Quarterly report pursuant to Section 13 or 15(d)

7. Stockholders' Equity

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7. Stockholders' Equity
 6 Months Ended
Jun. 30, 2016
Equity [Abstract]  
Stockholders' Equity

Preferred Stock

During the six months ended June 30, 2015, the former Medytox Series B preferred shareholders earned dividends totaling $1.3 million. At June 30, 2016 and December 31, 2015, accrued dividends of $1.7 million and $2.1 million, respectively, were included in accrued expenses. In conjunction with the Merger, all outstanding Medytox Series B preferred shares were cancelled in connection with the Merger in exchange for shares of Rennova Series B Convertible Preferred Stock, which are not entitled to receive dividends unless dividends are declared on the Company’s common stock.

 

During the six months ended June 30, 2016, Series C preferred shareholders converted a total of 260 shares of Series C Preferred Stock into 167,743 shares of common stock.

 

Common Stock

On March 9, 2016, the Company filed an amendment to its certificate of incorporation to increase the number of shares of common stock that the Company is authorized to issue from 50 million to 500 million. During the six months ended June 30, 2016, the Company issued an aggregate of 13,300 shares of its common stock to a consultant for services. The Company recognized $9,310 in compensation costs associated with these issuances. Also during the six months ended June 30, 2016, the Company issued 43,809 shares of common stock for the cashless exercise of outstanding warrants, issued 50,606 shares of common stock as an adjustment to previously converted preferred stock and cancelled 40,964 shares of common stock previously issued to an employee. During the six months ended June 30, 2015, the Company recognized $2.8 million in compensation expense related to the issuance of Medytox common stock to employees and consultants.

 

Stock Options

The Company currently maintains and sponsors the Tegal Corporation 2007 Incentive Award Plan (the “2007 Equity Plan”). Tegal Corporation is the predecessor entity to CollabRx. The 2007 Equity Plan, as amended, provides for the issuance of stock options and other equity awards to the Company’s officers, directors, employees and consultants. On May 2, 2016, the Company granted options to employees, directors and consultants to purchase an aggregate of 15,643,000 shares of the Company’s common stock under the 2007 Equity Plan. The Company recorded compensation expense in the amount of $0.4 million during the three and six months ended June 30, 2016 in connection with these grants. During the six months ended June 30, 2015, the Company recorded approximately $269,000 of compensation expense related to outstanding options to purchase Medytox common stock. These amounts are reflected in General and administrative expenses in the accompanying consolidated statements of operations. The following table summarizes the Company’s stock option activity for the six months ended June 30, 2016:

 

    Number of options     Weighted
average
exercise
price		  
Balance at December 31, 2015     1,600,674     $ 7.73  
Options granted during the period     15,643,000     $ 5.16  
Options exercised during the period     –     $ –  
Options forfeited during the period     –     $ –  
Options expired during the period     –     $ –  
Options outstanding at June 30, 2016     17,243,674     $ 5.40  
Options exercisable at June 30, 2016     13,823,674     $ 6.48  

 

The Company’s stock options are measured at fair value on the date of grant, and compensation expense is recorded over the requisite service period. The options granted during the six months ended June 30, 2016 were valued using a binomial option-pricing model using the following assumptions:

 

Expected term   9.89   years
Expected volatility   168%  
Risk free interest rate   1.88%  
Dividend yield   0%  

 

As of June 30, 2016, the Company had approximately $0.3 million of unrecognized compensation cost related to stock options granted under the Company’s 2007 Equity Plan, which is expected to be recognized over a weighted-average period of 1.36 years.

 

Basic and Diluted Loss per Share

Basic loss per share excludes dilution and is computed by dividing loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company. For the three and six months ended June 30, 2016 and 2015, basic loss per share is the same as diluted loss per share.

 

Diluted loss per share excludes all dilutive potential shares if their effect is anti-dilutive. As of June 30, 2016 and 2015, the following potential common stock equivalents were excluded from the calculation of diluted loss per share as their effect was anti-dilutive:

 

    June 30,     June 30,  
    2016     2015  
                 
Stock options outstanding     17,243,674       9,771,908  
Warrants outstanding     6,834,569       –  
Convertible debt     6,915,626       409,638  
Convertible preferred stock     11,948,047       72,711  
                 
      42,941,916       10,254,256