
|
94,249
|
|
|
|
1,246
|
|
|
|
300,206
|
|
Clifford Baron, Ph.D.
|
2014
|
|
|
13,846
|
|
|
|
0
|
|
|
|
144,600
|
|
|
|
0
|
|
|
|
158,446
|
|
Vice President and Chief Operating Officer
|
2013
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Gavin Gordon, Ph.D.
|
2014
|
|
|
182,404
|
|
|
|
0
|
|
|
|
28,100
|
|
|
|
0
|
|
|
|
210,504
|
|
Vice President of Business Development and Strategic Alliances
|
2013
|
|
|
122,019
|
|
|
|
25,000
|
|
|
|
125,090
|
|
|
|
0
|
|
|
|
272,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George Lundberg, M.D.
|
2014
|
|
|
139,423
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,577
|
|
|
|
145,000
|
|
Editor in Chief and Chief Medical Officer
|
2013
|
|
|
88,942
|
|
|
|
0
|
|
|
|
76,710
|
|
|
|
1,923
|
|
|
|
167,575
|
|
(1)
|
The amount is calculated by taking the aggregate number of restricted stock units multiplied by the closing sales price of our common stock on the grant date in accordance with FASB ASC 718.
|
(2)
|
All other compensation in fiscal year 2014 and 2013 includes for all individuals the value of the Company match under the 401(k) Plan.
|
Employment and Change in Control Agreements
CollabRx provides for certain severance benefits in the event that an executive’s employment is involuntarily or constructively terminated. Such severance benefits are designed to alleviate the financial impact of an involuntary termination through salary (and, with respect to Mr. Mika bonus) with the intent of providing for a stable work environment. We believe that reasonable severance benefits for our executive officers are important because it may be difficult for our executive officers to find comparable employment within a short period of time following certain qualifying terminations. CollabRx also believes these benefits are a means reinforcing and encouraging the continued attention and dedication of key executives of CollabRx to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control. We believe that the interests of stockholders will be best served if the interests of our senior management are aligned with them, and providing severance and change in control benefits should eliminate, or at least reduce, the reluctance of senior management to pursue potential change in control transactions that may be in the best interests of stockholders.
CollabRx extends severance benefits because they are essential to help CollabRx fulfill its objectives of attracting and retaining key managerial talent. These agreements are intended to be competitive within our industry and company size and to attract highly qualified individuals and encourage them to be retained by CollabRx. While these arrangements form an integral part of the total compensation provided to these individuals, and are considered by the Committee when determining executive officer compensation, the decision to offer these benefits did not influence the Committee’s determinations concerning other direct compensation or benefit levels. The Committee has determined that such arrangements offer protection that is competitive within our industry and company size and to attract highly qualified individuals and encourage them to be retained by CollabRx.
Employment Agreement with Thomas R. Mika: CollabRx previously entered into an at-will employment agreement with Mr. Mika, which was amended and restated as of February 12, 2013. The employment agreement has an initial term of two years and is subject to annual automatic one-year extensions unless either party provides prior notice of its intention not to renew. Under the agreement, Mr. Mika’s annual base salary is initially set at $284,000 per year subject to review and potential increase in accordance with Company policy. The employment agreement also provides for an annual target bonus equal to 50% of Mr. Mika’s annual base salary payable upon achievement of targets and other objectives set by the Board and for annual long-term incentive awards with a fair market value on the date of grant equal to 100% of Mr. Mika’s annual base salary. In July 2014 the Board approved a base salary increase for Mr. Mika of $25,000, effective immediately. However, Mr. Mika voluntarily deferred the increase until December 2014.
The employment agreement provides that in the event that Mr. Mika’s employment is terminated by us other than for “cause”, if he resigns for “good reason,” dies or becomes disabled, or if we give notice of nonrenewal of the term, he will receive a payment equal to two times his then-prevailing base salary, plus an amount equal to two times the average annual incentive bonus paid to Mr. Mika for the three most recently completed fiscal years in which a cash bonus program covering Mr. Mika was in effect or a cash bonus was actually paid, plus 24 months of COBRA payments, all payable in two equal lump sum payments, the first within 60 days following the date of separation and the second on the first anniversary of the date of separation. In the event that within three months prior or twelve months following a “change of control,” he is terminated by us other than for “cause” or if he resigns for “good reason”, the severance benefits will be payable in a lump sum and any long-term incentive awards outstanding shall become fully vested, and if applicable, exercisable.
For purposes of the employment agreement, “cause” generally means Mr. Mika’s willful engagement in an act or omission which is in bad faith and to the detriment of CollabRx, engagement in misconduct, gross negligence, or willful malfeasance, in each case that causes material harm to CollabRx, breach of the employment agreement in any material respect, habitual neglect of or material failure to perform his duties (other than any failure resulting solely from physical or mental disability or incapacity) after a written demand for performance is delivered to him by CollabRx, commission or conviction of a felony or any crime involving moral turpitude, use of drugs or alcohol in a way that either interferes with the performance of his duties or compromises the integrity or reputation of CollabRx, engagement in any act of dishonestly involving CollabRx, disclosure of confidential information of CollabRx not required by his job duties, engagement of commercial bribery or the perpetration of fraud. Mr. Mika will have 45 days to cure any event which could lead to termination for cause, if such events are curable.
For purposes of the employment agreement, “good reason” generally means the assignment to Mr. Mika of principal duties or responsibilities, or the substantial reduction of his duties and responsibilities, either of which is inconsistent with his position, a material reduction in his annual base salary, except to the extent the salaries of other executives of CollabRx are similarly reduced, a relocation of CollabRx’s principal place of business by more than 40 miles from San Francisco, California, or any material breach by CollabRx of the employment agreement that is not cured within 30 calendar days following written notice of the breach to CollabRx.
For purposes of the employment agreement, “change of control” means each of the following:
(i) A transaction or series of transactions (other than an offering of the Company’s common stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities outstanding immediately after such acquisition;
(ii) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board of Directors together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clause (i) above or clause (iii) below whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof;
(iii) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(A) Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and
(B) After which no person or group beneficially owns voting securities representing fifty percent (50%) or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning fifty percent (50%) or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or
(iv) The Company’s stockholders approve a liquidation or dissolution of the Company.
Executive Severance Plan. In addition, the Board has approved a severance program for executive officers which generally provides for severance in an amount equal to six month’s base salary in the event an executive officer’s employment is terminated by CollabRx without cause, however, in the event that an executive officer is terminated by CollabRx without cause within 12 months following a change of control, the Company will continue to pay such executive officer’s base salary for a period of 12 months.
For purposes of the executive severance program, the terms “cause” and “change of control” generally have the same meanings given to such terms in the employment agreements.
Employment Agreement with Clifford Baron: CollabRx entered into an at-will employment agreement with Dr. Barron, on March 5, 2014. The employment agreement has an initial term of two years and is subject to annual automatic one-year extensions unless either party provides prior notice of its intention not to renew. Under the agreement, Dr. Barron’s annual base salary is initially set at $200,000 per year subject to review and potential increase in accordance with Company policy. The employment agreement also provides that Dr. Baron will be eligible to receive incentive bonus payments from time to time in accordance with any incentive bonus program adopted by the Company. No such incentive bonus program is currently in effect.
Employment Agreement with Gavin Gordon: CollabRx entered into an at-will employment agreement with Mr. Gordon, on July 12, 2012. Under the agreement, Mr. Gordon’s annual base salary is initially set at $170,000 per year subject to review and potential increase in accordance with Company policy. Mr. Gordon was made an officer of the Company effective June 1, 2013, and as a result received an increase in his annual base salary. His current annual base salary is $185,000.
Employment Agreement with George Lundberg: CollabRx entered into an at-will employment agreement with Dr. Lundberg, on July 12, 2012. Under the agreement, Dr. Lundberg’s annual base salary was initially set at $125,000 per year subject to review and potential increase in accordance with Company policy, taking into account that Dr. Lundberg serves the Company in a capacity which is less than a full-time employee. Dr. Lundberg was made an officer of the Company effective September 2, 2013, and as a result received an increase in his annual base salary. His current annual base salary is $150,000.
For purposes of the executive severance program, the terms “cause” and “change of control” generally have the same meanings given to such terms in the employment agreements.
POTENTIAL PAYMENTS UPON TERMINATION
The following table summarizes potential change in control and severance payments to each named executive officer. The three right-hand columns describe the payments that would apply in three different potential scenarios — a termination of employment as a result of death, disability or our non-renewal of a written employment agreement; a termination of employment as a result of the named executive officer’s termination of employment by us other than for cause (or, with respect to Mr. Mika and Dr. Barron, either of their resignations for good reason); or a termination of employment as a result of the named executive officer’s termination of employment by us other than for cause (or, with respect to Mr. Mika and Dr. Barron, their resignations for good reason), in each case within 3 months prior to or 12 months following a change in control. The table assumes that the termination or change in control occurred on March 31, 2014.
Recipient and
Benefit
|
|
Death, Termination as a
Result
of Disability or Non-
Renewal
of Employment Agreement
|
|
|
Termination
without Cause or Resignation
for
Good Reason more than 3
Months
Prior to a Change in Control
or
More than 12 Months
Following a
Change of Control
|
|
|
Termination without Cause
or Resignation for Good
Reason Within 3 Months
prior
to or 12 Months Following
a
Change of Control
|
|
Thomas Mika
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
$
|
818,000
|
(1)
|
|
$
|
818,000
|
(1)
|
|
$
|
818,000
|
(1)
|
Option Award Acceleration (2)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
RSU Acceleration
|
|
|
--
|
|
|
|
--
|
|
|
$
|
212,960
|
(3)
|
Total
|
|
$
|
818,000
|
|
|
$
|
818,000
|
|
|
$
|
1,030,960
|
|
Clifford Baron
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
$
|
100,000
|
(4)
|
|
$
|
100,000
|
(4)
|
|
$
|
100,000
|
(4)
|
Option Award Acceleration (3)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
RSU Acceleration
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Total
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
Gavin Gordon
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
$
|
92,500
|
(4)
|
|
$
|
92,500
|
(4)
|
|
$
|
92,500
|
(4)
|
Total
|
|
$
|
92,500
|
|
|
$
|
92,500
|
|
|
$
|
92,500
|
|
George Lundberg
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
$
|
75,000
|
(4)
|
|
$
|
75,000
|
(4)
|
|
$
|
75,000
|
(4)
|
Total
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
(1) Amount represents 24 months of base salary plus two times the average annual incentive bonus paid to Mr. Mika for the previous three fiscal years in which a bonus plan was in place plus 24 months of COBRA payments, all payable in two equal lump sum payments, the first within 60 days following the date of separation and the second on the first anniversary of the date of separation. In the event that within three months prior or twelve months following a “change of control,” he is terminated for other than for “cause” or if he resigns for “good reason”, the severance benefits will be payable in a lump sum and any long-term incentive awards outstanding shall become fully vested, and if applicable, exercisable. Mr. Mika was provided an annual salary increase of $25,000 effective July 3, 2014. However, he has voluntarily chosen to defer that increase until January 1, 2015.
(2) Amount represents the fair market value of our common stock on March 31, 2014 less the exercise price of the accelerated stock options, multiplied by the number of shares underlying the options subject to accelerated vesting.
(3) Amount represents the fair market value of the grant as of the grant date, multiplied by the number of shares underlying the awards subject to accelerated vesting.
(4) Amount represents 6 months of base salary.
OUTSTANDING EQUITY OPTION AWARDS AT FISCAL YEAR END
The following table sets forth the outstanding stock options held by the named executive officers at March 31, 2014. No plan-based option awards were granted during the fiscal year ended March 31, 2014.
|
|
Options Awards
|
|
|
Restricted Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#) (1)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date (2)
|
|
|
Number of
Securities
Underlying
Vested
|
|
|
Number of
Securities
Underlying
Unvested
|
|
|
Market
Price at
Grant
Date
($)
|
|
|
RSU
Expiration
Date (4)
|
|
Thomas Mika
|
|
|
3,267
|
|
|
|
0
|
|
|
|
23.00
|
|
|
11/15/2016
|
|
|
|
0
|
(3)
|
|
|
9,800
|
|
|
|
2.45
|
|
|
|
|
|
|
|
|
20,730
|
|
|
|
0
|
|
|
|
21.00
|
|
|
12/18/2017
|
|
|
|
0
|
(6)
|
|
|
29,250
|
|
|
|
3.40
|
|
|
|
|
|
|
|
|
43,692
|
|
|
|
0
|
|
|
|
11.70
|
|
|
11/5/2018
|
|
|
|
0
|
(5)
|
|
|
50,000
|
|
|
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clifford Baron
|
|
|
--
|
|
|
|
40,000
|
|
|
|
3.22
|
|
|
3/5/2024
|
|
|
|
--
|
|
|
|
10,000
|
|
|
|
3.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gavin Gordon
|
|
|
--
|
|
|
|
10,000
|
|
|
|
3.22
|
|
|
3/5/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
7,500
|
|
|
|
3.75
|
|
|
1/1/2023
|
|
|
|
--
|
|
|
|
10,000
|
|
|
|
3.75
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
15,000
|
|
|
|
3.94
|
|
|
7/12/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George Lundberg
|
|
|
3,750
|
|
|
|
11,250
|
|
|
|
3.94
|
|
|
7/12/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Karis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,921
|
(7)
|
|
|
0
|
|
|
|
3.94
|
|
|
|
|
|
(1) Options vest at a rate of 25% of the shares on the first anniversary of the date the option is granted, 25% of the shares on the second anniversary of the date the option is granted, and 2.083% of the shares on the last day of each month commencing with the 25th month, with full vesting on the last day of the 48th month following the date the option is granted.
(2) The expiration date of each option occurs ten year after the date of grant of each option.
(3) The award (consisting of restricted stock units) vests 7,700 units on November 5, 2010, 17,500 units on each of November 5, 2011, November 5, 2012 and November 5, 2013, and 9,800 units on November 5, 2014. The constructive receipt of the underlying common stock has been deferred until November 5, 2014. In June 2014, Mr. Mika voluntarily forfeited vested restricted stock units providing him the right to receive 138,203 shares of the Company’s common stock.
(4) There is no expiration date for each restricted stock unit award.
(5) The award (consisting of restricted stock units) vests 25,000 units on June 30, 2012, June 30, 2013, September 30, 2014 and June 30, 2015. In June 2014, Mr. Mika voluntarily forfeited vested restricted stock units providing him the right to receive 138,203 shares of the Company’s common stock.
(6) The award (consisting of restricted stock units) vests 9,750 on April 1, 2013, April 1, 2014, April 1, 2015 and April 1, 2016. In June 2014, Mr. Mika voluntarily forfeited vested restricted stock units providing him the right to receive 138,203 shares of the Company’s common stock.
(7) The award (consisting of restricted stock units) is fully vested. Unvested shares have been forfeited.
Director Compensation for fiscal year ended March 31, 2014
Our outside directors currently receive an annual $15,000 retainer for service on the Board of Directors, meeting fees of $1,500 per Board meeting and $1,000 for the first six audit committee meetings and $750 for the first six nominating and compensation committee meetings not held in conjunction with a full Board of Directors meeting. Furthermore, directors may be reimbursed for certain expenses in connection with attendance at Board of Directors and committee meetings. Additionally, each committee chair receives an annual chair retainer as follows: $7,500 for the Audit Committee chair, $5,000 for the Compensation Committee chair and $4,000 for the Nominating/Corporate Governance Committee chair. In addition, non-employee directors receive options to purchase 1,666 shares of common stock upon initial election or appointment to the Board of Directors and each director automatically receives options to purchase 833 shares of common stock annually thereafter.
The following table shows non-employee director compensation during fiscal year 2014. Mr. Gilbert Bellini voluntarily decided not to stand for election for another term as a director prior to the Company’s Annual Meeting. Mr. Bellini originally joined the Board of Directors of our Company in September 2008 as a representative for Alcatel Micro Machining. He resigned his board membership in December 2010 after the transfer of our shares from Alcatel Micro Machining and was reappointed to our Board of Directors as an independent director in January 2011.
|
|
Fiscal Year Ended March 31, 2014
|
|
Name
|
|
Fees
Earned
or Paid in
Cash ($)
|
|
|
Option
Awards
($) (1)
|
|
|
Total ($)
|
|
Gilbert Bellini
|
|
|
25,000
|
|
|
|
2,298
|
|
|
|
27,298
|
|
James Karis
|
|
|
9,000
|
|
|
|
2,298
|
|
|
|
11,298
|
|
Jeffrey M. Krauss
|
|
|
32,500
|
|
|
|
2,298
|
|
|
|
34,798
|
|
Carl Muscari
|
|
|
34,000
|
|
|
|
2,298
|
|
|
|
36,298
|
|
(1) The value of the stock awards has been computed in accordance with FASB ASC 718, excluding the effect of estimated forfeitures.
We believe that although a portion of the compensation provided to our executive officers and other employees is performance-based, our executive compensation program does not encourage excessive or unnecessary risk taking. This is primarily due to the fact that our compensation programs are designed to encourage our executive officers and other employees to recognize and support both short-term and long-term strategic goals, in particular in connection with our pay-for-performance compensation philosophy. As a result, we do not believe that our compensation programs are reasonably likely to have a material adverse effect on us.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of March 31, 2014 for all of our equity compensation plans, including our Eighth Amended and Restated 1998 Equity Participation Plan, our 2007 Incentive Award Plan, and our Fifth Amended and Restated Stock Option Plan for Outside Directors, and inducement grants made to new employees which were not subject to approval by security holders.
Plan Category
|
|
Number of Securities
to be Issued upon
Exercise of all
Outstanding Options
and RSUs
|
|
|
Weighted-Average
Exercise Price of
Outstanding Options
and RSUs
|
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans
(Excluding Securities
Reflected in Column(a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
357,809
|
(1)
|
|
$
|
7.71
|
|
|
|
148,428
|
(2)
|
Equity compensation not approved by security holders
|
|
|
143,000
|
|
|
$
|
3.69
|
|
|
|
—
|
|
Total
|
|
|
500,809
|
(1)
|
|
$
|
6.56
|
|
|
|
148,428
|
(2)
|
(1) Excludes 26,080 Restricted Stock Unit awards whose distribution has been deferred.
(2) Excludes 3,705 shares remaining available for future issuance under our Employee Qualified Stock Purchase Plan.
Employee Benefit Plans
The number of shares indicated in the following employee benefit stock plans reflects a 1-for-5 reverse stock split effected by the Company on June 15, 2011.
Eighth Amended and Restated 1998 Equity Participation Plan (Eighth Amended and Restated)
Pursuant to the terms of the Company’s Eighth Amended and Restated 1998 Equity Participation Plan (“1998 Equity Plan”), aggregate of 333,333 shares of common stock were reserved for issuance pursuant to granted stock options and stock appreciation rights or upon the vesting of granted restricted stock awards. The exercise price of options generally was the fair value of the Company’s common stock on the date of grant. Options are generally subject to vesting at the discretion of the Compensation Committee of the Board of Directors (the “Committee”). At the discretion of the Committee, vesting may be accelerated when the fair market value of the Company’s stock equals a certain price established by the Committee on the date of grant. Incentive stock options will be exercisable for up to ten years from the grant date of the option. Non-qualified stock options will be exercisable for a maximum term to be set by the Committee upon grant. Upon the adoption of the 2007 Equity Plan, no further awards were issued under the 1998 Equity Plan.
2007 Incentive Award Plan
Pursuant to the terms of the Company’s 2007 Equity Participation Plan (“2007 Equity Plan”), which was authorized as a successor plan to the Company’s 1998 Equity Incentive Plan and Director Option Plan, an aggregate of 200,000 shares of common stock is available for grant pursuant to the 2007 Equity Plan, plus the number of shares of common stock which are or become available for issuance under the 1998 Equity Plan and the Director Option Plan and which are not thereafter issued under such plans. The 2007 Equity Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards, and performance-based awards. The option exercise price of all stock options granted pursuant to the 2007 Equity Plan will not be less than 100% of the fair market value of the common stock on the date of grant. Stock options may be exercised as determined by the Board, but in no event after the tenth anniversary date of grant, provided that a vested nonqualified stock option may be exercised up to 12 months after the optionee's death. Awards granted under the 2007 Equity Plan are generally subject to vesting at the discretion of the Committee. As of December 31, 2014, 87,882 shares were available for issuance under the 2007 Equity Plan.
Directors Stock Option Plan
Pursuant to the terms of the Fifth Amended and Restated Stock Option Plan for Outside Directors, as amended, (“Director Option Plan”), an aggregate of 66,667 shares of common stock were reserved for issuance pursuant to stock options granted to outside directors. Each outside director who was elected or appointed to the Board on or after September 15, 1998 was eligible to be granted an option to purchase 1,667 shares of common stock and on each second anniversary after the applicable election or appointment shall receive an additional option to purchase 833 shares, provided that such outside director continued to serve as an outside director on that date. For each outside director, 1/12th of the total number of shares will vest on the first day of each calendar month following the date of Option grant, contingent upon continued service as a director. Following the adoption of the 2007 Equity Plan, no further awards were issued under the Director Option Plan. As of April 7, 2014, non-employee directors receive options to purchase 5,000 shares of common stock upon initial election or appointment to the Board of Directors and each director automatically receives options to purchase 2,500 shares of common stock annually thereafter.
Employee Qualified Stock Purchase Plan
The Company has offered an employee qualified stock purchase plan (“Employee Plan”) under which rights are granted to purchase shares of common stock at 85% of the lower of the market value of such shares at the beginning of a six month offering period or at the end of that six month period. Under the Employee Plan, the Company is authorized to issue up to 16,667 shares of common stock. There were no common stock shares purchased in fiscal years 2014 or 2013. Shares available for future purchase under the Employee Plan were 3,705 at September 30, 2014. The Plan expired on July 22, 2014.
Savings and Investment Plan (401(k))
The Company has established a defined contribution plan that covers substantially all U.S. employees. Employee contributions of up to 4% of each U.S. employee’s compensation will be matched by the Company based upon a percentage to be determined annually by the Board. Employees may contribute up to 15% of their compensation, not to exceed a prescribed maximum amount. The Company made contributions to the plan of $42 and $24, in the years ended March 31, 2014 and 2013, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since March 31, 2011, there has not been, nor is there currently proposed, any transaction or series of related transactions to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which the other parties included or will include any of our directors, executive officers, holders of 5% or more of our voting securities, or any member of the immediate family of any of the foregoing persons, other than compensation arrangements with directors and executive officers, which are described where required in “Management,” “Executive Compensation,” and the transactions described below.
While the following transactions did not exceed $120,000, the only related party transactions in which the Company was involved were related to its investment in Sequel Power, which ended in March 2013, and which totaled $100,000 annually for management fees for fiscal years 2012 and 2013.
Procedures for Review, Approval or Ratification of Transactions with Related Persons
The Nominating/Corporate Governance Committee is responsible for review, approval or ratification of transactions with related persons of the Company, which shall include directors, executive officers, holders of more than 5% of the Company’s voting securities, or any member of the immediate family of any of the foregoing persons. The Nominating/Corporate Governance Committee has developed a Code of Business Conduct and Ethics that establishes policies and procedures to facilitate the review, approval or ratification of such transactions.
Indemnification Agreements
The Company currently maintains agreements to indemnify our directors and executive officers to the maximum extent allowed under Delaware law. Subject to the provisions of these agreements, these agreements will, among other things, indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of us or that person’s status as a member of our board of directors.
The following table sets forth information with respect to the beneficial ownership of shares of our common stock by our directors, the individuals named in the Summary Compensation Table, all directors and executive officers as a group and beneficial owners of more than 5% of our common stock as of December 31, 2014.
We have determined beneficial ownership of securities in accordance with the rules of the SEC. Under these rules, the number of shares of common stock deemed outstanding includes shares issuable upon exercise of options, warrants and restricted stock units held by the respective person or group which may be exercised or converted within 60 days after December 31, 2014. For purposes of calculating each person’s or group’s percentage ownership, stock options, warrants exercisable and restricted stock units that could be settled within 60 days after December 31, 2014 are included for that person or group but not the stock options, warrants or restricted stock units of any other person or group. Applicable percentage ownership is based on 2,929,121 shares of our common stock outstanding as of December 31, 2014. The address of each director and officer is c/o CollabRx, Inc., 44 Montgomery Street, Suite 800, San Francisco, CA 94104.
|
|
Shares Beneficially
Owned
Prior to the Offering
|
|
Name of Beneficial Owner
|
|
Number
|
|
|
Percentage
|
|
Executive Officers and Directors:
|
|
|
|
|
|
|
Thomas R. Mika
|
|
|
329,275
|
|
|
|
11.23
|
%
|
Clifford Baron
|
|
|
13,750
|
|
|
|
*
|
|
Gavin Gordon
|
|
|
28,750
|
|
|
|
*
|
|
George Lundberg
|
|
|
18,625
|
|
|
|
*
|
|
Paul Billings
|
|
|
21,042
|
|
|
|
*
|
|
James Karis
|
|
|
37,863
|
|
|
|
1.29
|
% |
Jeffrey M. Krauss
|
|
|
29,672
|
|
|
|
1.01
|
% |
Carl Muscari
|
|
|
23,080
|
|
|
|
*
|
|
All executive officers and directors as a group (8 persons)
|
|
|
502,056
|
|
|
|
17.13
|
% |
5% Stockholders:
|
|
|
|
|
|
|
|
|
None
DESCRIPTION OF CAPITAL STOCK
General
The following descriptions are summaries of the material terms of our amended and restated certificate of incorporation and amended and restated bylaws, and are qualified by reference to our amended and restated certificate of incorporation and amended and restated bylaws. For more detailed information, please see copies of these documents which are included as exhibits to the registration statement of which this prospectus forms a part. We refer in this section to our amended and restated certificate of incorporation as our certificate of incorporation, and we refer to our amended and restated bylaws as our bylaws.
Our authorized capital stock consists of 50,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of undesignated preferred stock, par value $0.01 per share. As of December 31, 2014, 2,931,621 shares of our common stock were outstanding and held by approximately 120 stockholders of record.
Common Stock
The holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of our common stock do not have any cumulative voting rights. Holders of our common stock are entitled to receive ratably any dividends declared by the board of directors out of funds legally available for that purpose, subject to any preferential dividend rights of any outstanding preferred stock. Our common stock has no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions. In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities and any liquidation preference of any outstanding preferred stock. The shares to be issued by us in this offering will be, when issued and paid for, validly issued, fully paid and non-assessable.
Preferred Stock
Our Board of Directors may, without further action by our stockholders, fix the rights, preferences, privileges and restrictions of up to an aggregate of 5,000,000 shares of preferred stock in one or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of our common stock. Any issuance of our preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that such holders would receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control or other corporate action. Upon the closing of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.
Options
As of December 31, 2014, we had outstanding options to purchase an aggregate of 673,676 shares of our common stock, with a weighted average exercise price of $4.66, pursuant to our Stock Plans, named above.
Restricted Stock Units
As of December 31, 2014, we had 167,000 restricted stock units, or RSUs, outstanding pursuant to our Stock Plans, named above. In addition, there are 72,297 vested RSUs, whose distribution has been deferred.
Warrants
As of December 31, 2014, we had outstanding warrants to purchase 27,405 shares of common stock at an exercise price of $2.50 per share, which are not exercisable until June 24, 2015 and which expire June 24, 2020. These warrants were issued in connection with the underwritten public offering which closed on June 25, 2014 for 913,500 shares of its common stock, offered at a public offering price of $2.00 per share.
In addition, warrants to purchase 92,888 shares of common stock with a weighted average exercise price of $3.15 per share were not included in the computation of diluted net loss per common share. These warrants, which represent the balance of Sequel Power’s grant, expired unexercised on January 14, 2015.
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Certain provisions of Delaware law, our certificate of incorporation and our bylaws contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, may have the effect of discouraging coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Board Composition and Filling Vacancies
Our bylaws provide that any Director or the entire Board may be removed at any time, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Directors shall be elected at the annual meeting of the stockholders and each Director elected shall hold office until his successor is elected and qualified; provided, however, that unless otherwise restricted by the Certificate of Incorporation or by law, any Director or the entire Board may be removed, either with or without cause, from the Board at any meeting of stockholders by a majority of the stock represented and entitled to vote thereat. Vacancies on the Board by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining Director. The Directors so chosen shall hold office until the next annual election of Directors and until their successors are duly elected and shall qualify, unless sooner displaced.
No Written Consent of Stockholders
Our certificate of incorporation provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting. This limit may lengthen the amount of time required to take stockholder actions and would prevent the amendment of our bylaws or removal of directors by our stockholders without holding a meeting of stockholders.
Meetings of Stockholders
Our certificate of incorporation and bylaws provide that only a majority of the members of our board of directors then in office may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our bylaws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.
Advance Notice Requirements
Our bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. Our bylaws specify the requirements as to form and content of all stockholders’ notices. These requirements may preclude stockholders from bringing matters before the stockholders at an annual or special meeting.
Amendment to Certificate of Incorporation and Bylaws
The Board may from time to time make, amend, supplement or repeal the Company’s Bylaws by vote of a majority of the Board, and the stockholders may change or amend or repeal these Bylaws by the affirmative vote of the majority of holders of the Common Stock. In addition to and not in limitation of the foregoing, the Company’s Bylaws or any of them may be amended or supplemented in any respect at any time, either: (i) at any meeting of stockholders, provided that any amendment or supplement proposed to be acted upon at any such meeting shall have been described or referred to in the notice of such meeting; or (ii) at any meeting of the Board, provided that any amendment or supplement proposed to be acted upon at any such meeting shall have been described or referred to in the notice of such meeting or an announcement with respect thereto shall have been made at the last previous Board meeting, and provided further that no amendment or supplement adopted by the Board shall vary or conflict with any amendment or supplement adopted by the stockholders.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
|
·
|
before the stockholder became interested, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
|
·
|
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances, but not the outstanding voting stock owned by the interested stockholder; or |
|
·
|
at or after the time the stockholder became interested, the business combination was approved by our board of directors and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder. |
Section 203 defines a business combination to include:
|
·
|
any merger or consolidation involving the corporation and the interested stockholder; |
|
·
|
any sale, transfer, lease, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation; |
|
·
|
subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; |
|
·
|
subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and |
|
·
|
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Exchange Listing
Our common stock is listed on the Nasdaq Capital Market under the trading symbol “CLRX.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Registrar and Transfer Company. The transfer agent and registrar’s address is 10 Commerce Drive, Cranford, New Jersey 07016.
The material terms and provisions of the warrants being issued in this offering are summarized below. The following description is subject to, and qualified in its entirety by, the form of warrant, which has been filed as an exhibit to the registration statement of which this prospectus is a part. Prospective investors should carefully review the terms and provisions set forth in the form of warrant.
Exercisability
In connection with the purchase of common stock, we will also issue warrants to purchase additional shares of common stock.. Each warrant entitles the holder to purchase one share of common stock. The warrants are exercisable immediately upon issuance and at any time up to the date that is five years from the date of issuance. The warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and payment in full for the number of our shares purchased upon such exercise (except in the case of a cashless exercise as discussed below). Unless otherwise specified in the warrant, the holder will not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% (subject to increase or decrease by a holder to any other percentage not in excess of 9.99% upon 61 days’ prior written notice to us and any such increase or decrease will apply only to the holder sending such notice and not to any other holder of warrants) of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants.
The initial exercise price per share purchasable upon exercise of the warrants is $1.56 per share.
In the event that the shares underlying the warrants are no longer registered under the Securities Act, the holder may, in its sole discretion, exercise the warrant in whole or in part and, in lieu of making cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, elect instead to receive upon such exercise the net number of shares determined according to the formula set forth in the warrant.
Subject to applicable laws, the warrants may be transferred at the option of the holders upon surrender of the warrants to us together with the appropriate instruments of transfer.
Anti-Dilution Provisions
The exercise price is subject to adjustment in the event of sales of our common stock during the one-year period following the closing at a price per share less than the exercise price then in effect (or securities convertible or exercisable into common stock at a conversion or exercise price less than the exercise price then in effect subject to customary exceptions). In addition, the exercise price and the number of shares issuable upon exercise are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common shares, and also upon any distributions of assets, including cash, stock or other property to our stockholders.
Fundamental Transaction
Upon the consummation of a Fundamental Transaction (as defined in the warrant), the holder of the warrant will have the right to receive, upon exercise of the warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of shares then issuable upon exercise in full of the warrant without regard to any limitations on exercise contained in the warrant.
A “Fundamental Transaction” is defined under the warrants as (i) we or any of our subsidiaries shall directly or indirectly (1) consolidate or merge with or into any other entity other than a subsidiary of ours, or (2) sell, lease, license, other than for purposes of granting a security interest assign, transfer, convey or otherwise dispose of all or substantially all of our respective properties or assets to any other person or entity, or (3) allow any other entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of our voting stock or (4) consummate a stock or share purchase agreement or other business combination with any other entity whereby such other person or entity acquires more than 50% of the outstanding shares of our voting stock or (5) (I) reorganize, recapitalize or reclassify our common stock, or (II) effect or consummate a stock combination, reverse stock split or other similar transaction involving our common stock or (III) make any public announcement or disclosure with respect to any stock combination, reverse stock split or other similar transaction involving our common stock or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by our issued and outstanding voting stock of ours; provided, however, that this clause (ii) shall not apply with respect to any person or group who is the beneficial owner, directly or indirectly, of at least 50% of the aggregate voting power represented by our issued and outstanding voting stock as of the date of this prospectus.
Rights as a Shareholder
Except as otherwise provided in the warrants or by virtue of such holder’s ownership of our common stock, the holder of a warrant does not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises the warrant.
Currently, no public market exists for our warrants. We do not intend to apply for the listing of the warrants on any national securities exchange. The common stock and warrants are immediately separable and will be issued separately, but will be purchased together in this offering.
Underwriter’s Warrants
Please see “Underwriting” for a description of the warrants we have agreed to issue to the underwriter in this offering, subject to the completion of the offering. We expect to enter into a warrant agreement in respect of the representative’s warrants prior to the closing of this offering.
Aegis Capital Corp. is the sole underwriter of the offering. We have entered into an underwriting agreement dated February 19, 2015 with the underwriter. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter and the underwriter has agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the following number of shares of our common stock and warrants:
Name of Underwriter
|
|
Number of Shares
|
|
|
Number of Warrants
|
|
Aegis Capital Corp.
|
|
|
3,840,000 |
|
|
|
3,840,000 |
|
Total
|
|
|
3,840,000 |
|
|
|
3,840,000 |
|
The underwriter is committed to purchase all the shares of common stock and warrants offered by us other than those covered by the option to purchase additional shares and warrants described below, if it purchases any shares. The obligations of the underwriter may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriter’s obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriter of an officer’s certificate and legal opinion.
We have agreed to indemnify the underwriter against specified liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments the underwriter may be required to make in respect thereof.
The underwriter is offering the common stock and warrants, subject to prior sale, when, as and if issued to and accepted by it, subject to approval of legal matters by its counsel and other conditions specified in the underwriting agreement. The underwriter reserves the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
The underwriter proposes to offer the common stock and warrants offered by us to the public at the public offering price set forth on the cover of this prospectus. In addition, the underwriter may offer some of the common stock and warrants to other securities dealers at such price less a concession of $0.05 per share and warrant. After the initial offering, the public offering price and concession to dealers may be changed.
We have granted the underwriter an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriter to purchase from us a maximum of 576,000 additional shares of common stock and/or warrants to purchase 576,000 additional shares of common stock to cover over-allotments. If the underwriter exercises all or part of this option, it will purchase shares and warrants covered by the option at the public offering price that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total price to the public will be $5,520,000 and the total net proceeds, before expenses, to us will be $5,133,600.
Discounts and Commissions. The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriter of its over-allotment option.
|
|
|
|
|
Total
|
|
|
|
|
|
|
Per
Share
|
|
|
Per
Warrant
|
|
|
Without
Over-
Allotment
|
|
|
With
Over- Allotment
|
|
Public offering price
|
|
$
|
1.25 |
|
|
$
|
0.0001 |
|
|
$
|
4,800,384.00 |
|
|
$
|
5,520,441.60 |
|
Underwriting discount (7%)
|
|
$
|
0.0875 |
|
|
$
|
0.000007 |
|
|
$
|
336,026.88 |
|
|
$
|
386,430.91 |
|
Non-accountable expense allowance (1%) (1)
|
|
$
|
0.0125 |
|
|
$
|
0.000001 |
|
|
$
|
48,003.84 |
|
|
$
|
55,204.42 |
|
Proceeds, before expenses, to us
|
|
$
|
1.15 |
|
|
$
|
0.000092 |
|
|
$
|
4,416,353.28 |
|
|
$
|
5,078,806.27 |
|
(1) The expense allowance is not payable with respect to the shares and/or warrants sold upon exercise of the underwriter’s over-allotment option.
We have agreed to pay the underwriter a non-accountable expense allowance equal to 1% of the public offering price of the shares (excluding shares that we may sell to the underwriter to cover over-allotments).
We have also agreed to pay all expenses relating to the offering, including (a) all filing fees and communication expenses relating to the registration of the shares to be sold in the offering (including shares sold upon exercise of the underwriter’s over-allotment option) with the Securities and Exchange Commission; (b) all fees associated with the review of the offering by FINRA (excluding fees and expenses of counsel in connection with such review), (c) all actual fees and expenses relating to the listing of the common stock and warrants to be sold in this offering on the Nasdaq Capital Market, (d) all fees, expenses and disbursements relating to background checks of our officers and directors in an amount not to exceed $2,000 per individual and $15,000 in the aggregate; (e) all fees, expenses and disbursements relating to the registration, qualification or exemption of securities offered under the “blue sky” securities laws designated by the underwriter; (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of securities offered under the securities laws of foreign jurisdictions designated by the underwriter; (g) the costs of all mailing and printing of the underwriting documents, registration statements, prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final prospectuses as the underwriter may reasonably deem necessary; (h) fees and expenses of the transfer agent for the shares offered; (i) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from us to the underwriter; (j) the fees and expenses of our accountants; (k) the fees and expenses of our legal counsel and other agents and representatives; (l) the fees and expenses of the underwriter’s legal counsel; (m) the cost associated with the underwriter’s use of Ipreo’s book-building, prospectus tracking and compliance software for the offering; and (n) the underwriter’s actual accountable “road show” expenses for the offering. Notwithstanding the foregoing, we shall only be required to reimburse up to a maximum of $50,000 of the underwriter’s actual accountable expenses as provided by clauses (d), (l), (m) and (n) above.
We estimate that the total expenses of the offering including all expenses to be reimbursed to the underwriter, excluding the underwriting discount, will be approximately $50,000.
Discretionary Accounts. The underwriter does not intend to confirm sales of the securities offered hereby to any accounts over which it has discretionary authority.
Lock-Up Agreements. Pursuant to certain “lock-up” agreements, (a) our executive officers and directors as of the pricing date of the offering, have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any securities of the company without the prior written consent of the underwriter, for a period of 90 days from the date of the pricing of the offering, and (b) we, and any successor, have agreed, subject to certain exceptions, not to for a period of 90 days from the date of the pricing of the offering (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of our capital stock; (2) file or caused to be filed any registration statement with the SEC relating to the offering of any shares of our capital stock or any securities convertible into or exercisable or exchangeable for shares of our capital stock; or (3) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our capital stock, whether any such transaction described in (1), (2), or (3) above is to be settled by delivery of shares of our capital stock or such other securities, in cash or otherwise.
This lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition. The exceptions permit, among other things, (1) the issuance by us of stock options pursuant to our existing stock incentive plans, or (2) the issuance of common stock upon the exercise of outstanding stock options and warrants.
Underwriter’s Warrants. We have agreed to issue to the underwriter warrants to purchase up to a total of 115,200 shares of common stock (3% of the shares of common stock sold). The warrants are exercisable at $1.56 per share (125% of the price of the shares sold in the offering), commencing one year from the closing date of the offering, and expiring five years after the effective date of the offering in compliance with the FINRA Rule 5110(f)(2)(G)(i). The warrants have been deemed to be underwriter’s compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriter (or permitted assignees under the Rule) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days following the effective date of the offering in compliance with the FINRA Rule 5110(g)(i). In addition, the warrants provide for registration rights upon request, in certain cases. We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
Right of First Refusal. Until twelve months after the closing date of the offering, the underwriter shall have an irrevocable right of first refusal to act as lead manager or sole book runner, exclusive placement agent, exclusive financial advisor or in any other similar capacity, on the underwriter’s customary terms and conditions, in the event we or any subsidiary retains or otherwise uses (or seeks to retain or use) the services of an investment bank or similar financial advisor to pursue a registered, underwritten public offering of, or a private placement of securities; provided, that the underwriter shall have no right of first refusal for any strategic partnership, investment, joint venture collaboration or other transaction that we undertake, including any offer or sale of securities by us pursuant to any such transaction.
Electronic Offer, Sale and Distribution of Shares. A prospectus in electronic format may be made available on the websites maintained by the underwriter or selling group members, if any, participating in this offering and the underwriter participating in this offering may distribute prospectuses electronically. The underwriter may agree to allocate a number of shares to selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriter and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.
Stabilization. In connection with this offering, the underwriter may engage in stabilizing transactions, overallotment transactions, syndicate covering transactions, penalty bids and purchases to cover positions created by short sales.
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·
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Stabilizing transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress. |
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·
|
Overallotment transactions involve sales by the underwriter of shares in excess of the number of securities the underwriter is obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short position, the number of securities over-allotted by the underwriter is not greater than the number of shares that it may purchase in the overallotment option. In a naked short position, the number of securities involved is greater than the number of shares in the overallotment option. The underwriter may close out any short position by exercising its overallotment option and/or purchasing shares in the open market. |
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·
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Syndicate covering transactions involve purchases of securities in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of securities to close out the short position, the underwriter will consider, among other things, the price of securities available for purchase in the open market as compared with the price at which it may purchase securities through exercise of the overallotment option. If the underwriter sells more securities than could be covered by exercise of the overallotment option and, therefore, has a naked short position, the position can be closed out only by buying securities in the open market. A naked short position is more likely to be created if the underwriter is concerned that after pricing there could be downward pressure on the price of the securities in the open market that could adversely affect investors who purchase in the offering. |
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·
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Penalty bids permit the underwriter to reclaim a selling concession from a syndicate member when the securities originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of our securities. As a result, the price of our securities in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriter make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may be effected on the Nasdaq Capital Market.
Passive market making. In connection with this offering, the underwriter and selling group members may engage in passive market making transactions in our common stock on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, that bid must then be lowered when specified purchase limits are exceeded.
Offer restrictions outside the United States
Other than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus supplement. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Australia
This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.
China
The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”
European Economic Area — Belgium, Germany, Luxembourg and Netherlands
The information in this document has been prepared on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (“Prospectus Directive”), as implemented in Member States of the European Economic Area (each, a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.
An offer to the public of securities has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:
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(a) |
to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
|
(b) |
to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet of more than €43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii) an annual net turnover of more than €50,000,000 (as shown on its last annual unconsolidated or consolidated financial statements); |
|
(c) |
to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive) subject to obtaining our prior consent or the prior consent of any underwriter for any such offer; or |
|
(d) |
in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. |
France
This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D. 744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
Ireland
The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100 natural or legal persons who are not qualified investors.
Israel
The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the ISA), or ISA, nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with the offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
Italy
The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Società e la Borsa, “CONSOB”) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:
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·
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to Italian qualified investors, as defined in Article 100 of Decree no. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and |
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·
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in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended. |
Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
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·
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made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and |
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·
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in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws. |
Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.
Japan
The securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”) pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.
Portugal
This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissăo do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Sweden
This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA).
This document is personal to the recipient only and not for general circulation in Switzerland.
United Arab Emirates
Neither this document nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor have we received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by us. No offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.
United Kingdom
Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to us.
In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
The validity of the shares of common stock offered by this prospectus will be passed upon for us by Goodwin Procter LLP, Menlo Park, California. Certain legal matters will be passed upon for the underwriter by Sichenzia Ross Friedman Ference LLP, New York, New York.
The consolidated financial statements of CollabRx, Inc. for each of the years ended at March 31, 2014 and 2013, appearing in this Prospectus and Registration Statement, have been audited by Burr Pilger Mayer, Inc., an independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock we are offering by this prospectus. This prospectus does not contain all of the information included in the registration statement. For further information pertaining to us and our common stock, you should refer to the registration statement and to its exhibits. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. You may obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
We are subject to the informational and reporting requirements of the Securities Exchange Act of 1934 and, in accordance with this law, file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facility and the website of the SEC referred to above. We also maintain a website at www.collabrx.com. You may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to “incorporate by reference” into this prospectus the information we file with the SEC in other documents, which means that we can disclose important information to you by referring you to those documents instead of having to repeat the information in this prospectus. The information incorporated by reference is considered to be part of this prospectus. We incorporate by reference the documents listed below:
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Annual Report on Form 10-K, as amended, for the fiscal year ended March 31, 2014 filed on June 9, 2014 and July 7, 2014; |
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Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30, 2014, September 30, 2014 and December 31, 2014 filed on August 14, 2014, November 14, 2014 and February 13, 2015, respectively; |
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Current Reports on Form 8-K filed April 11, 2014, May 30, 2014, June 23, 2014, August 19, 2014, September 30, 2014, November 24, 2014, December 3, 2014, January 20, 2015 and January 22, 2015; |
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·
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Proxy Statement on Schedule 14A filed July 29, 2014; and |
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·
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The description of our Common Stock as set forth in our Registration Statement on Form 8-A filed on September 21, 1995. |
We will furnish without charge to you a copy of any or all of the documents incorporated by reference, including exhibits to these documents, upon written or oral request. Direct your written request to: Investor Relations, CollabRx, Inc., 44 Montgomery Street, Suite 800, San Francisco, CA 94104, or call the Company at 415-248-5350.
A statement contained in a document incorporated by reference into this prospectus shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any other subsequently filed document which is also incorporated in this prospectus modifies or replaces such statement. Any statements so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
COLLABRX, INC.
Index to Financial Statements
The Company’s Financial Statements and notes thereto appear in this prospectus according to the following Index of Consolidated Financial Statements:
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Page
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117
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118
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119
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120
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|
121
|
|
122
|
|
147
|
|
148
|
|
149
|
|
150
|
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
of CollabRx Inc.
We have audited the accompanying consolidated balance sheets of CollabRx, Inc. and its subsidiaries (“the Company”) as of March 31, 2014 and 2013, and the related consolidated statements of comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended March 31, 2014. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor have we been engaged to perform, an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of CollabRx, Inc. and its subsidiaries as of March 31, 2014 and 2013 and the results of their operations and their cash flows for each of the two years in the period ended March 31, 2014 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s recurring losses from operations and negative cash flow from operations raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Burr Pilger Mayer, Inc.
San Francisco, California
June 6, 2014
COLLABRX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,430
|
|
|
$
|
4,039
|
|
Accounts receivable
|
|
|
148
|
|
|
|
250
|
|
Prepaid expenses
|
|
|
104
|
|
|
|
91
|
|
Other current assets
|
|
|
79
|
|
|
|
11
|
|
Deferred financing costs
|
|
|
162
|
|
|
|
--
|
|
Investment in convertible promissory note
|
|
|
378
|
|
|
|
--
|
|
Other assets of discontinued operations
|
|
|
--
|
|
|
|
11
|
|
Total current assets
|
|
|
2,301
|
|
|
|
4,402
|
|
Property and equipment, net
|
|
|
130
|
|
|
|
142
|
|
Intangible assets, net
|
|
|
1,281
|
|
|
|
1,490
|
|
Goodwill
|
|
|
603
|
|
|
|
603
|
|
Investment in convertible promissory note
|
|
|
--
|
|
|
|
345
|
|
Total assets
|
|
$
|
4,315
|
|
|
$
|
6,982
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other current liabilities
|
|
$
|
136
|
|
|
$
|
64
|
|
Accrued compensation
|
|
|
119
|
|
|
|
103
|
|
Common stock warrant liability
|
|
|
--
|
|
|
|
10
|
|
Deferred revenue
|
|
|
108
|
|
|
|
--
|
|
Liabilities of discontinued operations
|
|
|
5
|
|
|
|
16
|
|
Total current liabilities
|
|
|
368
|
|
|
|
193
|
|
Deferred tax liability
|
|
|
500
|
|
|
|
581
|
|
Promissory note
|
|
|
509
|
|
|
|
504
|
|
Other long-term liabilities
|
|
|
13
|
|
|
|
--
|
|
Total liabilities
|
|
|
1,390
|
|
|
|
1,278
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued and outstanding
|
|
|
--
|
|
|
|
--
|
|
Common stock, $0.01 par value; 50,000,000 shares authorized; 2,925,788 shares, 2,005,187 and 1,952,980 shares issued and outstanding as of June 30, 2014, March 31, 2014 and 2013, respectively
|
|
|
20
|
|
|
|
19
|
|
Additional paid-in capital
|
|
|
130,994
|
|
|
|
130,602
|
|
Accumulated other comprehensive loss
|
|
|
--
|
|
|
|
(142
|
)
|
Accumulated deficit
|
|
|
(128,089
|
)
|
|
|
(124,775
|
)
|
Total stockholders’ equity
|
|
|
2,925
|
|
|
|
5,704
|
|
Total liabilities and stockholders’ equity
|
|
$
|
4,315
|
|
|
$
|
6,982
|
|
See accompanying notes to consolidated financial statements.
COLLABRX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
Year Ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
658
|
|
|
$
|
300
|
|
Revenue - related party
|
|
|
--
|
|
|
|
100
|
|
Total revenue
|
|
|
658
|
|
|
|
400
|
|
Cost of revenue
|
|
|
158
|
|
|
|
56
|
|
Gross profit
|
|
|
500
|
|
|
|
344
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Engineering
|
|
|
1,714
|
|
|
|
667
|
|
Research and development
|
|
|
284
|
|
|
|
536
|
|
Sales and marketing
|
|
|
271
|
|
|
|
257
|
|
General and administrative
|
|
|
1,819
|
|
|
|
2,979
|
|
Total operating expenses
|
|
|
4,088
|
|
|
|
4,439
|
|
Operating loss
|
|
|
(3,588
|
)
|
|
|
(4,095
|
)
|
Other income, net
|
|
|
40
|
|
|
|
39
|
|
Loss before income tax benefit
|
|
|
(3,548
|
)
|
|
|
(4,056
|
)
|
Income tax benefit
|
|
|
(79
|
)
|
|
|
(83
|
)
|
Loss from continuing operations
|
|
|
(3,469
|
)
|
|
|
(3,973
|
)
|
Gain on sale of discontinued operations, net of taxes
|
|
|
267
|
|
|
|
--
|
|
(Loss) income from discontinued operations, net of taxes
|
|
|
(112
|
)
|
|
|
45
|
|
Net income from discontinued operations, net of taxes
|
|
|
155
|
|
|
|
45
|
|
Net loss
|
|
$
|
(3,314
|
)
|
|
$
|
(3,928
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(1.77
|
)
|
|
$
|
(2.14
|
)
|
Net income (loss) per share from discontinued operations:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.08
|
|
|
$
|
0.02
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(1.69
|
)
|
|
$
|
(2.12
|
)
|
Weighted-average shares used in per share computation:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
1,965
|
|
|
|
1,856
|
|
See accompanying notes to consolidated financial statements.
COLLABRX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income (loss)
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of March 31, 2012
|
|
|
1,688,807
|
|
|
$
|
17
|
|
|
$
|
129,052
|
|
|
$
|
(142
|
)
|
|
$
|
(120,847
|
)
|
|
$
|
8,080
|
|
Stock issued for asset acquisition - CollabRx
|
|
|
236,433
|
|
|
|
2
|
|
|
|
930
|
|
|
|
-
|
|
|
|
-
|
|
|
|
932
|
|
Stock compensation expense and released restricted stock units
|
|
|
27,740
|
|
|
|
-
|
|
|
|
695
|
|
|
|
-
|
|
|
|
-
|
|
|
|
695
|
|
Warrants exchanged for services Sequel
|
|
|
-
|
|
|
|
-
|
|
|
|
(75
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(75
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,928
|
)
|
|
|
(3,928
|
)
|
Balances as of March 31, 2013
|
|
|
1,952,980
|
|
|
|
19
|
|
|
|
130,602
|
|
|
|
(142
|
)
|
|
|
(124,775
|
)
|
|
|
5,704
|
|
Stock issued in connection with 2014 ATM Plan
|
|
|
1,810
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
Stock options exercised
|
|
|
10,000
|
|
|
|
-
|
|
|
|
35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35
|
|
Stock compensation expense and released restricted stock units
|
|
|
40,397
|
|
|
|
1
|
|
|
|
351
|
|
|
|
-
|
|
|
|
-
|
|
|
|
352
|
|
Cumulative translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
142
|
|
|
|
|
|
|
|
142
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,314
|
)
|
|
|
(3,314
|
)
|
Balances as of March 31, 2014
|
|
|
2,005,187
|
|
|
$
|
20
|
|
|
$
|
130,994
|
|
|
$
|
-
|
|
|
$
|
(128,089
|
)
|
|
$
|
2,925
|
|
See accompanying notes to consolidated financial statements.
COLLABRX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
Year Ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,314
|
)
|
|
$
|
(3,928
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock compensation expense
|
|
|
352
|
|
|
|
695
|
|
Fair value adjustment of common stock warrants
|
|
|
(10
|
)
|
|
|
(9
|
)
|
Depreciation
|
|
|
34
|
|
|
|
16
|
|
Reclassified loss of foreign exchange translation
|
|
|
142
|
|
|
|
--
|
|
Loss on disposal of property and equipment
|
|
|
--
|
|
|
|
17
|
|
Amortization of intangible assets
|
|
|
209
|
|
|
|
160
|
|
Accrued interest on convertible note receivable
|
|
|
(33
|
)
|
|
|
(33
|
)
|
Deferred tax liability
|
|
|
(81
|
)
|
|
|
(83
|
)
|
Accrued interest promissory note payable
|
|
|
5
|
|
|
|
4
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
102
|
|
|
|
(250
|
)
|
Prepaid expenses
|
|
|
(13
|
)
|
|
|
(40
|
)
|
Other current assets
|
|
|
(33
|
)
|
|
|
(81
|
)
|
Deferred financing costs
|
|
|
(162
|
)
|
|
|
--
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
101
|
|
|
|
(483
|
)
|
Deferred revenue
|
|
|
108
|
|
|
|
--
|
|
Current assets and liabilities from discontinued operations, net
|
|
|
--
|
|
|
|
177
|
|
Net cash used in operating activities
|
|
|
(2,593
|
)
|
|
|
(3,838
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(22
|
)
|
|
|
(119
|
)
|
Cash received from acquisition
|
|
|
--
|
|
|
|
476
|
|
Issuance of note receivable
|
|
|
--
|
|
|
|
(300
|
)
|
Net cash (used in)/provided by investing activities
|
|
|
(22
|
)
|
|
|
57
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from at-the-market facility
|
|
|
6
|
|
|
|
--
|
|
Net cash provided by financing activities
|
|
|
6
|
|
|
|
--
|
|
Net decrease in cash and cash equivalents
|
|
|
(2,609
|
)
|
|
|
(3,781
|
)
|
Cash and cash equivalents as of beginning of year
|
|
|
4,039
|
|
|
|
7,820
|
|
Cash and cash equivalents as of end of year
|
|
$
|
1,430
|
|
|
$
|
4,039
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activities:
|
|
|
|
|
|
|
|
|
Warrants received in exchange for services
|
|
$
|
--
|
|
|
$
|
75
|
|
Shares issued in CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
932
|
|
Note Receivable used as consideration for CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
300
|
|
Promissory Note issued in CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
500
|
|
Fair value of assets acquired in CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
2,253
|
|
Liabilities assumed in CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
997
|
|
Amount receivable from stock option exercise
|
|
$
|
35
|
|
|
$
|
--
|
|
See accompanying notes to Consolidated Financial Statements.
COLLABRX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per
share data, unless otherwise noted)
Note 1. Description of Business and Summary of Significant Accounting Policies
The Company
CollabRx, Inc., a Delaware corporation (“CollabRx,” the “Company” or “we,” “us,” or “our”), is the formerly named Tegal Corporation, a Delaware corporation (“Tegal”), which acquired a private company of the same name on July 12, 2012. Following approval by its stockholders on September 25, 2012, Tegal amended its charter and changed its name to “CollabRx, Inc.” (the “Name Change”).
Tegal was formed in December 1989 to acquire the operations of the former Tegal Corporation, a division of Motorola, Inc. Tegal’s predecessor company was founded in 1972 and acquired by Motorola, Inc. in 1978. Tegal completed its initial public offering in October 1995.
Originally, Tegal designed, manufactured, marketed and serviced specialized plasma etch systems used primarily in the production of micro-electrical mechanical systems (“MEMS”) devices, such as sensors, accelerometers and power devices. Tegal also sold systems for the etching and deposition of materials found in other devices, such as integrated circuits (“ICs”) and optoelectronic devices found in products such as smart phones, networking gear, solid-state lighting, and digital imaging.
As the Company transitioned away from its legacy lines of business in manufacturing and devices, it explored opportunities in various emerging technology sectors, including the photovoltaic solar and medical device industries. These efforts led to Tegal’s investments in Sequel Power and NanoVibronix, as well as the Company’s acquisition of CollabRx, a company that develops information technology products based systems and methods for aggregating and contextualizing the world’s knowledge on genomics-based medicine, with specific applications in advanced cancer.
On July 12, 2012, we completed the transition of our business model with the closing of our acquisition of CollabRx. We intend that our acquisition of CollabRx will form the core of our operations going forward. The Company sought and received stockholder approval at the annual meeting held on September 2012 for an amendment to Tegal’s Certificate of Incorporation, changing the corporate name to CollabRx, Inc.
On January 14, 2011, the Company, se2quel Partners and Sequel Power entered into a Formation and Contribution Agreement. The Company contributed $2 million in cash to Sequel Power in exchange for an approximate 25% ownership interest in Sequel Power. Sequel Power was focused on the promotion of solar power plant development projects worldwide, the development of self-sustaining businesses from such projects, including but not limited to activities relating to and supporting, developing, building and operating solar photovoltaic fabrication facilities and solar farms, and the consideration of other non-photovoltaic renewable energy projects. The project services provided to Sequel Power represented the Company’s sole source of revenue for all of fiscal 2012.
On March 31, 2013, Sequel Power irrevocably assigned and transferred unto the Company for cancelation the balance of its Warrants representing the right to purchase 44,578 shares of the Company’s common stock. In exchange, the Company agreed to waive receivables related to certain fees earned under its Services Agreement with Sequel Partners and its 25% ownership interest in Sequel Power. In addition, effective March 31, 2013, the Company terminated its management agreement with Sequel Power. We do not anticipate making any additional investments in Sequel Power or any other solar-related businesses.
The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern.
Without additional capital, our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. We may need to generate significant revenue or sell equity or debt securities to raise additional funds to continue to operate as a going concern beyond the first quarter of fiscal year 2015. In addition, the perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations and may adversely affect our ability to raise additional capital.
The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, and contemplate the realization of assets and the settlement of liabilities and commitments in the normal course of business.
There can be no assurance that we will be able to obtain the funds required for our continued operations. There can be no assurance that additional financing will be available to us or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain financing on a timely basis, we will not be able to meet our obligations as they become due and we will be forced to scale down or perhaps even cease the operation of our business.
The CollabRx Merger
On July 12, 2012, we completed the acquisition of CollabRx (the “Merger”), pursuant to an Agreement and Plan of Merger dated as of June 29, 2012, (the “Merger Agreement”). As a result of the Merger, CollabRx became a wholly-owned subsidiary of the Company. In consideration for 100% of the stock of CollabRx, we agreed to issue an aggregate of 236,433 shares of common stock, representing 14% of the Company’s total shares outstanding prior to the closing, to former CollabRx stockholders. As of July 12, 2012, these shares had a fair value of $932. We also assumed $500 of existing CollabRx indebtedness through the issuance of promissory notes. The principal amount of the promissory notes is payable in equal installments on the third, fourth and fifth anniversaries of the date of issuance, along with the accrued but unpaid interest as of such dates. Also the note receivable balance recognized in the period prior to the acquisition date consisted of an outstanding loan related to the Company’s investment in CollabRx in the first quarter of fiscal year 2013. The Company’s initial investment in CollabRx was in the form of a promissory note that accrued interest at a rate of 0.28% per year compounded annually and matured on or about November 7, 2012. After the completion of the acquisition of CollabRx, the loan was reclassified to be included as part of the purchase price, thereby extinguishing the $300 bridge loan previously extended to CollabRx. The Company did not pay any cash consideration in connection with the acquisition.
In addition, Tegal granted a total of 368,417 restricted stock units (“RSUs”) and options as “inducement grants” to newly hired management and employees, all subject to four-year vesting and other restrictions. In December 2012, an aggregate of 215,475 RSUs were forfeited in connection with the resignation of James Karis as the Company’s Co-Chief Executive Officer.
On July 12, 2012, in connection with the acquisition of CollabRx, pursuant to the Merger Agreement, dated June 29, 2012, we entered into an Agreement Not to Compete with Jay M. Tenenbaum (the “Noncompete”), pursuant to which Mr. Tenenbaum agreed to refrain from competing with the Company on the terms set forth therein for a period of three years commencing on July 12, 2012.
Also on July 12, 2012, we entered into a Stockholders Agreement (the “Stockholders Agreement”) with the former stockholders of CollabRx. Pursuant to the Stockholders Agreement, (i) the Company has agreed to provide certain registration rights to the stockholders, and (ii) the stockholders have agreed to certain transfer restrictions and voting provisions for a period of two years.
In connection with the Merger Agreement and the Employment Agreement dated as of June 29, 2012 by and among the Company and James Karis, on July 12, 2012, Mr. Karis, the former Chief Executive Officer of CollabRx, was appointed the Co-Chief Executive Officer and a director of the Company. In December 2012, Mr. Karis resigned from his position as Co-Chief Executive Officer but remained on the Company’s Board of Directors.
In addition, pursuant to the Indemnity Agreement dated as of July 12, 2012 by and between the Company and James Karis (the “Indemnity Agreement”), Mr. Karis has been granted customary indemnification rights in connection with his position as an officer and director of the Company.
Additional information is set forth, including the description of the Merger provided above, and is qualified in its entirety by reference to the full text of the transaction documents, copies of which are filed as exhibits to the Form 8-K reports filed July 5, 2012 and July 18, 2012.
Principles of Consolidation and Foreign Currency Transactions
The consolidated financial statements include the accounts of the Company and all of its subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States. Intercompany transactions and balances are eliminated in consolidation. Accounts denominated in foreign currencies are translated using the foreign currencies as the functional currencies. Assets and liabilities of foreign operations are translated to U.S. dollars at current rates of exchange and revenues and expenses are translated using weighted-average rates. The effects of translating the financial statements of foreign subsidiaries into U.S. dollars are reported as accumulated other comprehensive income (loss), a separate component of stockholders’ equity. Gains and losses from foreign currency transactions are included in the statements of operations as a component of other income (expense), net, and were not material in all periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could vary from those estimates.
Reclassification
Certain prior year operating expense amounts were reclassified, still within operating expenses, to conform to the current year presentation.
Cash and Cash Equivalents
The Company considers all highly liquid debt and equity instruments having a maturity of three months or less on the date of purchase to be cash equivalents.
As of March 31, 2014 and 2013, all of the Company’s current investments are classified as cash equivalents in the consolidated balance sheets. The investment portfolio as of March 31, 2014 and 2013 is comprised of money market funds. As of March 31, 2014 and 2013, the fair value of the Company’s investments approximated cost.
Financial Instruments
The carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, notes receivable, accounts payable, accrued expenses and other liabilities approximates fair value due to their relatively short maturity. Based on the borrowing rates currently available to the Company, the note payable carrying value approximates fair value. With our exit from our historical operations, our exposure to foreign currency fluctuations has been mostly eliminated. The Company does not hold derivative financial instruments for speculative purposes. Previously, the Company would periodically enter into foreign exchange contracts to sell Euros, which are used to hedge a sales transaction in which costs were denominated in U.S. dollars and the related revenue was generated in Euros. On March 31, 2014 and 2013, the Company had no open foreign exchange contracts to sell Euros or any other foreign currencies.
Changes in the exchange rate between the Euro and the U.S. dollar are currently immaterial to our operating results. Exposure to foreign currency exchange rate risk may increase over time as our business evolves.
Fair Value Measurements
The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and we consider what assumptions market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
|
·
|
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. |
|
·
|
Level 2: Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument. |
|
·
|
Level 3: Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. |
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
The Company’s financial instruments consist primarily of money market funds. As of March 31, 2014, all of the Company’s current assets in financial instruments investments were classified as cash equivalents in the consolidated balance sheet. Our cash equivalents totaled $1,430. The investment portfolio at March 31, 2014 was comprised of money market funds. The carrying amounts of the Company’s cash equivalents are valued using Level 1 inputs. The Company uses the Black-Scholes option pricing model as its method of valuation for warrants that are subject to warrant liability accounting. The determination of the fair value as of the reporting date is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables which could provide differing variables. These variables include, but are not limited to, expected stock price volatility over the term of the security and risk free interest rate. In addition, the Black-Scholes option pricing model requires the input of an expected life for the securities for which we have estimated based upon the stage of the Company’s development. The fair value of the warrant liability is revalued each balance sheet date utilizing the Black-Scholes option pricing model computations with the decrease or increase in the fair value being reported in the consolidated statement of operations as other income, net. A significant increase (decrease) of any of the subjective variables independent of other changes would result in a correlated increase (decrease) in the liability and an inverse effect on net income (loss). The Company also had warrant liabilities which are valued using Level 3 inputs.
As of September 30, 2013, the Company’s warrant liability has been extinguished, and the Company has no other financial instruments subject to using Level 3 inputs.
The change in the fair value of the common stock warrant liability is as follows:
|
|
Year Ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Balance at the beginning of the period
|
|
$
|
10
|
|
|
$
|
19
|
|
Change in fair value recorded in earnings, including expirations
|
|
|
(10
|
)
|
|
|
(9
|
)
|
Balance at the end of the period
|
|
$
|
-
|
|
|
|
10
|
|
Investment in Unconsolidated Affiliate
The Company evaluates our joint venture arrangements to determine whether they should be recorded on a consolidated basis. The percentage of ownership interest in the joint venture, an evaluation of control and whether a variable interest entity (“VIE”) exists are all considered in the consolidation assessment.
We account for our investment in joint ventures where we own a non-controlling interest or where we are not the primary beneficiary of a VIE using the equity method of accounting. Under the equity method, our cost of investment is adjusted for our share of equity in the earnings of the unconsolidated affiliate and reduced by distributions received.
Any differences between the cost of our investment in an unconsolidated affiliate and our underlying equity as reflected in the unconsolidated affiliate’s financial statements generally result from a different basis in assets contributed to the joint venture. The net difference between our investment in unconsolidated affiliates and the underlying equity of unconsolidated affiliates is generally amortized over a period of ten years, which is determined to be the estimated useful life of the underlying intangibles which created the difference in carrying amount. As a result of the impairment charge taken in fiscal year 2012 for the total value against our unconsolidated affiliate, the net difference as of March 31, 2013 was $0. The amortization expense related to this difference for the fiscal year ended March 31, 2013 was $0.
On a periodic basis, we assess whether there are any indicators that the fair value of our investments in unconsolidated affiliates may be impaired. An investment is impaired only if our estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment. Our estimates of fair value for each investment are based on a number of assumptions such as future revenue projections, operating forecasts, discount rates and capitalization rates, among others. These assumptions are subject to economic and market uncertainties. As these factors are difficult to predict and are subject to future events that may alter our assumptions, the fair values estimated in the impairment analyses may not be realized.
Our estimate of the fair value of our investment was $0 as of March 31, 2013; we previously incurred an impairment charge of our investment in our unconsolidated affiliates during the year ended March 31, 2012 in the amount of $1,377, bringing the fair value of the investment to $0 as of March 31, 2012. On March 21, 2013, Sequel Power irrevocably assigned and transferred unto the Company for cancelation the balance of its Warrants representing the right to purchase 44,578 shares of the Company’s common stock. In exchange, the Company agreed to waive receivables related to certain fees earned under its Services Agreement with Sequel Partners and its 25% ownership interest in Sequel Power. In addition, effective March 31, 2013, the Company terminated its management agreement with Sequel Power.
Investment in Convertible Promissory Note
The Company’s carrying amount of its investment in a Convertible Promissory Note approximates fair value. On a periodic basis, we assess whether there are any indicators that the fair value of our investment in Convertible Promissory Note may be impaired. An investment is impaired only if our estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment.
As of March 31, 2014, the Company’s investment in Convertible Promissory Note consisted solely of the investment in NanoVibronix. That note bears interest at a rate of 10% per year compounded annually and matured on November 15, 2014. Interest is accrued and recognized quarterly. As of March 31, 2014 and 2013, the Convertible Promissory Note balance was $378 and $345, respectively, consisting of the original $300 investment and $78 and $45, respectively, in accrued interest. Should NanoVibronix, Inc. become a public company, then the Company’s Chief Executive Officer will become a member of the NanoVibronix, Inc. Board of Directors.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash investments and accounts receivable. Substantially all of the Company’s liquid investments are invested in money market funds. The Company’s accounts receivable are derived primarily from sales to customers located in the United States. Prior to our exit from our historical core operations, the Company performed ongoing credit evaluations of its customers and generally required no collateral. For fiscal years 2014 and 2013, the Company had zero reserves for potential credit losses as such risk was determined to be immaterial. The Company does not currently maintain an allowance for doubtful accounts receivable for potential estimated losses resulting from the inability of the Company’s customers to make required payments. The Company believes no such reserve is currently required. The Company had zero write-offs during fiscal years 2014 and 2013. The Company reviews the estimated risk of current customers’ inability to make payments on a quarterly basis to determine if any amount is uncollectible.
As of March 31, 2014, four customers accounted for 100% of the accounts receivable balance. One customer accounted for 100% of the accounts receivable balance as of March 31, 2013. As of March 31, 2014, the balance in accounts receivable was $148. As of March 31, 2013, the balance in accounts receivable was $250 and one customer accounted for 100% of the Company’s accounts receivable balance.
Life Technologies, Inc. has been a major contributor to our revenues and gross profits for the past two fiscal years, however we have funded the Company’s operating expenses primarily with cash on hand and the net proceeds from the sale of discontinued assets, as disclosed in prior and current filings. We are actively engaged in negotiations with several other companies who are interested in purchasing our content on similar terms or under annual subscriptions or software-as-a-service arrangements.
For the period ended March 31, 2014, Life Technologies Inc.'s amount due in the Company’s accounts receivable balance was zero. The Company sold the last two patent lots for approximately $365 in the second quarter of the current fiscal year. The Company received the funds from the patent sales in the third quarter of fiscal year 2014.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Leasehold improvements are stated at cost and are amortized using the straight-line method over the shorter of the estimated useful life of the improvements or the lease term. Significant additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred. When assets are disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are included in the results of operations. The Company generally depreciates its assets over the following periods:
|
Years
|
Furniture and machinery and equipment
|
7
|
Computer and software
|
3 – 5
|
Leasehold improvements
|
5 or remaining lease life
|
Intangible Assets
Intangibles include acquired technology, customer relationships, non-compete agreements, patents and trademarks that are amortized on a straight-line basis over periods ranging from 3 years to 10 years. The Company performs an ongoing review of its identified intangible assets to determine if facts and circumstances exist that indicate the useful life is shorter than originally estimated or the carrying amount may not be recoverable. If such facts and circumstances exist, the Company assesses the recoverability of identified intangible assets by comparing the projected undiscounted net cash flow associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.
Intangible assets, except for trade names, are amortized on a straight-line basis. Intangible assets related to trade names are not amortized. The Company tests for impairment at least annually. The amortization expense included in cost of revenue is related to the acquired software and is amortized on a straight line basis over the expected life of the asset, which the Company believes to be ten years.
No impairment charges for intangible assets were recorded for the fiscal years ended 2014 and 2013. Prior to the acquisition of CollabRx, all of the Company’s historical intangible assets, other than those related to NLD and Compact, were included in the asset sale of the DRIE product line to SPTS. The last of the intangible assets related to NLD and Compact were sold in the second quarter in fiscal year 2014.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable as well as at fiscal year end. If undiscounted expected future cash flows are less than the carrying value of the assets, an impairment loss is recognized based on the excess of the carrying amount over the fair value of the assets. No impairment charges for intangible assets were recorded for the fiscal years ended 2014 and 2013, respectively, since all of the Company’s historical intangible assets, other than those related to NLD and Compact, were included in the asset sale of the DRIE product line to SPTS. As the Company’s NLD patents and intellectual property were all internally developed (except for those acquired in connection with the Simplus acquisition, which were subsequently written-off) the value of the Company’s NLD technology had no recorded value prior to sale.
Long-lived assets also consist of property, plant and equipment. The Company recorded disposal losses of $0 and $17 for fixed assets for the fiscal years ended March 31, 2014 and 2013, respectively. In fiscal year 2013, the Company disposed of certain assets in connection with the relocation of its main offices from Petaluma, CA to San Francisco, CA.
Deferred Financing Costs
Deferred financing costs represent expenses incurred to raise equity capital related to financing transactions which have not yet been completed as of the balance sheet dates.
Accounts Receivable – Allowance for Sales Returns and Doubtful Accounts
For fiscal years 2014 and 2013, the Company had zero reserves for potential credit losses as such risk was determined to be immaterial. The Company does not currently maintain an allowance for doubtful accounts receivable for potential estimated losses resulting from the inability of the Company’s customers to make required payments. The Company believes no such reserve is currently required. The Company had zero write-offs during fiscal years 2014 and 2013. The Company reviews the estimated risk of current customers’ inability to make payments on a quarterly basis to determine if any amount is uncollectible.
As of March 31, 2014, the balance in accounts receivable was $148. As of March 31, 2013, the balance in accounts receivable was $250.
As of March 31, 2014, four customers accounted for 100% of the accounts receivable balance. One customer accounted for 100% of the accounts receivable balance as of March 31, 2013.
Revenue Recognition
Each contract sale of our interpretive data is evaluated individually in regard to revenue recognition. We had integrated in our evaluation the related guidance included in Accounting Standards Codification (“ASC”) Topic 605 – “Revenue Recognition”. We recognized revenue when persuasive evidence of an arrangement exists, the seller’s price is fixed or determinable and collectability is reasonably assured.
For arrangements that include multiple deliverables, we identify separate units of accounting based on the guidance under ASC 605-25, “Multiple Element Arrangements”, which provides that revenue arrangements with multiple deliverables should be divided into separate units of accounting, if certain criteria are met. The consideration of the arrangement is allocated to the separate units of accounting using the relative selling price method. Applicable revenue recognition criteria are considered separately for each separate unit of accounting.
Revenue from fixed price contracts is recognized primarily under the percentage of completion method. Under this method we recognize estimated contract revenue and resulting income based on costs incurred to date as a percentage of the total estimated costs as we consider this model to best reflect the economics of these contracts. In such contracts, the Company’s efforts, measured by time incurred, typically represents the contractual milestones or output measure.
Income Taxes
We account for income taxes in accordance with ASC Topic 740, “Income Taxes”, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Under ASC 740, the liability method is used in accounting for income taxes. Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We evaluate annually the realizability of our deferred tax assets by assessing our valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. In 2014 and 2013, we have recorded a full valuation allowance for our deferred tax assets based on our past losses and uncertainty regarding our ability to project future taxable income. In future periods, if we are able to generate income we may reduce or eliminate the valuation allowance.
Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed using the weighted-average number of common shares outstanding plus any potentially dilutive securities, except when the effect of including such changes is antidilutive. The weighted-average number of shares and the (loss) income per share reflect a 1-for-5 reverse stock split effected by the Company on June 15, 2011.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718 – “Compensation-Stock Compensation” (“ASC 718”) which establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s service period.
We have adopted several stock plans that provide for issuance of equity instruments to our employees and non-employee directors. Our plans include incentive and non-statutory stock options and restricted stock awards. These equity awards generally vest ratably over a four-year period on the anniversary date of the grant, and stock options expire ten years after the grant date. Restricted stock awards do not expire. Certain restricted stock awards may vest on the achievement of specific performance targets. We also have an Employee Stock Purchase Plan (“ESPP”) that allows qualified employees to purchase shares of common stock at 85% of the fair market value on specified dates. The ESPP plan expires on July 22, 2014.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of the Company during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. For the years ended March 31, 2014 and 2013, the Company had no items of other comprehensive loss. Therefore, the net loss equals comprehensive loss for the years then ended.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The new guidance requires entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income unless the amounts are not reclassified in their entirety to net income. For amounts that are not required to be reclassified in their entirety to net income in the same reporting period, entities are required to cross-reference other disclosures that provide additional detail about those amounts. The new guidance was effective for periods beginning after December 15, 2012, and had no material impact on our consolidated financial statements. See Note 5, Discontinued Operations.
In March 2013, the FASB issued ASU 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-05”). ASU 2013-05 clarifies that when a parent reporting entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity, the parent is required to apply the guidance in ASC 830-30 to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. ASU 2013-05 is effective prospectively for fiscal years and interim reporting periods within those years beginning after December 15, 2013. The new guidance was adopted early. See Note 5, Discontinued Operations.
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-11”). The new guidance requires entities to report an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The new guidance is effective prospectively for fiscal years and interim reporting periods within those years beginning after December 15, 2013. The Company does not expect the new guidance to have a material impact on our consolidated financial statements.
In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ” “ASU 2014-08”, which changes the requirements for reporting discontinued operations in Subtopic 205-20 “Presentation of Financial Statements - Discontinued Operations.” The ASU changes the definition of discontinued operations by limiting discontinued operations reporting to disposals that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. Under current U.S. GAAP, many disposals, some of which may be routine in nature and not representative of a substantive change in an entity’s strategy, are reported in discontinued operations. ASU 2014-08 requires expanded disclosures for discontinued operations designed to provide users of financial statements with more information about the assets, liabilities, revenues, expenses and cash flows related to discontinued operations. ASU 2014-08 also requires an entity to disclose the pretax profit or loss (or change in net assets for a not-for-profit entity) of an individually significant component of an entity that does not qualify for discontinued operations reporting. The amendments in ASU 2014-08 are effective prospectively for fiscal years, and interim periods, beginning after December 15, 2014. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The Company does not expect the new guidance to have a material impact on our consolidated financial statements. See Note 5, Discontinued Operations.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and the IASB has issued IFRS 15, Revenue from Contracts with Customers. The issuance of these documents completes the joint effort by the FASB and the IASB to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and IFRS. The new guidance affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company will continue to evaluate this newly issued guidance.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Sub Topic 205-40) -Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 clarifies principles and definitions that may be used by an organization’s management for disclosures that are currently made available in financial statement footnotes. Presently, U.S. GAAP does not provide an organization’s management guidance regarding its responsibility to assess whether substantial doubt exists regarding the ability to continue as a going concern or to prepare related footnote disclosures. Instead, auditors are responsible for assessing an entity’s ability to continue as a going concern under AU-C 570. ASU 2014-15 will move this responsibility to management. ASU 2014-15 will require management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern for one year from the date the financial statements are issued. ASU 2014-15 is effective for annual periods ending after December 15, 2016 to allow the auditing guidance to catch up with this change. ASU No. 2014-15 affects all companies and nonprofits and early application is allowed.
Note 2. Balance Sheet and Statement of Operations Detail
Property and equipment, net, consisted of:
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Furniture
|
|
$
|
133
|
|
|
$
|
132
|
|
Office Equipment
|
|
|
72
|
|
|
|
51
|
|
Leasehold Improvements
|
|
|
5
|
|
|
|
5
|
|
Total
|
|
|
210
|
|
|
|
188
|
|
Accumulated Depreciation
|
|
|
(80
|
)
|
|
|
(29
|
)
|
Disposals
|
|
|
-
|
|
|
|
(17
|
)
|
Total Property and Equipment
|
|
$
|
130
|
|
|
$
|
142
|
|
Depreciation expense for years ended March 31, 2014 and 2013 was $34 and $16, respectively.
Note 3. Intangible Assets
With the acquisition of CollabRx, as of March 31, 2014, the Company’s intangible assets net value was $1,281. The Company does not amortize the trade name as it has an indefinite life subject to annual impairment tests. The net book value of Goodwill was $603.
As of March 31, 2014, intangible assets, net, not including goodwill, consisted of the following:
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Developed Technology
|
|
$
|
719
|
|
|
|
(128
|
)
|
|
|
591
|
|
Customer Relationships
|
|
|
433
|
|
|
|
(152
|
)
|
|
|
281
|
|
Trade Name
|
|
|
346
|
|
|
|
-
|
|
|
|
346
|
|
Non Compete Agreement
|
|
|
151
|
|
|
|
(88
|
)
|
|
|
63
|
|
Total
|
|
$
|
1,649
|
|
|
$
|
(368
|
)
|
|
$
|
1,281
|
|
Amortization expense was $209 and $160 in fiscal 2014 and 2013, respectively.
As of March 31, 2013, intangible assets, net not including goodwill, consisted of the following:
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Developed Technology
|
|
$
|
719
|
|
|
|
(56
|
)
|
|
|
663
|
|
Customer Relationships
|
|
|
433
|
|
|
|
(65
|
)
|
|
|
368
|
|
Trade Name
|
|
|
346
|
|
|
|
-
|
|
|
|
346
|
|
Non Compete Agreement
|
|
|
151
|
|
|
|
(38
|
)
|
|
|
113
|
|
Total
|
|
$
|
1,649
|
|
|
$
|
(159
|
)
|
|
$
|
1,490
|
|
Future estimated amortization expense is as follows:
Year Ending March 31,
|
|
Estimated
Amortization
Expense
|
|
2015
|
|
$
|
209
|
|
2016
|
|
|
171
|
|
2017
|
|
|
159
|
|
2018
|
|
|
94
|
|
2019
|
|
|
72
|
|
Thereafter
|
|
|
230
|
|
|
|
$
|
935
|
|
The Company sold all remaining intangibles, except the NLD related patents, to SPTS on February 9, 2011. The Company retained the internally developed NLD patents and has sold all of these patents as of March 31, 2014.
Note 4. Earnings Per Share (EPS)
Basic EPS is computed by dividing income (loss) available to common stockholders (numerator) by the weighted-average number of common shares outstanding (denominator) for the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. The computation of diluted EPS uses the average market prices during the period. All amounts in the following table are in thousands except per share data. The weighted-average number of shares and the (loss) income per share reflect a 1-for-5 reverse stock split effected by the Company on June 15, 2011.
Basic net income (loss) per common share is computed using the weighted-average number of shares of common stock outstanding.
The following table represents the calculation of basic and diluted net income (loss) per common share (in thousands, except per share data):
|
|
Year Ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(3,469
|
)
|
|
$
|
(3,973
|
)
|
Net income from discontinued operations, net of taxes
|
|
|
155
|
|
|
|
45
|
|
Net loss applicable to common stockholders
|
|
$
|
(3,314
|
)
|
|
$
|
(3,928
|
)
|
Basic and diluted:
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
|
1,965
|
|
|
|
1,856
|
|
Weighted-average common shares used in per share computation
|
|
|
1,965
|
|
|
|
1,856
|
|
Net loss per share from continuing operations:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(1.77
|
)
|
|
$
|
(2.14
|
)
|
Net income per share from discontinued operations:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.08
|
|
|
$
|
0.02
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(1.69
|
)
|
|
$
|
(2.12
|
)
|
Outstanding options, warrants and RSUs of 500,809 and 448,986, at a weighted-average exercise price of $10.17 and $7.23, as of March 31, 2014 and 2013, respectively, were not included in the computation of diluted net (loss) income per common share for the periods presented as a result of their anti-dilutive effect. Such securities could potentially dilute earnings per share in future periods.
Note 5. Discontinued Operations
Until 2011, we designed, manufactured, marketed and serviced specialized plasma etch systems used primarily in the production of micro-electrical mechanical systems devices, such as sensors, accelerometers and power devices. Previously, we also sold systems for the etching and deposition of materials found in other devices, such as integrated circuits and optoelectronic devices found in products such as smart phones, networking gear, solid-state lighting, and digital imaging.
In a series of meetings in late May and early June 2009, our Board of Directors reviewed several basic strategic options presented by management, including investigating opportunities for the sale of the Company or its assets. In December 2009, having received no bona fide offers for the Company as a going concern, the Board and management agreed to continue operations and to offer selected asset groups to potential buyers.
On March 19, 2010, we completed the sale of the legacy Etch and PVD assets to OEM Group, Inc. We discontinued our development efforts in NLD at the end of fiscal 2010, and began offering these assets for sale to third-parties. At the same time, we began the process of closing and/or liquidating all of our other wholly-owned subsidiary companies, including SFI and Tegal GmbH, along with branches in Taiwan, Korea and Italy. The subsidiaries were then included in discontinued operations.
On February 9, 2011, the Company and SPTS entered into an Asset Purchase Agreement. That agreement included the sale of all of the shares of Tegal France, SAS, the Company’s wholly-owned subsidiary and product lines and certain equipment, intellectual property and other assets relating to the DRIE systems and certain related technology. In accordance with generally accepted accounting principles, the DRIE business operations related to the designing, manufacturing, marketing and servicing of systems and parts within the semiconductor industry was presented in discontinued operations in our consolidated financial statements. Amounts for the prior periods were reclassified to conform to this presentation. The exit from the DRIE operation was essentially completed by the end of the fourth quarter of our 2011 fiscal year.
The assets and liabilities of discontinued operations are presented separately under the captions “Assets of discontinued operations” and “Liabilities of discontinued operations,” respectively, in the accompanying consolidated balance sheets as of March 31, 2014 and 2013, respectively, and consist of the following:
|
|
March 31,
2014
|
|
|
March 31,
2013
|
|
Assets of Discontinued Operations:
|
|
|
|
|
|
|
Accounts and other receivables, net of allowances for sales returns and doubtful accounts of $0
|
|
$
|
-
|
|
|
$
|
4
|
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
|
7
|
|
Total assets of discontinued operations
|
|
$
|
-
|
|
|
$
|
11
|
|
Liabilities of Discontinued Operations:
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
5
|
|
|
$
|
16
|
|
Total liabilities of discontinued operations
|
|
$
|
5
|
|
|
$
|
16
|
|
As of March 31, 2014, discontinued assets were eliminated with the final closure of the Company’s foreign subsidiary. Discontinued liabilities are related to outstanding commission due. This commission is to be paid when the final documentation of the sale of the last two lots of patents is fulfilled. As of March 31, 2013 discontinued assets and liabilities are solely related to a foreign subsidiary.
Discontinued operations consists of interest income from accounts related to discontinued operations, other income, gains and losses on the disposal of fixed assets of discontinued operations, gains and losses on foreign exchange, as well as the reclassification of net expenses associated with our exit from our historical core operations.
During fiscal 2014, we recognized $365 from the sale of the last of our NLD patents. As these assets were internally developed, there was a corresponding zero book value. The NLD revenue was offset by related expenses of $98, resulting in a net gain, net of taxes, of $267. With this sale, the Company has no other intellectual property related to discontinued operations. Discontinued operations also included expenses related to the final closing of former foreign subsidiaries. In the three months ended June 30, 2013, the Company recognized a reclassification out of accumulated other comprehensive loss and into Loss from Discontinued Operations, net of taxes. The reclassification is related to the recognition of a non-cash loss of $142 from foreign exchange differences from its former Tegal foreign subsidiaries, primarily as a result of the final closing of the former Tegal German subsidiary. The Company received permission to close the German subsidiary in June 2013. No further audits or reviews are anticipated by foreign taxing authorities. The Company also recognized a cash gain of $20 in discontinued operations as a result of final closing of bank accounts in its Italian subsidiary and a federal tax refund regarding discontinued operations..
In fiscal 2013, discontinued operations included a gain resulting from the net settlement of legal expenses related to closing a foreign subsidiary (for which a higher amount of legal expense had been accrued in the prior fiscal year), offset by R&D expenses included in discontinued operations.
On May 7, 2012, the Company received a VAT refund related to discontinued operations in its former French subsidiary in the amount of 312 Euros. As of March 31, 2012, this amount was recognized in other assets of discontinued operations. The settlement of this outstanding amount due is classified as a reduction of assets of discontinued operations. The related foreign exchange gain was classified as a gain on the sale of discontinued operations in the first quarter of fiscal year 2013.
Total revenue from discontinued operations for fiscal years 2014 and 2013 was $0. The total income from discontinued operations, including income tax expense (benefit), was $155 and $45, for the same years, respectively.
Note 6. Income Taxes
The deferred tax asset valuation allowance as of March 31, 2014 is attributed to U.S. federal, and state deferred tax assets, which result primarily from future deductible accruals, net operating loss carryforwards, and tax credit carryforwards. We believe that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding our ability to realize the deferred tax assets such that a full valuation allowance has been recorded. These factors include our history of losses, and the lack of carryback capacity to realize deferred tax assets.
In accordance with Section 382 of the Internal Revenue Code, the amounts of and benefits from net operating loss and tax credit carryforwards may be impaired or limited in certain circumstances. Events which cause limitations in the amount of net operating losses or credits that we may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% as defined, over a three year period.
We recognize interest and penalties related to uncertain tax positions in income tax expense. Income tax expense for the year ended March 31, 2014 includes no interest. As of March 31, 2014, we have no accrued interest and penalties related to uncertain tax positions.
Components of loss from continuing operations before income tax benefit is attributed to the following geographic locations for the years ended March 31, 2014 and 2013 (in thousands):
Year ended March 31,
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
(3,548
|
)
|
|
$
|
(4,056
|
)
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
Loss from continuing operations before income tax benefit
|
|
$
|
(3,548
|
)
|
|
$
|
(4,056
|
)
|
Components of income tax expense (benefit) for the years ended March 31, 2014 and 2013 consisted of the following (in thousands):
Year ended March 31,
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State and Local
|
|
|
2
|
|
|
|
-
|
|
Foreign (credit)
|
|
|
-
|
|
|
|
-
|
|
Total current tax expense (benefit)
|
|
|
2
|
|
|
|
-
|
|
Deferred
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
(81
|
)
|
|
|
(83
|
)
|
State and Local
|
|
|
-
|
|
|
|
-
|
|
Foreign (credit)
|
|
|
-
|
|
|
|
-
|
|
Total deferred tax expense
|
|
|
(81
|
)
|
|
|
(83
|
)
|
Total income tax expense (benefit)
|
|
$
|
(79
|
)
|
|
$
|
(83
|
)
|
The income tax expense (benefit) for the years ended March 31, 2014 and 2013 differed from the amounts computed by applying the statutory U.S. federal income tax rate as follows (in thousands):
Year ended March 31,
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Federal tax expense (benefit) at U.S. Statutory Rate
|
|
$
|
(1,126
|
)
|
|
$
|
(1,335
|
)
|
State tax expense (benefit) net of federal tax effect
|
|
|
(193
|
)
|
|
|
(246
|
)
|
Change in valuation allowance
|
|
|
1,196
|
|
|
|
4,572
|
|
Tax effect of acquired net operating loss carryforwards
|
|
|
-
|
|
|
|
(3,123
|
)
|
Foreign Sub Germany
|
|
|
251
|
|
|
|
-
|
|
Amortization of deferred tax liability
|
|
|
(81
|
)
|
|
|
(83
|
)
|
Other items
|
|
|
(126
|
)
|
|
|
132
|
|
Total income tax benefit
|
|
$
|
(79
|
)
|
|
$
|
(83
|
)
|
Components of deferred taxes are as follows (in thousands):
Year ended March 31,
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Deferred revenue
|
|
$
|
48
|
|
|
$
|
-
|
|
Accruals, reserves and other
|
|
|
1,932
|
|
|
|
1,616
|
|
Net operating loss carryforwards
|
|
|
45,142
|
|
|
|
44,404
|
|
Credit carryforward
|
|
|
2,397
|
|
|
|
2,380
|
|
Capitalized research and development costs
|
|
|
299
|
|
|
|
299
|
|
Other
|
|
|
5
|
|
|
|
9
|
|
Gross deferred tax assets
|
|
|
49,823
|
|
|
|
48,708
|
|
Valuation allowance
|
|
|
(49,823
|
)
|
|
|
(48,708
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred tax liability:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
(500
|
)
|
|
$
|
(581
|
)
|
The Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Taxes”, (ASC Topic 740), on January 1, 2007. As a result of the implementation of ASC Topic 740, the Company did not recognize any adjustment to the liability for uncertain tax positions and therefore did not record any adjustment to the beginning balance of accumulated deficit on the consolidated balance sheet. As of the date of adoption, the Company recorded a $1.4 million reduction to deferred tax assets for unrecognized tax benefits, all of which is currently offset by a full valuation allowance and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet at that time.
Tabular Reconciliation of Unrecognized Tax Benefits
|
|
|
|
Ending Balance as of March 31, 2012
|
|
$
|
833
|
|
Increase/(Decrease) of unrecognized tax benefits taken in prior years
|
|
|
-
|
|
Increase/(Decrease) of unrecognized tax benefits related to current year
|
|
|
2
|
|
Increase/(Decrease) of unrecognized tax benefits related to settlements
|
|
|
-
|
|
Reductions to unrecognized tax benefits related to lapsing statute of limitations
|
|
|
(13
|
)
|
Ending Balance as of March 31, 2013
|
|
|
822
|
|
Increase/(Decrease) of unrecognized tax benefits taken in prior years
|
|
|
-
|
|
Increase/(Decrease) of unrecognized tax benefits related to current year
|
|
|
77
|
|
Increase/(Decrease) of unrecognized tax benefits related to settlements
|
|
|
-
|
|
Reductions to unrecognized tax benefits related to lapsing statute of limitations
|
|
|
-
|
|
Ending Balance as of March 31, 2014
|
|
$
|
899
|
|
There are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date.
Because the statute of limitations does not expire until after the net operating loss and credit carryforwards are actually used, the statues are still open on fiscal years ended March 31, 1995 forward for federal purposes, and for fiscal years ended March 31, 2003 forward for state purposes. For the years prior to March 31, 2010 for federal purposes and prior to March 31, 2009 for state purposes, any adjustments would be limited to reduction in the net operating loss and credit carryforwards.
Total interest and penalties included in the statement of operations for the year ended March 31, 2014 is zero. It is the Company’s policy to include interest and penalties related to uncertain tax positions in tax expense.
We have recorded no net deferred tax assets for the years ended March 31, 2014 and 2013, respectively. The Company has provided a valuation allowance of $49.8 million and $48.7 million as of March 31, 2014 and 2013, respectively. The valuation allowance fully reserves all net operating loss carryforwards, credits and non-deductible accruals and reserves, for which realization of future benefit is uncertain. The realization of net operating losses may be limited due to change of ownership rules. The valuation allowance increased by $1.1 million in fiscal 2014 and increased by $4.8 million during fiscal 2013.
As of March 31, 2014, the Company has net operating loss carryforwards of approximately $121.5 million and $65.2 million for federal and state tax purposes, respectively. The federal net operating loss carryforward will begin to expire in the year ended March 31, 2020 and the state of California began expiring as of March 31, 2013.
As of March 31, 2014, the Company also has research and experimentation credit carryforwards of $1.4 million and $0.9 million for federal and state income tax purposes, respectively. A portion of the federal credit began to expire in the year ended March 31, 2012 and the state of California will never expire under current law.
The Tax Reform Act of 1986 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a corporation during a certain time period. In the event the Company had incurred a change in ownership, utilization of the carryforwards could be significantly restricted
Note 7. CollabRx Acquisition
On July 12, 2012, we completed the acquisition of CollabRx, pursuant to the previously announced Merger Agreement, dated as of June 29, 2012. As a result of the merger, CollabRx became a wholly-owned subsidiary of the Company. In consideration for 100% of the stock of CollabRx, we agreed to issue an aggregate of 236,433 shares of common stock, representing 14% of the Company’s total shares outstanding prior to the closing, to former CollabRx stockholders. As of July 12, 2012, these shares had a fair value of $932. We also assumed $500 of existing CollabRx indebtedness through the issuance of promissory notes. The principal of the promissory notes is payable in equal installments on the third, fourth and fifth anniversaries of the date of issuance, along with the accrued but unpaid interest as of such dates. Also the prior period note receivable balance consisted of an outstanding loan related to the Company’s investment in CollabRx in the first quarter of the current fiscal year. The Company’s initial investment in CollabRx was in the form of a promissory note that accrued interest at a rate of 0.28% per year compounded annually and matured on or about November 7, 2012. After the completion of the acquisition of CollabRx, the loan was reclassified to be included as part of the purchase price, thereby extinguishing the $300 bridge loan previously extended to CollabRx. The Company did not pay any cash consideration in connection with the acquisition.
In addition, Tegal granted a total of 368,417 RSUs and options as “inducement grants” to newly hired management and employees, all subject to four-year vesting and other restrictions. In December 2012, an aggregate of 215,475 RSUs were forfeited in connection with the resignation of James Karis as the Company’s Co-Chief Executive Officer.
On July 12, 2012, in connection with the acquisition of CollabRx, pursuant to the Merger Agreement, dated June 29, 2012, we entered into an Agreement Not to Compete with Jay M. Tenenbaum (the “Noncompete”), pursuant to which Mr. Tenenbaum agreed to refrain from competing with the Company on the terms set forth therein for a period of three years commencing on July 12, 2012.
Also on July 12, 2012, we entered into a Stockholders Agreement (the “Stockholders Agreement”) with the former stockholders of CollabRx. Pursuant to the Stockholders Agreement, (i) the Company has agreed to provide certain registration rights to the stockholders, and (ii) the stockholders have agreed to certain transfer restrictions and voting provisions for a period of two years.
In connection with the Merger Agreement and the Employment Agreement dated as of June 29, 2012 by and among the Company and James Karis, on July 12, 2012, Mr. Karis, the former Chief Executive Officer of CollabRx, was appointed the Co-Chief Executive Officer and a director of the Company. In December 2012, Mr. Karis resigned from his position as Co-Chief Executive Officer but remained on the Company’s Board of Directors.
In addition, pursuant to the Indemnity Agreement dated as of July 12, 2012 by and between the Company and James Karis (the “Indemnity Agreement”), Mr. Karis has been granted customary indemnification rights in connection with his position as an officer and director of the Company.
Additional information is set forth in the Company’s 8-K report filed on July 18, 2012, and is incorporated herein in its entirety by reference.
The purchase price for the CollabRx acquisition was allocated as follows:
PURCHASE PRICE ALLOCATION FOR ACQUISITION OF COLLABRX
Assets acquired:
|
|
|
|
Developed Technology
|
|
$
|
720
|
|
Customer Relationships
|
|
|
433
|
|
Trade Name
|
|
|
346
|
|
Non Compete Agreement
|
|
|
151
|
|
Cash
|
|
|
476
|
|
AP and accrueds
|
|
|
(333
|
)
|
Deferred tax liability
|
|
|
(664
|
)
|
Goodwill
|
|
|
603
|
|
Total Acquired Assets, net
|
|
$
|
1,732
|
|
Purchase Price summary:
|
|
|
|
|
Common Stock Consideration
|
|
$
|
932
|
|
Promissory Note Assumed
|
|
|
500
|
|
Loan/Note Payable Assumed
|
|
|
300
|
|
|
|
$
|
1,732
|
|
CollabRx offers cloud-based expert systems that provide clinically relevant interpretive knowledge to institutions, physicians, researchers and patients for genomics-based medicine in cancer and other diseases to inform health care decision making. With access to over 50 clinical and scientific advisors at leading academic institutions and a suite of tools and processes that combine artificial intelligence-based analytics with proprietary interpretive content, CollabRx is well positioned to participate in the $300 billion value-added “big data” opportunity in the US health care market (as reported by McKinsey Global Institute), over half of which specifically targets areas in cancer and cancer genomics. The Company recognized $83 in tax benefit in the year ended March 31, 2014 regarding the deferred tax liability related to this acquisition.
CollabRx provides this market data information so investors may understand the relevance of our estimates. We believe that overall size of the market for cancer diagnostics and therapeutics is a good indicator of the increasing importance of this market to a wide spectrum of health care providers, researchers and value-chain participants. The number of people affected by cancer, the information generated in connection with cancer research, the amount of money spent in the United States on cancer diagnostics and therapeutics are all relevant to the opportunity that we have identified. Further, we know that within these large markets, certain areas, including those that are directly addressed by CollabRx, are growing disproportionately because of advances in technology. Because the markets are emergent, and because our customers (particularly those within the diagnostic laboratory segment) are still developing their own diagnostic tests in oncology, we currently do not have reliable, publicly-available estimates to accurately determine the size of that particular market. It is with the recent emergence of multi-biomarker testing and multi-gene panels, to date largely performed by a single private company, that the requirement for complex integration of interpretive data has become a recognizable need. As the providers of testing platforms enable such testing at the individual laboratory level through increasingly more cost-effective technologies, and as more diagnostic labs develop their own tests based on these technologies, we believe that the market for independent interpretive analysis will expand rapidly. With regard to the market for our Therapy Finders and related products, we expect to garner some portion of the advertising budgets related to the marketing of cancer diagnostics and therapies, but we are not aware of any reliable, publicly-available estimates of market sizes for web-based tools of the type that we have developed.
With regard to our GVA, while genomic testing for cancer has been performed for a number of years by academic medical centers, such testing was largely focused on single biomarkers, for which the interpretation is relatively straightforward. It is with the recent emergence of multi-biomarker testing and multi-gene panels, to date largely performed by a single private company, that the requirement for complex integration of interpretive data has become a recognizable need. As the providers of testing platforms enable such testing at the individual laboratory level through increasingly more cost-effective technologies, and as more diagnostic labs develop their own tests based on these technologies, we believe that the market for independent interpretive analysis will expand rapidly.
The physicians and researchers within our network of advisors have agreed to participate in our efforts for an indefinite term, on an uncompensated basis, and without a formal agreement.
On December 7, 2012, CollabRx and James M. Karis entered into an Amendment No. 1 (the “Employment Agreement Amendment”) to the Employment Agreement dated June 29, 2012 between the Company and Mr. Karis (the “Employment Agreement”). Pursuant to the Employment Agreement Amendment, Mr. Karis resigned as Co-Chief Executive Officer of the Company effective December 31, 2012 (the “Termination Date”) but will continue to serve as a director of the Company and provide consulting services to the Company from time to time after the Termination Date. In addition, the Company waived its entitlement to recoup from Mr. Karis his signing bonus and Mr. Karis agreed to amend his RSU Agreement to terminate vesting as of the Termination Date. The Company and Mr. Karis also agreed to a mutual release of claims.
The full text of the Employment Agreement Amendment and the RSU Agreement amendment was filed as Exhibit 10.1 and 10.2 to the form 8-K filed on December 7, 2012, and is incorporated herein by reference in its entirety.
Note 8. Commitments and Contingencies
The Company has several non-cancelable operating leases, primarily for general office space, that expire over the next four years. We have no capital leases at this time. Future minimum lease payments under these leases are as follows:
Year Ending March 31,
|
|
Operating
Leases
|
|
|
|
|
|
2015
|
|
$
|
123
|
|
2016
|
|
|
126
|
|
2017
|
|
|
129
|
|
2018
|
|
|
54
|
|
Total minimum lease payments
|
|
$
|
432
|
|
Most leases provide for the Company to pay real estate taxes and other maintenance expenses. Rent expense for operating leases related to discontinued operations, net of sublease income, was $0 during each of the years ended March 31, 2014 and 2013, respectively. Rent expense for operating leases related to continuing operations, net of sublease income, was $131 and $79, during the years ended March 31, 2014 and 2013, respectively.
As of September 1, 2012, we maintain our headquarters, encompassing our executive office and storage areas in San Francisco, California. We have a primary lease for office space, consisting of 2,614 square feet, which expires August 31, 2017. Prior to moving to San Francisco, we were located in Petaluma, California. We had a primary lease for office space, consisting of 2,187 square feet, which expired August 31, 2012. We rent storage/workspace areas on a monthly basis. We own all of the equipment used in our facilities. Such equipment consists primarily of computer related assets.
Note 9. Sale of Common Stock and Warrants
During fiscal years 2014 and 2013, the Company entered into a contract with certain consultants of the Company pursuant to which the Company granted stock options in lieu of some cash payments, dependent upon the continuation of the contract and the achievement of certain performance goals.
During the fiscal year 2011, the Company issued 185,777 warrants valued at $1,645 using the Black-Scholes option pricing model with an exercise price at the market value on the day of the grant (the date the Formation and Contribution Agreement was signed) and an average interest rate of 1.62% and a four year life. The Company booked $0 of expense for warrants previously issued. As of January 14, 2015, the outstanding 92,888 warrants from the original grant expired unexercised. The balance of the original grant was irrevocably assigned and transferred unto the Company for cancelation by Sequel Power. In exchange, the Company agreed to waive receivables related to certain fees earned under its Services Agreement with Sequel Partners and its 25% ownership interest in Sequel Power.
As of March 31, 2013, there were 8,348 warrants outstanding, with an average exercise price of $30. The last of these warrants expired in September 2013.
As of March 31, 2014, there were no warrants outstanding. The last of these warrants expired in September 2013, and had an average exercise price of $30.
As of March 31, 2014, there were 1,810 shares issued from the At Market Distribution Plan 2014, which was set up as a result of the Company’s S-3 filing in the third quarter of fiscal year 2014.
At Market Distribution Plan 2014
Pursuant to the terms of the Company’s At Market Distribution Plan (“2014 ATM Plan”), which was authorized and formalized as the result of the Company’s S-3 filing, an aggregate of 709,046 shares of common stock are available for grant pursuant to the terms of the plan. The 2014 ATM Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards, and performance-based awards. The option exercise price of all stock options granted pursuant to the 2014 ATM Plan will not be less than 100% of the fair market value of the common stock on the date of grant. Stock options may be exercised as determined by the Board, but in no event after the tenth anniversary date of grant, provided that a vested nonqualified stock option may be exercised up to 12 months after the optionee's death. Awards granted under the 2014 ATM Plan are generally subject to vesting at the discretion of the Committee. As of March 31, 2014, 707,236 shares were available for issuance under the 2014 ATM Plan.
Note 10. Employee Benefit Plans
The number of shares indicated in the following employee benefit stock plans reflects a 1-for-5 reverse stock split effected by the Company on June 15, 2011.
Eighth Amended and Restated 1998 Equity Participation Plan (Eighth Amended and Restated)
Pursuant to the terms of the Company’s Eighth Amended and Restated 1998 Equity Participation Plan (“1998 Equity Plan”), aggregate of 333,333 shares of common stock were reserved for issuance pursuant to granted stock options and stock appreciation rights or upon the vesting of granted restricted stock awards. The exercise price of options generally was the fair value of the Company’s common stock on the date of grant. Options are generally subject to vesting at the discretion of the Compensation Committee of the Board of Directors (the “Committee”). At the discretion of the Committee, vesting may be accelerated when the fair market value of the Company’s stock equals a certain price established by the Committee on the date of grant. Incentive stock options will be exercisable for up to ten years from the grant date of the option. Non-qualified stock options will be exercisable for a maximum term to be set by the Committee upon grant. Upon the adoption of the 2007 Equity Plan, no further awards were issued under the 1998 Equity Plan.
2007 Incentive Award Plan
Pursuant to the terms of the Company’s 2007 Equity Participation Plan (“2007 Equity Plan”), which was authorized as a successor plan to the Company’s 1998 Equity Incentive Plan and Director Option Plan, an aggregate of 200,000 shares of common stock is available for grant pursuant to the 2007 Equity Plan, plus the number of shares of common stock which are or become available for issuance under the 1998 Equity Plan and the Director Option Plan and which are not thereafter issued under such plans. The 2007 Equity Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards, and performance-based awards. The option exercise price of all stock options granted pursuant to the 2007 Equity Plan will not be less than 100% of the fair market value of the common stock on the date of grant. Stock options may be exercised as determined by the Board, but in no event after the tenth anniversary date of grant, provided that a vested nonqualified stock option may be exercised up to 12 months after the optionee's death. Awards granted under the 2007 Equity Plan are generally subject to vesting at the discretion of the Committee. As of March 31, 2014, 148,428 shares were available for issuance under the 2007 Equity Plan.
Directors Stock Option Plan
Pursuant to the terms of the Fifth Amended and Restated Stock Option Plan for Outside Directors, as amended, (“Director Option Plan”), an aggregate of 66,667 shares of common stock were reserved for issuance pursuant to stock options granted to outside directors. Each outside director who was elected or appointed to the Board on or after September 15, 1998 was eligible to be granted an option to purchase 1,667 shares of common stock and on each second anniversary after the applicable election or appointment shall receive an additional option to purchase 833 shares, provided that such outside director continued to serve as an outside director on that date. For each outside director, 1/12th of the total number of shares will vest on the first day of each calendar month following the date of Option grant, contingent upon continued service as a director. Following the adoption of the 2007 Equity Plan, no further awards were issued under the Director Option Plan.
Employee Qualified Stock Purchase Plan
The Company has offered an employee qualified stock purchase plan (“Employee Plan”) under which rights are granted to purchase shares of common stock at 85% of the lower of the market value of such shares at the beginning of a six month offering period or at the end of that six month period. Under the Employee Plan, the Company is authorized to issue up to 16,667 shares of common stock. There were no common stock shares purchased in fiscal years 2014 or 2013. Shares available for future purchase under the Employee Plan were 3,705 as of March 31, 2014.
Savings and Investment Plan
The Company has established a defined contribution plan that covers substantially all U.S. employees. Employee contributions of up to 4% of each U.S. employee’s compensation will be matched by the Company based upon a percentage to be determined annually by the Board. Employees may contribute up to 15% of their compensation, not to exceed a prescribed maximum amount. The Company made contributions to the plan of $42 and $24, in the years ended March 31, 2014 and 2013, respectively.
Note 11. Stock Based Compensation
The share amounts and share prices reflect a 1-for-5 reverse stock split effected by the Company on June 15, 2011.
A summary of stock option activity during the year ended March 31, 2014 is as follows:
|
|
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term (in Years)
|
|
Aggregate
Intrinsic
Value
|
|
Beginning outstanding
|
|
|
263,807
|
|
|
$
|
10.22
|
|
|
|
|
|
Granted
|
|
|
120,332
|
|
|
$
|
3.51
|
|
|
|
|
|
Exercised
|
|
|
(10,000
|
)
|
|
$
|
3.45
|
|
|
|
|
|
Expired
|
|
|
(2,380
|
)
|
|
$
|
63.97
|
|
|
|
|
|
Ending outstanding
|
|
|
371,759
|
|
|
$
|
7.89
|
|
|
|
7.59
|
|
|
$
|
775.00
|
|
Ending vested and expected to vest
|
|
|
371,437
|
|
|
$
|
7.89
|
|
|
|
7.59
|
|
|
$
|
775.00
|
|
Ending exercisable
|
|
|
175,841
|
|
|
$
|
12.58
|
|
|
|
5.82
|
|
|
$
|
775.00
|
|
The aggregate intrinsic value of options and warrants outstanding as of March 31, 2014 is calculated as the difference between the exercise price of the underlying options and the market price of our common stock as of March 31, 2014.
The weighted-average estimated grant date fair value, as defined by ASC 718, for stock options granted during fiscal 2014 and 2013, was $3.06 and $2.82, per option, respectively.
The following table summarizes information with respect to stock options outstanding as of March 31, 2014:
Range of
Exercise Prices
|
|
|
Number
Outstanding
As of
March 31,
2014
|
|
|
Weighted-
Average
Remaining
Contractual
Term
(in years)
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Number
Exercisable
As of
March 31,
2014
|
|
|
Weighted-
Average
Exercise
Price
As of
March 31,
2014
|
|
$
|
2.90
|
|
|
$
|
4.50
|
|
|
|
271,329
|
|
|
|
8.98
|
|
|
$
|
3.67
|
|
|
|
75,411
|
|
|
$
|
3.67
|
|
|
6.00
|
|
|
|
11.70
|
|
|
|
48,690
|
|
|
|
4.74
|
|
|
|
11.12
|
|
|
|
48,690
|
|
|
|
11.12
|
|
|
17.80
|
|
|
|
28.10
|
|
|
|
39,244
|
|
|
|
3.47
|
|
|
|
21.63
|
|
|
|
39,244
|
|
|
|
21.63
|
|
|
34.20
|
|
|
|
89.52
|
|
|
|
12,496
|
|
|
|
1.43
|
|
|
|
43.65
|
|
|
|
12,496
|
|
|
|
43.65
|
|
$
|
2.90
|
|
|
$
|
89.52
|
|
|
|
371,759
|
|
|
|
7.59
|
|
|
$
|
7.89
|
|
|
|
175,841
|
|
|
$
|
12.58
|
|
No shares were granted under the Employee Stock Purchase Plan during fiscal years 2014 and 2013.
The Company used the following valuation assumptions to estimate the fair value of options granted for the years ended March 31, 2014 and 2013, respectively:
STOCK OPTIONS:
|
|
2014
|
|
|
2013
|
|
Expected life (years)
|
|
|
6.0
|
|
|
|
6.0
|
|
Volatility
|
|
|
152.0
|
%
|
|
|
156.8
|
%
|
Risk-free interest rate
|
|
|
1.52
|
%
|
|
|
0.65
|
%
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Valuation and Other Assumptions for Stock Options
Valuation and Amortization Method. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. We estimate the fair value using a single option approach and amortize the fair value on a straight-line basis for options expected to vest. All options are amortized over the requisite service periods of the awards, which are generally the vesting periods.
Expected Term. The expected term of options granted represents the period of time that the options are expected to be outstanding. We estimate the expected term of options granted based on our historical experience of exercises including post-vesting exercises and termination.
Expected Volatility. The Company estimates the volatility of our stock options at the date of grant using historical volatilities. Historical volatilities are calculated based on the historical prices of our common stock over a period at least equal to the expected term of our option grants.
Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes option pricing model on the implied yield in effect at the time of option grant on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term of our option grants.
Dividends. The Company has never paid any cash dividends on common stock and we do not anticipate paying any cash dividends in the foreseeable future.
Forfeitures. The Company uses historical data to estimate pre-vesting option forfeitures. We record stock-based compensation expense only for those awards that are expected to vest.
The Company does not use multiple share-based payment arrangements.
Restricted Stock Units
The following table summarizes the Company’s restricted stock award activity for the period ended March 31, 2014:
|
|
Number
of
Shares
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Balance March 31, 2013
|
|
|
183,904
|
|
|
$
|
2.67
|
|
Granted
|
|
|
10,000
|
|
|
|
3.22
|
|
Released
|
|
|
(40,397
|
)
|
|
|
2.56
|
|
Vested
|
|
|
(24,437
|
)
|
|
|
2.56
|
|
Balance, March 31, 2014
|
|
|
129,070
|
|
|
$
|
2.77
|
|
The weighted-average estimated grant date fair value, as defined by ASC Topic 718 for restricted stock awards granted during fiscal 2014 and 2013 was $3.22 and $3.84, per award, respectively.
As of March 31, 2014 there was $209 of total unrecognized compensation cost related to restricted stock which is expected to be recognized over a weighted-average period of 1.30 years.
As of March 31, 2014 there was $392 of total unrecognized compensation cost related to stock options which is expected to be recognized over a weighted-average period of 3.08 years.
Total stock-based compensation expense related to stock options and RSUs for the years ended March 31, 2014 and 2013 was $352 and $695, respectively.
Note 12. Geographical and Segment Information
As of March 31, 2014, the Company’s sole source of revenue was related to its genomics based information technology with respect to its acquisition of CollabRx. The Company’s chief operating decision-maker has been identified as the President and Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.
For geographical reporting, revenues are attributed to the geographic location in which the customers’ facilities are located. For all periods presented, net sales by geographic region were all in the United States.
For fiscal year 2013, the Company operated in two segments through its earnings of project service revenues as a result of its contribution agreement with Sequel Power as well as in the medical technology information market. On March 31, 2013, Sequel Power irrevocably assigned and transferred unto the Company for cancelation the balance of its Warrants representing the right to purchase 44,578 shares of the Company’s common stock. In exchange, the Company agreed to waive receivables related to certain fees earned under its Services Agreement with Sequel Partners and its 25% ownership interest in Sequel Power. In addition, effective March 31, 2013, the Company terminated its management agreement with Sequel Power.
CollabRx, will form the core of our business and operations going forward.
|
|
Revenue for the
Year Ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Segment Revenue:
|
|
|
|
|
|
|
Genomics based technology information
|
|
$
|
658
|
|
|
$
|
300
|
|
Solar power management services
|
|
|
--
|
|
|
|
100
|
|
Total revenue
|
|
$
|
658
|
|
|
$
|
400
|
|
Revenues for each period presented are all part of continuing operations. No revenues for the fiscal years 2014 and 2013 have been reclassified to discontinued operations. All revenues of continuing operations are attributed to the United States.
The composition of our top five customers changed from year to year. In fiscal year 2014, five customers accounted 96% of our revenues. In fiscal year 2013, two customers accounted for 100% of our genomics based revenue, and one customer, Sequel Power, accounted for 100% of solar power project service related sales. The Company no longer operates in the solar power management services segment.
Long-lived assets consist of property and equipment and are attributed to the geographic location in which they are located.
All long-lived assets are located in the United States and are included in continuing operations. There are no long-lived assets in discontinued operations.
Note 13. Investment in Unconsolidated Affiliate
On January 14, 2011, Tegal, se2quel Partners LLC, a California limited liability company and Sequel Power LLC, a newly formed Delaware limited liability company (“Sequel Power”), entered into a Formation and Contribution Agreement (the “Contribution Agreement”). Sequel Power was focused on the promotion of solar power plant development projects worldwide, the development of self-sustaining businesses from such projects, including but not limited to activities relating to and supporting, developing, building and operating solar photovoltaic fabrication facilities and solar farms, and the consideration of other non-photovoltaic renewable energy projects. Se2quel Partners is owned by Ferdinand Seemann, who previously served as an independent member of the Company’s Board of Directors. Pursuant to the Formation and Contribution Agreement, Tegal contributed $2 million in cash to Sequel Power in exchange for an approximate 25% ownership interest in Sequel Power. In addition, Tegal issued warrants (“Warrants”) to se2quel Partners and se2quel Management GmbH, a German limited liability company, to purchase an aggregate of 185,777 shares of the Company’s common stock at an exercise price of $3.15 per share. The warrants are exercisable for a period of four years. On March 31, 2012, Sequel Power irrevocably assigned and transferred unto the Company for cancelation a portion of warrants representing the right to purchase 48,310 shares of the Company’s common stock. In exchange, the Company agreed to waive the collection of certain earned fees under its Services Agreement with Sequel Partners. On March 21, 2013, Sequel Power irrevocably assigned and transferred unto the Company for cancelation the balance of its Warrants representing the right to purchase 44,578 shares of the Company’s common stock. In exchange, the Company agreed to waive receivables related to certain fees earned under its Services Agreement with Sequel Partners and its 25% ownership interest in Sequel Power. In addition, effective March 21, 2013, the Company terminated its management agreement with Sequel Power.
COLLABRX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
|
|
December 31,
2014
|
|
|
March 31,
2014 *
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
193
|
|
|
$
|
1,430
|
|
Accounts receivable
|
|
|
47
|
|
|
|
148
|
|
Prepaid expenses and other current assets
|
|
|
166
|
|
|
|
183
|
|
Deferred financing costs
|
|
|
--
|
|
|
|
162
|
|
Investment in convertible promissory note
|
|
|
399
|
|
|
|
378
|
|
Total current assets
|
|
|
805
|
|
|
|
2,301
|
|
Property and equipment, net
|
|
|
117
|
|
|
|
130
|
|
Intangible assets, net
|
|
|
1,125
|
|
|
|
1,281
|
|
Goodwill
|
|
|
603
|
|
|
|
603
|
|
Total assets
|
|
$
|
2,650
|
|
|
$
|
4,315
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
175
|
|
|
$
|
136
|
|
Accrued compensation
|
|
|
155
|
|
|
|
119
|
|
Promissory note payable, current
|
|
|
208
|
|
|
|
--
|
|
Deferred revenue
|
|
|
72
|
|
|
|
108
|
|
Liabilities of discontinued operations
|
|
|
-
|
|
|
|
5
|
|
Total current liabilities
|
|
|
610
|
|
|
|
368
|
|
Deferred tax liability
|
|
|
438
|
|
|
|
500
|
|
Promissory notes payable
|
|
|
317
|
|
|
|
509
|
|
Other long-term liabilities
|
|
|
13
|
|
|
|
13
|
|
Total liabilities
|
|
|
1,378
|
|
|
|
1,390
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued and outstanding
|
|
|
--
|
|
|
|
--
|
|
Common stock, $0.01 par value; 50,000,000 shares authorized; 2,931,621 and 2,005,187 shares issued and outstanding at December 31, 2014 and March 31, 2014 respectively
|
|
|
29
|
|
|
|
20
|
|
Additional paid-in capital
|
|
|
132,720
|
|
|
|
130,994
|
|
Accumulated deficit
|
|
|
(131,477
|
)
|
|
|
(128,089
|
)
|
Total stockholders’ equity
|
|
|
1,272
|
|
|
|
2,925
|
|
Total liabilities and stockholders’ equity
|
|
$
|
2,650
|
|
|
$
|
4,315
|
|
* Derived from the Company’s audited consolidated financial statements.
See accompanying notes to condensed consolidated financial statements.
COLLABRX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
|
|
Three Months Ended
December 31,
|
|
|
Nine Months Ended
December 31,
|
|
|
|
2014**
|
|
|
2013**
|
|
|
2014**
|
|
|
2013**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
94
|
|
|
$
|
56
|
|
|
$
|
334
|
|
|
$
|
577
|
|
Cost of revenue
|
|
|
18
|
|
|
|
104
|
|
|
|
54
|
|
|
|
140
|
|
Gross profit/(loss)
|
|
|
76
|
|
|
|
(48
|
)
|
|
|
280
|
|
|
|
437
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
|
|
|
475
|
|
|
|
473
|
|
|
|
1,556
|
|
|
|
1,199
|
|
Research and development
|
|
|
1
|
|
|
|
21
|
|
|
|
83
|
|
|
|
234
|
|
Sales and marketing
|
|
|
68
|
|
|
|
57
|
|
|
|
221
|
|
|
|
196
|
|
General and administrative
|
|
|
672
|
|
|
|
422
|
|
|
|
1,869
|
|
|
|
1,410
|
|
Total operating expenses
|
|
|
1,216
|
|
|
|
973
|
|
|
|
3,729
|
|
|
|
3,039
|
|
Operating loss
|
|
|
(1,140
|
)
|
|
|
(1,021
|
)
|
|
|
(3,449
|
)
|
|
|
(2,602
|
)
|
Other income/(expense), net
|
|
|
(4
|
)
|
|
|
7
|
|
|
|
5
|
|
|
|
33
|
|
Loss before income tax benefit
|
|
|
(1,144
|
)
|
|
|
(1,014
|
)
|
|
|
(3,444
|
)
|
|
|
(2,569
|
)
|
Income tax benefit, net
|
|
|
(20
|
)
|
|
|
(20
|
)
|
|
|
(56
|
)
|
|
|
(61
|
)
|
Loss from continuing operations
|
|
|
(1,124
|
)
|
|
|
(994
|
)
|
|
|
(3,388
|
)
|
|
|
(2,508
|
)
|
Gain on sale of discontinued operations, net of taxes
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
267
|
|
Loss from discontinued operations, net of taxes
|
|
|
--
|
|
|
|
(10
|
)
|
|
|
--
|
|
|
|
(122
|
)
|
Net income/(loss) from discontinued operations, net of taxes
|
|
|
--
|
|
|
|
(10
|
)
|
|
|
--
|
|
|
|
145
|
|
Net loss
|
|
$
|
(1,124
|
)
|
|
$
|
(1,004
|
)
|
|
$
|
(3,388
|
)
|
|
$
|
(2,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.38
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(1.28
|
)
|
Net income/(loss) per share from discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
0.07
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.38
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(1.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in per share computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
2,932
|
|
|
|
1,963
|
|
|
|
2,478
|
|
|
|
1,955
|
|
See accompanying notes to condensed consolidated financial statements.
COLLABRX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
Nine Months Ended
December 31,
|
|
|
|
2014
|
|
|
2013
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,388
|
)
|
|
$
|
(2,363
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
365
|
|
|
|
272
|
|
Fair value adjustment of common stock warrants
|
|
|
-
|
|
|
|
(10
|
)
|
Depreciation
|
|
|
30
|
|
|
|
24
|
|
Amortization of intangible assets
|
|
|
156
|
|
|
|
156
|
|
Accrued interest on convertible promissory note
|
|
|
(21
|
)
|
|
|
(25
|
)
|
Deferred taxes
|
|
|
(62
|
)
|
|
|
(61
|
)
|
Accrued interest on promissory note payable
|
|
|
16
|
|
|
|
4
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
101
|
|
|
|
195
|
|
Prepaid expenses and other current assets
|
|
|
17
|
|
|
|
(62
|
)
|
Deferred financing costs
|
|
|
162
|
|
|
|
(129
|
)
|
Accounts payable and accrued expenses
|
|
|
39
|
|
|
|
133
|
|
Accrued compensation
|
|
|
36
|
|
|
|
67
|
|
Deferred revenue
|
|
|
(36
|
)
|
|
|
--
|
|
Current assets and liabilities from discontinued operations, net
|
|
|
(5
|
)
|
|
|
143
|
|
Net cash used in operating activities
|
|
|
(2,590
|
)
|
|
|
(1,656
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(17
|
)
|
|
|
(17
|
)
|
Net cash used in investing activities
|
|
|
(17
|
)
|
|
|
(17
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from at-the-market facility
|
|
|
23
|
|
|
|
--
|
|
Proceeds from sale of common stock, net of expenses of $480
|
|
|
1,347
|
|
|
|
--
|
|
Net cash provided by financing activities
|
|
|
1,370
|
|
|
|
--
|
|
Net decrease in cash and cash equivalents
|
|
|
(1,237
|
)
|
|
|
(1,673
|
)
|
Cash and cash equivalents, beginning
|
|
|
1,430
|
|
|
|
4,039
|
|
Cash and cash equivalents, ending
|
|
$
|
193
|
|
|
$
|
2,366
|
|
Supplemental disclosure of non-cash activities:
|
|
|
|
|
|
|
Shares issued in CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
932
|
|
Note receivable used as consideration for CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
300
|
|
Promissory Note issued in CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
500
|
|
Fair value of assets acquired in CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
2,253
|
|
Liabilities assumed in CollabRx acquisition
|
|
$
|
--
|
|
|
$
|
997
|
|
See accompanying notes to condensed consolidated financial statements.
COLLABRX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in thousands, except share and per share data, unless otherwise noted)
1. Description of Business and Summary of Significant Accounting Policies
CollabRx, Inc., a Delaware corporation (“CollabRx,” the “Company” or “we,” “us,” or “our”), is the renamed Tegal Corporation, (“Tegal”), which acquired a private company of the same name on July 12, 2012. Following approval by its stockholders on September 25, 2012, Tegal amended its charter and changed its name to “CollabRx, Inc.” (the “Name Change”).
Tegal was formed in December 1989 to acquire the operations of the former Tegal Corporation, a division of Motorola, Inc. Tegal’s predecessor company was founded in 1972 and acquired by Motorola, Inc. in 1978. Tegal completed its initial public offering in October 1995.
CollabRx offers cloud-based expert systems that provide clinically relevant interpretive knowledge to institutions, physicians, researchers and patients for genomics-based medicine in cancer to inform health care decision-making. With access to approximately 75 clinical and scientific advisors at leading academic institutions and a suite of tools and processes that combine artificial intelligence-based analytics with proprietary interpretive content, the Company is well positioned to participate in the value-added “big data” opportunity in the U.S. health care. We use the term “cloud” to mean a product or service that can be delivered via the Internet, usually on a pay-for-use or subscription basis, versus the purchase and installation of enterprise-based software, which typically requires investments in both software and hardware, often also requiring large-scale customization efforts. We use the term “big data” to refer to datasets whose size is beyond the ability of typical database software tools to capture, store, manage, and analyze.
We search publicly available databases as source documents for our knowledge base. Such databases include those that are available, either free or on a commercial basis, in the areas of clinical trials, drugs, investigational compounds, biomarkers, bioinformatics, cancer ontology and literature. We then aggregate, annotate and integrate these datasets for the purpose of defining the relationship of biomarkers to therapeutic strategies, drugs and clinical trials. None of the individual databases we utilize as sources provide information on the interrelationships of these discrete elements. In addition, CollabRx has developed a process for incorporating the guidance of our network of physician and research advisors in the selection of the most relevant data for specific diagnoses, histopathology data, prior treatments and biomarkers. The result of this software- and expert-assisted process is proprietary content incorporated into our knowledge base which includes decision rules, succinct statements of therapeutic strategy and a comprehensive listing of appropriate drugs and clinical trials, all related to specific aberrations which might be observed in connection with genomic testing.
Although the process and results are proprietary, we always refer to the relevant source documentation that provides the support for the identification of an actionable biomarker, typically a peer-reviewed, published paper. In this way, we avoid the “black-box algorithm problem”, which is prevalent in other companies’ predictive analytical models, but is not currently a trusted methodology in medical practice. Our proprietary content is incorporated into our knowledge base, which is updated regularly with the assistance of a large network of independent advisors, and which forms the basis for all our products and services. Our knowledge base contains no individual patient data, nor do our processes for providing related content include the review by our network of independent experts of any individual test data.
Our knowledge base informs two distinctly different products and services.
Genetic Variant Annotation™ Service. The “Genetic Variant Annotation” or “GVA” is a service offered to diagnostic testing laboratories, including academic medical centers and commercial laboratories. Our lab customers provide us with a test result, usually in the form of an electronic file that represents the results of a genomic test, typically from a “Next Generation Sequencing” (“NGS”), micro-array or similar testing platform. The test results provided to us contain no patient-identifiable information. We analyze the test results for the purpose of identifying those genetic alterations which we have annotated in advance as being “actionable” (i.e., related to a therapeutic strategy). We provide the testing lab with a report, incorporating information regarding identified biomarkers and associated therapeutic strategies for each, along with relevant drugs and clinical trials, to a level and in a format that we have agreed in advance with our customer. We are compensated for this service either on a per-test or on a volume-adjusted subscription basis. This service is not available to the public and is not available on our website.
Therapy Finder Products. Our Therapy Finder™ products are a series of cancer-specific, web-based and mobile apps which are accessed by physicians and patients, usually in the physician’s office. After indicating a number of pre-set options related to stage of cancer, histopathology, prior treatments and presence of biomarkers on an input page, the physician is presented with a results page which explains the role of the biomarker, identifies a possible therapeutic strategy for that particular set of inputs, along with tabs associated with searchable lists of relevant drugs and clinical trials. Therapy Finders are an interactive, informational and educational resource for both physicians and patients, and can be used for decision-support. They neither contain nor store any patient identifiable information. The advisors associated with the development and updating of each app are prominently featured. The development and distribution of Therapy Finders is partially supported by sponsorships and advertising revenue. They are available free of charge through both a commercial channel (in association with MedPage Today, a property of on-line media company, Everyday Health, Inc.) and on our company website. Our aim is to make this tool available as widely as possible, through as many channels as possible, to help community physicians understand the relevance of biomarker testing and the availability of potential therapies for their advanced cancer patients.
Recently, we redesigned our Therapy Finders so that they could be accessed by physicians using the iOS operating system from Apple, Inc. via an iPhone or an iPad, and have named this mobile application “CancerRx.” CancerRx was co-developed with MedPage Today of Everyday Health, Inc., with the ownership of the application retained by CollabRx. A special feature of CancerRx is a daily oncology newsfeed from MedPage Today, all with real-time over the air updates. Our agreement with MedPage Today has each side absorbing its own costs for the development, but sharing the gross advertising, sponsorship and data analytics revenues associated with the app. We officially launched CancerRx on May 28, 2014 in connection with the 2014 American Society of Clinical Oncology (ASCO) meeting.
We intend to pursue collaborative arrangements with other companies and entities that provide contract research services to oncology practices, conduct in-house clinical and translational research, collect information on patient outcomes and link this information to genetic sequencing data, and calculate the relative costs and benefits associated with different diagnostic tests and therapies. We expect such efforts to lead to novel insights and advances to improve the quality of cancer care and reduce the costs of delivering it. The physicians and researchers within our network of advisors have agreed to participate in our efforts for an indefinite term, on an uncompensated basis, and without a formal agreement. The board assignments, biographies and current affiliations of all of our advisors are posted on our website.
The Company’s condensed consolidated financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business for the foreseeable future. We incurred net losses of $3,388 and $2,363 for the nine months ended December 31, 2014 and 2013, respectively. We used $2,590 and $1,656 of cash in operating activities for the nine months ended December 31, 2014 and 2013, respectively. We are currently reliant on borrowings under the Loan and Security Agreement with Medytox Solutions to fund our operations.
On October 20, 2014, the Company filed a registration statement with the SEC on Form S-1 under the Securities Act. CollabRx anticipates using the net proceeds from the offering for general corporate purposes, including development of its products and services, general and administrative expenses and working capital. Aegis Capital Corporation is acting as the sole book-running manager for the offering. The Company anticipates filing a final prospectus supplement and accompanying prospectus describing the terms of the offering will be filed with the SEC and will be available on the SEC's website located at http://www.sec.gov.
On June 25, 2014, the Company closed an underwritten public offering of 913,500 shares of its common stock, offered at a public offering price of $2.00 per share. The Company netted $1,347 after underwriting expenses of $480. CollabRx anticipates using the net proceeds from the offering for general corporate purposes, including development of its products and services, general and administrative expenses and working capital. Aegis Capital Corporation acted as the sole book-running manager for the offering. In addition to the offering of 913,500 shares of common stock, 27,405 warrants to purchase shares of common stock were issued in connection with this offering, and were sold to Aegis Capital Corporation for one hundred dollars. These warrants have an exercise price of $2.50 per share and are not exercisable until June 24, 2015 and expire June 24, 2020. Such securities could potentially dilute earnings per share in future periods. Previously deferred financing expenses incurred to raise equity capital related to financing transactions prior to the completion of the financing, as well as other related expenses incurred in the current period, were recognized in the current period and offset the gross proceeds raised.
This offering was made pursuant to an effective shelf registration statement (No. 333-193019) previously filed with the U.S. Securities and Exchange Commission (the "SEC"). A final prospectus supplement and accompanying prospectus describing the terms of the offering has been filed with the SEC and is available on the SEC's website located at http://www.sec.gov.
While the Company successfully completed the aforementioned public offering, without additional capital, our recurring losses from operations raise substantial doubt about our ability to continue as a going concern.
Until the Company can generate sufficient levels of cash from its operations, we may need to sell equity or debt securities to raise additional funds to continue to operate as a going concern beyond December 31, 2014. In addition, the perception that we may not be able to continue as a going concern may cause others to choose not to pursue a business relationship with us due to concerns about our ability to meet our contractual obligations and may adversely affect our ability to raise additional capital.
The Company expects to continue to finance future cash needs primarily through proceeds from equity financings and collaborative agreements with strategic partners or through a business combination with a company that has such financing in order to be able to sustain its operations until the Company can achieve profitability and positive cash flows.
There can be no assurance that we will be able to obtain the funds required for our continued operations. There can be no assurance that additional financing will be available to us or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain financing on a timely basis, we will not be able to meet our obligations as they become due and we will be forced to scale down or perhaps even cease the operation of our business.
Discontinued Operations
The Company sold its remaining patents relating to its discontinued semiconductor capital equipment business in fiscal year 2014. With this sale and the closure of the former Tegal’s foreign subsidiaries, also in the prior fiscal year, the Company has no other activities or assets related to discontinued operations.
Basis of Presentation
In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the March 31, 2014 audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the information set forth herein. The financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission (“SEC”), but omit certain information and footnote disclosures necessary to present the financial statements in accordance with GAAP. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, and contemplate the realization of assets and the settlement of liabilities and commitments in the normal course of business. The accompanying condensed consolidated financial statements have been prepared assuming we will continue as a going concern. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2014, filed on June 9, 2014. The results of operations for the three and nine months ended December 31, 2014 are not necessarily indicative of results to be expected for the entire year.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of the Company during the period from transactions and other events and circumstances, excluding transactions resulting from investments by owners and other distributions to owners. For the three and nine months ended December 31, 2014 and 2013, respectively, the Company had no items of other comprehensive loss. Therefore the net loss equals the comprehensive loss for each of the three and nine months then ended.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could vary from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash investments. The Company’s accounts receivable balance is also subject to credit risk. Substantially all of the Company’s liquid investments are invested in money market funds. The Company’s accounts receivable are derived primarily from sales to customers located in the United States. The Company performs ongoing credit evaluations of its customers and generally requires no collateral. The Company no longer maintains reserves for potential credit losses. There have been no write-offs during the periods presented.
For the three months ended December 31, 2014, four customers accounted for 27.7%, 26.5% and 15.2% and 14.9%, respectively, of the Company’s revenue. For the nine months ended December 31, 2014, five customers accounted for 20.0%, 17.9%, 15.0% and 15.0% and 11.7%, respectively, of the Company’s revenue. For the three and nine months ended December 31, 2013, one customer accounted for 89.8% and 86.7%, respectively, of the Company’s revenue.
Life Technologies, Inc., (now Thermo-Fisher Scientific, Inc.) has been a major contributor to our revenue and gross profit in the past. However, we have funded the Company’s operating expenses primarily with cash on hand, the net proceeds from the sale of discontinued assets, as disclosed in prior filings, and our recent follow-on public offering of stock. We are actively engaged in negotiations with several other companies who are interested in purchasing our content on similar terms or under annual subscriptions or software-as-a-service (“SaaS”) arrangements.
For the period ended December 31, 2014, one customers accounted for 77.8% of the balance in accounts receivable. One customer accounted for 90.9% of the balance in accounts receivable for the period ended December 31, 2013. The Company sold the last two patent lots of our NLD portfolio for approximately $365 in the second quarter of the prior fiscal year. The related accounts receivable were recorded in other assets of discontinued operations.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments having a maturity of three months or less on the date of purchase to be cash equivalents.
As of December 31, 2014 and March 31, 2014, all of the Company’s cash equivalents are included as Level 1 assets on the fair value hierarchy, and were held in the form of money market funds in the condensed consolidated balance sheets. As of December 31, 2014 and March 31, 2014, the fair value of the Company’s investments approximated cost.
Promissory Notes Payable
On July 12, 2012, Tegal completed the acquisition of CollabRx. As part of the purchase price, Tegal issued promissory notes in the amount of $500 in exchange for existing CollabRx indebtedness. The principal amount of the promissory notes is payable in equal installments on the third, fourth and fifth anniversaries of the date of issuance, along with the accrued but unpaid interest as of such dates.
Investment in Convertible Promissory Note
On November 22, 2011, the Company completed a $300 strategic investment in NanoVibronix, Inc., (“NanoVibronix”) a private company that develops medical devices and products that implement its proprietary therapeutic ultrasound technology. The Company’s investment in NanoVibronix is in the form of a convertible promissory note that bears interest at a rate of 10% per year compounded annually and matured on November 15, 2014. Our investment was intended to precede a possible merger of the two companies. However, those discussions were terminated by mutual agreement between the parties and NanoVibronix, Inc. continues to operate as a private company as of December 31, 2014. NanoVibronix has filed a registration statement with the Securities and Exchange Commission in connection with a proposed initial public offering. If the offering is completed, the Convertible Promissory Note will be converted into common stock of NanoVibronix. In addition, should NanoVibronix, Inc. become a public company, the Company’s Chief Executive Officer will become a member of the NanoVibronix, Inc. Board of Directors.
The convertible series B-1 promissory notes matured on November 15, 2014. The entire outstanding principal balance and any outstanding fees or interest became due and payable in full on such date. On February 9, 2015 NanoVibronix, Inc. filed a Form S-10 with the SEC, and on February 10, 2015, coincident with the additional investment of $3,000, the series B-1 promissory note held by CollabRx was converted into Series B-1 preferred shares. Coincident with the effectiveness of this filing, the Series B-1 preferred shares held by CollabRx will be converted into 204,507 shares of NanoVibronix common stock, representing 8.9% of the 2,289,682 shares of total common shares outstanding as of January 30, 2015.
As of December 31, 2014 and March 31, 2014, the Convertible Promissory Note balance was $399 and $378, respectively, consisting of the original $300 investment and $99 and $78, respectively, in accrued interest.
Accounts Receivable – Allowance for Sales Returns and Doubtful Accounts
For the three months ended December 31, 2014 and 2013, respectively, the Company had zero reserves for potential credit losses as such risk was determined to be insignificant. The Company does not currently maintain an allowance for doubtful accounts receivable for potential estimated losses resulting from the inability of the Company’s customers to make required payments. The Company believes no such reserve is currently required. The Company had zero write-offs during the periods presented. The Company reviews the estimated risk of current customers’ inability to make payments on a quarterly basis to determine if any amount is uncollectible.
Revenue Recognition
Each contract sale of our interpretive data is evaluated individually in regard to revenue recognition. We have integrated in our evaluation the related guidance included in Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. We recognize revenue when persuasive evidence of an arrangement exists, the seller’s price is fixed or determinable and collectability is reasonably assured.
For arrangements that include multiple deliverables, we identify separate units of accounting based on the guidance under ASC 605-25, Multiple Element Arrangements, which provides that revenue arrangements with multiple deliverables should be divided into separate units of accounting, if certain criteria are met. The consideration of the arrangement is allocated to the separate units of accounting using the relative selling price method. Applicable revenue recognition criteria are considered separately for each separate unit of accounting.
Revenue from fixed price contracts is recognized primarily under the percentage of completion method. Under this method we recognize estimated contract revenue and resulting income based on costs incurred to date as a percentage of the total estimated costs as we consider this model to best reflect the economics of these contracts. In such contracts, the Company’s efforts, measured by time incurred, typically represents the contractual milestones or output measure. If at any time during the contract period, we determine that a loss will occur, we recognize the loss in that period. Furthermore, if in previous periods a profit was recognized under the percentage-of completion method, the profit would be reversed during the period we determined a loss on the contract exists.
Income Taxes
We account for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Under ASC 740, the liability method is used in accounting for income taxes. Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We evaluate annually our ability to realize our deferred tax assets by assessing our valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. In 2014 and 2013, we have recorded a full valuation allowance for our deferred tax assets based on our past losses and uncertainty regarding our ability to project future taxable income. In future periods, if we are able to generate income we may reduce or eliminate the valuation allowance.
Fair Value Measurements
The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and we consider what assumptions market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
|
·
|
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. |
|
·
|
Level 2: Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument. |
|
·
|
Level 3: Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. |
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
The Company’s financial instruments consist primarily of money market funds denominated in U.S. dollars. The carrying amounts of our cash and cash equivalents are valued using Level 1 inputs. Our cash equivalents total $1,134.
Intangible Assets
Intangible assets include patents, trade names, software, non-compete agreements, customer relationships and trademarks that are amortized on a straight-line basis over periods ranging from three to ten years. The Company performs an ongoing review of its identified intangible assets to determine if facts and circumstances exist that indicate the useful life is shorter than originally estimated or the carrying amount may not be recoverable. If such facts and circumstances exist, the Company assesses the recoverability of identified intangible assets by comparing the projected undiscounted net cash flow associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. As of the current reporting period, the Company’s remaining intangible assets, not including those related to the acquisition of CollabRx, were internally developed, which have a carrying value of zero. Currently the Company expenses all costs incurred to renew or extend the term of a recognized intangible asset.
The Company sold its remaining patents relating to its discontinued semiconductor capital equipment business in fiscal year 2014. With this sale, the Company has no other intangible assets related to discontinued operations.
With the acquisition of CollabRx, the Company acquired software, trade names, customer relationships, non-compete agreements and goodwill. The lives of the acquired intangible assets range from three to ten years. Intangible assets, except for trade names, are amortized on a straight-line basis. Intangible assets related to trade names are not amortized. The Company tests for impairment at least annually. The fair values of these assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount might not be recoverable. If undiscounted expected future cash flows are less than the carrying value of the assets, an impairment loss will be recognized based on the excess of the carrying amount over the fair value of the assets. The Company recognized $156 and $156 of amortization expense for the nine-month periods ended December 31, 2014 and 2013, respectively. The amortization expense included in cost of revenue is related to the acquired software and is amortized on a straight-line basis over the expected life of the asset, which the Company believes to be ten years.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, as well as at fiscal year end. If undiscounted expected future cash flows are less than the carrying value of the assets, an impairment loss is recognized based on the excess of the carrying amount over the fair value of the assets.
The Company recorded zero disposal losses for fixed assets for the three months ended December 31, 2014 and 2013, respectively.
Deferred Offering Costs
Deferred offering costs represent expenses incurred to raise equity capital related to financing transactions that have not yet been completed. In the three months ended December 31, 2014, the Company deferred $0 of offering costs in connection with a secondary offering, which was filed on October 20, 2014. In the nine months ended December 31, 2014, the Company recognized previously deferred offering costs of $162 in connection with its underwritten public offering of 913,500 shares of its common stock, which closed on June 25, 2014.
Stock-Based Compensation
We have adopted several stock plans that provide for issuance of equity instruments to our employees and non-employee directors. Our plans include incentive and non-statutory stock options and restricted stock awards. These equity awards generally vest ratably over a four-year period on the anniversary date of the grant, and stock options expire ten years after the grant date. Certain restricted stock awards may vest on the achievement of specific performance targets. The Company also had an Employee Stock Purchase Plan (“ESPP”), allowing qualified employees to purchase Company shares at 85% of the fair market value on specified dates. The ESPP was allowed to expire on July 22, 2014 and has not been renewed.
Total stock-based compensation expense related to stock options and restricted stock units (“RSUs”) for the nine months ended December 31, 2014 and 2013 was $365 and $272, respectively.
The Company utilized the following weighted average valuation assumptions to estimate the fair value of options that were granted for the three and nine-month periods ended December 31, 2014 and 2013, respectively.
STOCK OPTIONS:
|
|
Three Months Ended
December 31,
|
|
|
Nine Months Ended
December 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Expected life (years)
|
|
|
6.0
|
|
|
|
6.0
|
|
|
|
6.0
|
|
|
|
6.0
|
|
Volatility
|
|
|
141.73%
|
|
|
|
152.22%
|
|
|
|
141.73% - 151.70%
|
|
|
|
152.22% - 152.95$
|
|
Risk-free interest rate
|
|
|
1.67%
|
|
|
|
1.30%
|
|
|
|
1.63% - 1.75%
|
|
|
|
1.30% - 1.72$
|
|
Dividend yield
|
|
|
0%
|
|
|
|
0%
|
|
|
|
0%
|
|
|
|
0$
|
|
Valuation and Other Assumptions for Stock Options
Valuation and Amortization Method. We estimate the fair value of stock options granted using the Black-Scholes option pricing model. We estimate the fair value using a single option approach and amortize the fair value on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods.
Expected Term. The expected term of options granted represents the period of time that the options are expected to be outstanding. We estimate the expected term of options granted based on our historical experience of exercises including post-vesting exercises and termination.
Expected Volatility. We estimate the volatility of our stock options at the date of grant using historical volatilities. Historical volatilities are calculated based on the historical prices of our common stock over a period at least equal to the expected term of our option grants.
Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes option pricing model on U.S. Treasury yield curve in effect at the time of grant for zero-coupon issues with remaining terms equivalent to the expected term of our option grants.
Dividends. We have never paid any cash dividends on common stock and we do not anticipate paying any cash dividends in the foreseeable future.
Forfeitures. We use historical data to estimate pre-vesting option forfeitures. We record stock-based compensation expense only for those awards that are expected to vest.
During the three months ended December 31, 2014, the Company granted 198,679 options.
Stock Options
A summary of the stock option activity during the nine months ended December 31, 2014 is as follows:
|
|
Shares
|
|
|
Weighted Average
Exercise
Price
|
|
|
Weighted Average Remaining Contractual Term (in Years)
|
|
|
Aggregate Intrinsic
Value
|
|
Beginning outstanding, March 31, 2014
|
|
|
371,759
|
|
|
$
|
7.89
|
|
|
|
7.59
|
|
|
$
|
775.00
|
|
Granted
|
|
|
352,747
|
|
|
|
1.29
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(32,848
|
)
|
|
|
2.87
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(17,982
|
)
|
|
|
8.66
|
|
|
|
|
|
|
|
|
|
Ending outstanding, December 31, 2014
|
|
|
673,676
|
|
|
$
|
4.66
|
|
|
|
8.26
|
|
|
$
|
-
|
|
Ending vested and expected to vest
|
|
|
673,345
|
|
|
$
|
4.66
|
|
|
|
8.26
|
|
|
$
|
-
|
|
Ending exercisable
|
|
|
258,536
|
|
|
$
|
9.10
|
|
|
|
6.41
|
|
|
$
|
-
|
|
The aggregate intrinsic value of stock options outstanding as of December 31, 2014 is calculated as the difference between the exercise price of the underlying options and the market price of our common stock as of December 31, 2014.
The following table summarizes information with respect to stock options outstanding as of December 31, 2014:
Range of
Exercise Prices
|
|
|
Number Outstanding As of December 31,2014
|
|
|
Weighted Average Remaining Contractual Term
(in years)
|
|
|
Weighted-Average Exercise Price
|
|
|
Number Exercisable As of December 31,2014
|
|
|
Weighted-Average Exercise Price As of December 31,2014
|
|
$
|
0.75
|
|
|
$
|
1.50
|
|
|
|
218,679
|
|
|
|
9.92
|
|
|
$
|
0.80
|
|
|
|
9,166
|
|
|
$
|
1.38
|
|
|
1.99
|
|
|
|
3.22
|
|
|
|
190,567
|
|
|
|
9.34
|
|
|
|
2.55
|
|
|
|
47,315
|
|
|
|
2.28
|
|
|
3.35
|
|
|
|
6.00
|
|
|
|
169,830
|
|
|
|
7.83
|
|
|
|
3.91
|
|
|
|
107,455
|
|
|
|
3.91
|
|
|
6.25
|
|
|
|
11.70
|
|
|
|
45,358
|
|
|
|
3.89
|
|
|
|
11.50
|
|
|
|
45,358
|
|
|
|
11.50
|
|
|
17.80
|
|
|
|
28.10
|
|
|
|
37,578
|
|
|
|
2.67
|
|
|
|
21.80
|
|
|
|
37,578
|
|
|
|
21.80
|
|
|
34.20
|
|
|
|
41.45
|
|
|
|
11,664
|
|
|
|
0.74
|
|
|
|
40.37
|
|
|
|
11,664
|
|
|
|
40.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.75
|
|
|
$
|
41.45
|
|
|
|
673,676
|
|
|
|
8.26
|
|
|
$
|
4.66
|
|
|
|
258,536
|
|
|
$
|
9.10
|
|
As of December 31, 2014, there was $440 of total unrecognized compensation cost related to outstanding options which the Company expects to recognize over an estimated weighted average period of 1.89 years.
Restricted Stock Units
The following table summarizes the Company’s unvested RSU activity for the nine months ended December 31, 2014:
|
|
Number
of
Shares
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Balance, March 31, 2014
|
|
|
129,050
|
|
|
$
|
2.77
|
|
Granted
|
|
|
100,000
|
|
|
|
1.99
|
|
Forfeited
|
|
|
(10,000
|
)
|
|
|
3.75
|
|
Vested
|
|
|
(52,050
|
)
|
|
|
2.42
|
|
Balance, December 31, 2014
|
|
|
167,000
|
|
|
$
|
2.35
|
|
Unvested Restricted Stock as of December 31, 2014
As of December 31, 2014, there was $219 of total unrecognized compensation cost related to outstanding RSUs, which the Company expects to recognize over an estimated weighted average period of 1.32 years.
In the three and nine months ending December 31, 2014, the company granted zero and 100,000 RSUs, respectively.
2. Earnings Per Share (EPS):
Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted-average number of common shares outstanding (denominator) for the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. The computation of diluted EPS uses the average market prices during the period.
Basic net loss per common share is computed using the weighted-average number of shares of common stock outstanding.
The following table represents the calculation of basic and diluted net loss per common share:
|
|
Three Months Ended
December 31,
|
|
|
Nine Months Ended
December 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(1,124
|
)
|
|
$
|
(994
|
)
|
|
$
|
(3,388
|
)
|
|
$
|
(2,508
|
)
|
Net income/(loss) from discontinued operations, net of taxes
|
|
|
-
|
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
145
|
|
Net loss applicable to common stockholders
|
|
$
|
(1,124
|
)
|
|
$
|
(1,004
|
)
|
|
$
|
(3,388
|
)
|
|
$
|
(2,363
|
)
|
Weighted-average common shares used in per share computation
|
|
|
2,932
|
|
|
|
1,963
|
|
|
|
2,478
|
|
|
|
1,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.38
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(1.28
|
)
|
Net income/(loss) per share from discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
0.07
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.38
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(1.21
|
)
|
The following shares of common stock equivalents and warrants were excluded from the computation of diluted earnings per share for the nine months ended December 31, 2014 and 2013 because including them would have been anti dilutive.
|
|
December 31, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
Outstanding Options
|
|
|
673,676
|
|
|
|
300,926
|
|
Outstanding RSUs
|
|
|
239,297
|
|
|
|
126,654
|
|
ESPP
|
|
|
-
|
|
|
|
-
|
|
|
|
|
912,973
|
|
|
|
427,580
|
|
|
|
|
|
|
|
|
|
|
Warrants - Sequel
|
|
|
92,888
|
|
|
|
92,888
|
|
Warrants
|
|
|
27,405
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Shares Excluded from EPS calculation
|
|
|
1,033,266
|
|
|
|
520,468
|
|
The weighted-average exercise price per share of the excluded outstanding options and outstanding and deferred RSUs was $6.88 and $9.99 on December 31, 2014 and 2013, respectively. The warrants to purchase 92,888 shares of common stock had an exercise price of $3.15 per share, and represented the balance of Sequel Power’s grant, which expired unexercised on January 14, 2015. In addition, the outstanding balance excludes 27,405 warrants to purchase shares of common stock, which were issued in connection with the recent public offering, which closed on June 25, 2104. These warrants have an exercise price of $2.50 per share and are not exercisable until June 24, 2015 and expire June 24, 2020. Such securities could potentially dilute earnings per share in future periods.
3. Financial Instruments:
The carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, convertible promissory note, notes receivable, accrued expenses, promissory note payable and other liabilities approximates fair value due to their relatively short maturity. The Company currently has only minimal sales in global markets and is not exposed to changes in foreign currency exchange rates. The Company does not hold derivative financial instruments for speculative purposes. Foreign currency transaction gains and (losses), if any, are included in other income (expense), and were $0 for the three and nine month periods ended December 31, 2014 and 2013. December 31, 2014, the Company had no open foreign exchange contracts to sell Euros or any other foreign currencies. Certain warrants expired on September 9, 2013, which then ended the Company’s liability associated with these warrants, which had an exercise price of $30.00.
Changes in the exchange rate between the Euro and the U.S. dollar are currently immaterial to our operating results. Exposure to foreign currency exchange rate risk may increase over time as our business evolves.
On November 22, 2011, the Company completed a $300 strategic investment in NanoVibronix, Inc., a private company that develops medical devices and products that implement its proprietary therapeutic ultrasound technology. The Company’s investment in NanoVibronix is in the form of a convertible promissory note that bears interest at a rate of 10% per year compounded annually and matured on November 15, 2014. Principal and accrued interest under the note automatically convert into shares of Series B-1 Participating Convertible Preferred Stock of NanoVibronix upon the earlier to occur of (i) a $3,000 (or larger) equity financing by NanoVibronix or (ii) a sale of NanoVibronix. In addition, the Company may convert principal and accrued interest under the note into shares of NanoVibronix Series B-1 Participating Convertible Preferred Stock at its election at any time. In either case, the conversion price is $0.284 per share.
Our investment was intended to precede a possible merger of the two companies. However, those discussions were terminated by mutual agreement between the parties and NanoVibronix, Inc. continues to operate as a private company. NanoVibronix has filed a registration statement with the Securities and Exchange Commission in connection with a proposed initial public offering. If the offering is completed, the Convertible Promissory Note will be converted into common stock of NanoVibronix. In addition, should, Inc. become a public company, then the Company’s Chief Executive Officer will become a member of the NanoVibronix, Inc. Board of Directors.
4. Discontinued Operations:
The Company sold its remaining patents relating to its discontinued semiconductor capital equipment business in fiscal year 2014. With this sale, the Company has no other intellectual property related to discontinued operations. With this sale and the closure of the former Tegal’s foreign subsidiaries, also in the prior fiscal year, the Company has no other activities or assets related to discontinued operations.
The exit from the Company’s historical operations NanoVibronix was essentially completed by the end of the fourth quarter of our 2011 fiscal year.
In the nine months ended December 31, 2013, the Company recognized a cash gain of $20 in discontinued operations as a result of final closing of bank accounts in its Italian subsidiary and a federal tax refund regarding discontinued operations, and a net $4 non cash gain related to the write off of discontinued assets and liabilities in its foreign subsidiaries. In the same period, the Company also recognized a reclassification out of accumulated other comprehensive loss and into Loss from Discontinued Operations, net of taxes. The reclassification is related to the recognition of a non-cash loss of $142 from the foreign exchange differences from its former Tegal foreign subsidiaries, primarily as a result of the final closing the former Tegal German subsidiary. The Company received permission to close the German subsidiary in June 2013. No further audits or reviews are anticipated by foreign taxing authorities.
As of December 31, 2014, the Company had $0 in both discontinued assets and liabilities. As of March 31, 2014, the Company had $0 in discontinued assets and $5 in discontinued liabilities. During the nine months ended December 31, 2014, the Company recognized no activity in discontinued operations. With this sale, the Company has no remaining intellectual property related to discontinued operations.
5. Geographical and Segment Information:
For the periods presented, the Company’s source of revenue was related to genomics based technology information services. The Company’s chief operating decision-maker has been identified as the President and Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.
For geographical reporting, revenues are attributed to the geographic location in which the customers’ facilities are located. Long-lived assets consist of property, plant and equipment and are attributed to the geographic location in which they are located. For all periods presented, revenues by geographic region were all in the United States.
Revenues for the three and nine months ended December 31, 2014 and 2013, respectively, are all part of continuing operations, and all related to our genomics based technology information.
CollabRx’s genomics based technology information business is the core of our business and operations going forward. Additionally, all long-lived assets are located in the United States and are included in continuing operations. There are no long-lived assets in discontinued operations.
6. Recent Accounting Pronouncements:
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and the IASB has issued IFRS 15, Revenue from Contracts with Customers. The issuance of these documents completes the joint effort by the FASB and the IASB to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and IFRS. The new guidance affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company will continue to evaluate this newly issued guidance.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Sub Topic 205-40) -Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 clarifies principles and definitions that may be used by an organization’s management for disclosures that are currently made available in financial statement footnotes. Presently, U.S. GAAP does not provide an organization’s management guidance regarding its responsibility to assess whether substantial doubt exists regarding the ability to continue as a going concern or to prepare related footnote disclosures. Instead, auditors are responsible for assessing an entity’s ability to continue as a going concern under AU-C 570. ASU 2014-15 will move this responsibility to management. ASU 2014-15 will require management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern for one year from the date the financial statements are issued. ASU 2014-15 is effective for annual periods ending after December 15, 2016 to allow the auditing guidance to catch up with this change. ASU No. 2014-15 affects all companies and nonprofits and early application is allowed.
7. Commitments and Contingencies
The Company has several non-cancelable operating leases, primarily for general office space, that expire over the next four years. We have no capital leases at this time. Future minimum lease payments under these leases are as follows:
Year Ending March 31,
|
|
Operating
Leases
|
|
|
|
|
|
2015
|
|
$
|
31
|
|
2016
|
|
|
126
|
|
2017
|
|
|
129
|
|
2018
|
|
|
54
|
|
Thereafter
|
|
|
-
|
|
Total minimum lease payments
|
|
$
|
340
|
|
Most leases provide for the Company to pay real estate taxes and other maintenance expenses. Rent expense for operating leases related to discontinued operations, net of sublease income, was $0 during each of the three and nine months ended December 31, 2014, and 2013, respectively. Rent expense for operating leases related to continuing operations, net of sublease income, was $32 and $97, during the three and nine months ended December 31, 2014, respectively. Rent expense for operating leases related to continuing operations, net of sublease income, was $30 and $100, during the three and nine months ended December 31, 2013, respectively.
8. Subsequent Events:
On January 16, 2015, CollabRx entered into a Loan and Security Agreement (the “Loan Agreement”) with Medytox, pursuant to which it is contemplated that Medytox will loan up to $2,396 to the Company. Medytox is a holding company that owns and operates businesses in the medical services sector. Its principal line of business is clinical laboratory blood and urine testing services, with a particular emphasis in the provision of urine drug toxicology and comprehensive pain medication monitoring programs to physicians, clinics and rehabilitation facilities in the United States.
On January 16, 2015, CollabRx entered into an Agreement with Medytox. Pursuant to the Agreement, CollabRx agreed that in the event it enters into a merger or other sale transaction involving at least thirty-five percent (35.0%) of its shares or assets with a party other than Medytox, CollabRx will pay Medytox a $1,000 fee (the “Fee”). Notwithstanding the foregoing, no Fee will be payable to Medytox in the event (i) Medytox has not provided funding to CollabRx of at least $500 pursuant to the Loan Agreement or (ii) Medytox has not funded an advance requested by CollabRx under the Loan Agreement, subject to certain exceptions.
On January 14, 2011, CollabRx entered into a Formation and Contribution Agreement with se2quel Partners and Sequel Power. We impaired the entire book value of the investment in Sequel Power on March 31, 2012. In two separate transactions, Sequel Power irrevocably assigned and transferred to the Company for cancelation all of its Warrants representing the right to purchase shares of the Company’s common stock. In exchange, we agreed to terminate our Management Services Agreement with Sequel Power and to waive receivables related to accrued fees thereunder. On January 14, 2015, warrants representing the right to purchase 92,888 shares of the Company’s common stock held by se2quel Management, GMBH expired unexercised. There are no other warrants relating to this investment.
The Company filed a second amendment to the Registration Statement on Form S-1 with the Securities and Exchange Commission (“SEC”) on February 6, 2015. CollabRx anticipates using the net proceeds from the offering for general corporate purposes, including development of its products and services, general and administrative expenses and working capital. Aegis Capital Corporation is to act as the sole book-running manager for the offering. The Company also filed a final prospectus supplement and accompanying prospectus describing the terms of the offering which is available on the SEC's website located at http://www.sec.gov.
CollabRx, invested $300 in NanoVibronix, Inc. on November 22, 2011 in the form of a convertible promissory note. NanoVibronix intends to form a public company board (as disclosed in the S-1) and to appoint new independent directors, including the CollabRx’s Chief Executive Officer to the Board. The appointment will take place upon the S-10 being declared effective by the SEC.
The convertible series B-1 promissory notes matured on November 15, 2014. The entire outstanding principal balance and any outstanding fees or interest became due and payable in full on such date. On February 9, 2015 NanoVibronix, Inc. filed a Form S-10 with the SEC, and on February 10, 2015, coincident with the additional investment of $3,000, the series B-1 promissory note held by CollabRx was converted into Series B-1 preferred shares. Coincident with the effectiveness of this filing, the Series B-1 preferred shares held by CollabRx will be converted into 204,507 shares of NanoVibronix common stock, representing 8.9% of the 2,289,682 shares of total common shares outstanding as of January 30, 2015.
There can be no assurance that we will be able to obtain the funds required for our continued operations. There can be no assurance that additional financing will be available to us or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain financing on a timely basis, we will not be able to meet our obligations as they become due and we will be forced to scale down or perhaps even cease the operation of our business.
9. Controls and Procedures
Evaluation of disclosure controls and procedures. As of March 31, 2014, management performed, with the participation of our Chief Executive Officer and Acting Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the report we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Acting Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Based on the evaluation, our Chief Executive Officer and Acting Chief Financial Officer concluded that as of March 31, 2014 such disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control Over Financial Reporting. Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.
Our internal control over financial reporting includes those policies and procedures that:
· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;
· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has conducted, with the participation of our Chief Executive Officer and our Acting Chief Financial Officer, an assessment, including testing of the effectiveness of our internal control over financial reporting as of March 31, 2014. Management’s assessment of internal control over financial reporting was based on the framework in Internal Control over Financial Reporting – Guidance for Smaller Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, Management concluded that our system of internal control over financial reporting was effective as of March 31, 2014.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during the fourth quarter ended March 31, 2014 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The effectiveness of our internal control over financial reporting as of March 31, 2014 has not been audited by Burr Pilger Mayer, Inc., an independent registered public accounting firm, as stated in their report appearing above. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
3,840,000 Shares of Common Stock and
Warrants to Purchase 3,840,000 Shares of Common Stock
PROSPECTUS
Aegis Capital Corp
Through and including March 16, 2015 (the 25th day after the date of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.