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Share Name | Share Symbol | Market | Type |
---|---|---|---|
XpresSpa Group Inc | NASDAQ:XSPA | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.655 | 0.6501 | 0.68 | 0 | 01:00:00 |
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
20-4988129
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
780 3rd Ave.
15th Floor, New York, NY
|
|
10017
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
|
¨
|
Accelerated filer
|
¨
|
|
|
|
|
Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
x
|
|
|
|
Page
|
|
|
|
|
PART I. FINANCIAL INFORMATION
|
|
3
|
|
|
|
|
|
Item 1.
|
Financial Statements
|
|
3
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
17
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
27
|
Item 4.
|
Controls and Procedures
|
|
28
|
|
|
|
|
PART II. OTHER INFORMATION
|
|
28
|
|
|
|
|
|
Item 1.
|
Legal Proceedings
|
|
28
|
Item 1A.
|
Risk Factors
|
|
31
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
37
|
Item 3.
|
Defaults Upon Senior Securities
|
|
37
|
Item 4.
|
Mine Safety Disclosures
|
|
37
|
Item 5.
|
Other Information
|
|
37
|
Item 6.
|
Exhibits
|
|
37
|
2 | ||
|
|
|
September 30,
2013 |
|
December 31,
2012 |
|
||
Current assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
40,436
|
|
$
|
56,960
|
|
Short-term investments
|
|
|
673
|
|
|
|
|
Accounts receivable
|
|
|
98
|
|
|
151
|
|
Prepaid expenses and other current assets
|
|
|
656
|
|
|
318
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
41,863
|
|
|
57,429
|
|
|
|
|
|
|
|
|
|
Long-term deposit
|
|
|
46
|
|
|
54
|
|
Property and equipment, at cost, net of $119 and $47 accumulated depreciation and
amortization, as of September 30, 2013 and December 31, 2012, respectively |
|
|
249
|
|
|
294
|
|
Intangible assets, net
|
|
|
30,360
|
|
|
34,044
|
|
Goodwill
|
|
|
65,965
|
|
|
65,965
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
138,483
|
|
$
|
157,786
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
4,011
|
|
$
|
1,444
|
|
Accrued employee compensation
|
|
|
256
|
|
|
398
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4,267
|
|
|
1,842
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
Derivative liabilities on account of warrants
|
|
|
4,126
|
|
|
7,612
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
Series A Convertible Preferred stock, $0.01 par value per share; 5,000,000 authorized; none
issued and outstanding |
|
|
|
|
|
|
|
Common stock, $0.01 par value per share 150,000,000 authorized; 84,120,724 and
81,889,226 issued and outstanding as of September 30, 2013 and December 31, 2012, respectively |
|
|
841
|
|
|
819
|
|
Additional paid-in capital
|
|
|
186,308
|
|
|
171,108
|
|
Deficit accumulated during the development stage
|
|
|
(57,059)
|
|
|
(23,595)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
130,090
|
|
|
148,332
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
138,483
|
|
$
|
157,786
|
|
3 | ||
|
4 | ||
|
|
|
|
Common
stock |
|
|
Additional
paid-in capital |
|
|
Deficit
accumulated during the development stage |
|
|
Total
|
|
Balance as of June 8, 2011 (Inception)
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Issuance of shares of common stock
|
|
|
170
|
|
|
4,975
|
|
|
|
|
|
5,145
|
|
Stock-based compensation
|
|
|
|
|
|
474
|
|
|
|
|
|
474
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
(2,754)
|
|
|
(2,754)
|
|
Balance as of December 31, 2011
|
|
|
170
|
|
|
5,449
|
|
|
(2,754)
|
|
|
2,865
|
|
Conversion of Series A Preferred Convertible Preferred stock,
classified as mezzanine equity |
|
|
8
|
|
|
68
|
|
|
|
|
|
76
|
|
Stock-based compensation, including grant of shares to consultants
|
|
|
3
|
|
|
8,084
|
|
|
|
|
|
8,087
|
|
Recording of equity instruments upon Merger, net of fair value
of issued warrants $21,954 and issuance cost of $463 |
|
|
152
|
|
|
54,809
|
|
|
|
|
|
54,961
|
|
Issuance of warrants
|
|
|
|
|
|
2,883
|
|
|
|
|
|
2,883
|
|
Conversion of Series A Preferred Convertible Preferred stock,
classified as equity |
|
|
201
|
|
|
(201)
|
|
|
|
|
|
|
|
Exercise of warrants
|
|
|
76
|
|
|
22,856
|
|
|
|
|
|
22,932
|
|
Exercise of stock options
|
|
|
8
|
|
|
501
|
|
|
|
|
|
509
|
|
Issuance of shares in connection with a financing round, net of
issuance cost of $52 |
|
|
96
|
|
|
31,052
|
|
|
|
|
|
31,148
|
|
Shares issued for acquisition of patents
|
|
|
2
|
|
|
748
|
|
|
|
|
|
750
|
|
Issuance of shares in connection with a financing round, net of
issuance cost of $39 |
|
|
103
|
|
|
44,859
|
|
|
|
|
|
44,962
|
|
Net loss for the year
|
|
|
|
|
|
|
|
|
(20,841)
|
|
|
(20,841)
|
|
Balance as of December 31, 2012
|
|
|
819
|
|
|
171,108
|
|
|
(23,595)
|
|
|
148,332
|
|
Exercise of stock options and vesting of Restricted Stock Units (“RSU”)
|
|
|
18
|
|
|
955
|
|
|
|
|
|
973
|
|
Exercise of warrants
|
|
|
4
|
|
|
1,352
|
|
|
|
|
|
1,356
|
|
Conversion of derivative warrants into equity warrants
|
|
|
|
|
|
3,918
|
|
|
|
|
|
3,918
|
|
Stock-based compensation
|
|
|
|
|
|
8,975
|
|
|
|
|
|
8,975
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
(33,464)
|
|
|
(33,464)
|
|
Balance as of September 30, 2013
|
|
$
|
841
|
|
$
|
186,308
|
|
$
|
(57,059)
|
|
$
|
130,090
|
|
5 | ||
|
|
|
Nine months ended September 30,
|
|
Cumulative from
Inception to September 30, |
|
|||||
|
|
2013
|
|
2012
|
|
2013
|
|
|||
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(33,464)
|
|
$
|
(6,836)
|
|
$
|
(57,059)
|
|
Adjustments to reconcile net cash flows used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Items not affecting cash flows
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
3,856
|
|
|
1,211
|
|
|
6,686
|
|
Change in deferred tax assets and liabilities
|
|
|
1
|
|
|
(162)
|
|
|
(57)
|
|
Stock-based compensation
|
|
|
8,975
|
|
|
5,532
|
|
|
17,536
|
|
Issuance of warrants
|
|
|
|
|
|
|
|
|
2,883
|
|
Assignment of patents
|
|
|
(100)
|
|
|
|
|
|
(100)
|
|
Change in fair value of warrants
|
|
|
1,220
|
|
|
(7,240)
|
|
|
(5,627)
|
|
Exchange rate (gain) losses
|
|
|
11
|
|
|
(6)
|
|
|
19
|
|
Changes in current assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
Increase in receivables, prepaid expenses and other current assets
|
|
|
(283)
|
|
|
(504)
|
|
|
(517)
|
|
Increase in payables and accruals
|
|
|
2,400
|
|
|
2,043
|
|
|
2,856
|
|
Net cash used in operating activities
|
|
|
(17,384)
|
|
|
(5,962)
|
|
|
(33,380)
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(27)
|
|
|
(151)
|
|
|
(244)
|
|
Deposit in short-term investments
|
|
|
(673)
|
|
|
|
|
|
(673)
|
|
Acquisition of patents
|
|
|
|
|
|
(22,548)
|
|
|
(25,944)
|
|
Decrease (increase) in deposits
|
|
|
8
|
|
|
(46)
|
|
|
(38)
|
|
Cash acquired as part of acquisition of Vringo (1)
|
|
|
|
|
|
3,326
|
|
|
3,326
|
|
Net cash used in investing activities
|
|
$
|
(692)
|
|
$
|
(19,419)
|
|
$
|
(23,573)
|
|
6 | ||
|
|
|
Nine months ended September 30,
|
|
Cumulative from
Inception to September 30, |
|
|||||
|
|
2013
|
|
2012
|
|
2013
|
|
|||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock, net of issuance cost of $52
|
|
$
|
|
|
$
|
31,148
|
|
$
|
31,148
|
|
Proceeds from issuance of common stock, net of issuance cost of $39
|
|
|
|
|
|
|
|
|
44,962
|
|
Repayment of note payablerelated party
|
|
|
|
|
|
(3,200)
|
|
|
|
|
Proceeds from issuance of preferred stock
|
|
|
|
|
|
|
|
|
1,800
|
|
Proceeds from issuance of common stock
|
|
|
|
|
|
|
|
|
5,145
|
|
Exercise of stock options
|
|
|
973
|
|
|
171
|
|
|
1,482
|
|
Exercise of warrants
|
|
|
566
|
|
|
1,598
|
|
|
12,841
|
|
Net cash provided by financing activities
|
|
|
1,539
|
|
|
29,717
|
|
|
97,378
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
13
|
|
|
1
|
|
|
11
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(16,524)
|
|
|
4,337
|
|
|
40,436
|
|
Cash and cash equivalents at beginning of period
|
|
|
56,960
|
|
|
5,212
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
40,436
|
|
$
|
9,549
|
|
$
|
40,436
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows information
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
|
|
9
|
|
|
17
|
|
Income taxes paid
|
|
|
22
|
|
|
10
|
|
|
32
|
|
Non-cash investing and financing transactions
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A preferred stock to common stock shares
|
|
|
|
|
|
|
|
|
39
|
|
Exercise of derivative warrants
|
|
|
790
|
|
|
596
|
|
|
11,447
|
|
Non cash acquisition of patents through issuance of common stock shares
|
|
|
|
|
|
|
|
|
750
|
|
Conversion of derivative warrants into equity warrants
|
|
|
3,918
|
|
|
|
|
|
3,918
|
|
Conversion of Series A Convertible Preferred stock, classified as
mezzanine equity, into common stock, prior to the Merger |
|
|
|
|
|
76
|
|
|
76
|
|
Conversion of Series A Convertible Preferred stock, classified as
mezzanine equity, into common stock, upon Merger |
|
|
|
|
|
1,724
|
|
|
1,724
|
|
Conversion of Series A Convertible Preferred stock, classified as
equity, into common stock, post-Merger |
|
|
|
|
|
201
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Cash acquired as part of acquisition of Vringo
|
|
|
|
|
|
|
|
|
|
|
Working capital (excluding cash and cash equivalents)
|
|
|
|
|
|
|
|
$
|
740
|
|
Long term deposit
|
|
|
|
|
|
|
|
|
(8)
|
|
Fixed assets, net
|
|
|
|
|
|
|
|
|
(124)
|
|
Goodwill
|
|
|
|
|
|
|
|
|
(65,965)
|
|
Technology
|
|
|
|
|
|
|
|
|
(10,133)
|
|
Fair value of Legal Parent’s shares of common stock and vested $0.01 options
|
|
|
|
|
|
|
|
|
58,211
|
|
Fair value of warrants and vested stock options
|
|
|
|
|
|
|
|
|
17,443
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
3,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,326
|
|
7 | ||
|
8 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from Inception
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
to September 30,
|
|
|||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
|||||
Basic Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to shares of common stock
|
|
$
|
(10,560)
|
|
$
|
(3,124)
|
|
$
|
(33,464)
|
|
$
|
(6,836)
|
|
$
|
(57,059)
|
|
Basic Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock outstanding during the period
|
|
|
83,450,697
|
|
|
48,437,587
|
|
|
82,757,899
|
|
|
25,493,415
|
|
|
46,229,656
|
|
Weighted average number of penny stock options
|
|
|
88,070
|
|
|
353,232
|
|
|
124,506
|
|
|
117,744
|
|
|
109,930
|
|
Basic common stock shares outstanding
|
|
|
83,538,767
|
|
|
48,790,819
|
|
|
82,882,405
|
|
|
25,611,159
|
|
|
46,339,586
|
|
Basic net loss per common stock share
|
|
$
|
(0.13)
|
|
$
|
(0.06)
|
|
$
|
(0.40)
|
|
$
|
(0.27)
|
|
$
|
(1.23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to shares of common stock
|
|
$
|
(10,560)
|
|
$
|
(3,124)
|
|
$
|
(33,464)
|
|
$
|
(6,836)
|
|
$
|
(57,059)
|
|
Increase in net loss attributable to derivative warrants
|
|
|
(758)
|
|
$
|
(7,240)
|
|
$
|
(53)
|
|
$
|
(7,240)
|
|
$
|
(3,387)
|
|
Diluted net loss attributable to shares of common stock:
|
|
$
|
(11,318)
|
|
$
|
(10,364)
|
|
$
|
(33,517)
|
|
$
|
(14,076)
|
|
$
|
(60,446)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic common shares outstanding
|
|
|
83,538,767
|
|
|
48,790,819
|
|
|
82,882,405
|
|
|
25,611,159
|
|
|
46,339,586
|
|
Weighted average number of derivative warrants outstanding during the period
|
|
|
2,563,090
|
|
|
9,436,281
|
|
|
89,677
|
|
|
9,436,281
|
|
|
1,460,477
|
|
Diluted common stock shares outstanding
|
|
|
86,101,857
|
|
|
58,227,100
|
|
|
82,972,082
|
|
|
35,047,440
|
|
|
47,800,063
|
|
Diluted net loss per common stock share
|
|
$
|
(0.13)
|
|
$
|
(0.18)
|
|
$
|
(0.40)
|
|
$
|
(0.40)
|
|
$
|
(1.26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share data presented excludes from the calculation of diluted net loss the following potentially dilutive securities, as of September 30 of the applicable period, as they had an anti-dilutive impact:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Both vested and unvested options at $0.96-$5.50 exercise price, to purchase an equal number of shares of common stock of the Company
|
|
|
10,225,387
|
|
|
9,160,429
|
|
|
10,225,387
|
|
|
9,160,429
|
|
|
10,225,387
|
|
Unvested penny options to purchase an equal number of shares of common stock of the Company
|
|
|
|
|
|
30,250
|
|
|
|
|
|
30,250
|
|
|
|
|
Unvested RSUs to issue an equal number of shares of common stock of the Company
|
|
|
2,411,771
|
|
|
3,126,667
|
|
|
2,411,771
|
|
|
3,126,667
|
|
|
2,411,771
|
|
Common stock shares granted, but not yet vested
|
|
|
45,762
|
|
|
108,625
|
|
|
45,762
|
|
|
108,625
|
|
|
45,762
|
|
Warrants to purchase an equal number of shares of common stock of the Company
|
|
|
15,829,262
|
|
|
12,814,533
|
|
|
18,289,611
|
|
|
12,814,533
|
|
|
15,115,357
|
|
Total number of potentially dilutive instruments, excluded from the calculation of net loss per share:
|
|
|
28,512,182
|
|
|
25,240,504
|
|
|
30,972,531
|
|
|
25,240,504
|
|
|
27,798,277
|
|
9 | ||
|
|
|
As of September 30,
2013 |
|
As of December 31,
2012 |
|
Weighted average
amortization period (years) |
|
||
Acquired technology (see Note 5)
|
|
$
|
10,133
|
|
$
|
10,133
|
|
6.0
|
|
Patents
|
|
|
26,794
|
|
|
26,694
|
|
8.5
|
|
Total
|
|
|
36,927
|
|
|
36,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: accumulated amortization
|
|
|
(6,567)
|
|
|
(2,783)
|
|
|
|
|
|
$
|
30,360
|
|
$
|
34,044
|
|
|
|
Period ending December 31,
|
Amount
|
|
2013 (three months ending December 31, 2013)
|
$
|
1,257
|
2014
|
|
5,009
|
2015
|
|
5,009
|
2016
|
|
4,618
|
2017 and thereafter
|
|
14,467
|
|
$
|
30,360
|
10 | ||
|
|
|
|
|
|
Fair value measurement at reporting date using
|
|
|||||
|
|
|
|
|
Quoted prices in
|
|
|
|
|
|
|
|
|
|
|
|
active markets
|
|
Significant other
|
|
Significant
|
|
|
|
|
|
|
|
for identical
|
|
observable
|
|
unobservable
|
|
|
Derivative liabilities on account of warrants
|
|
Balance
|
|
assets (Level 1)
|
|
inputs (Level 2)
|
|
inputs (Level 3)
|
|
||
As of September 30, 2013
|
|
$
|
4,126
|
|
|
|
|
|
$
|
4,126
|
|
As of December 31, 2012
|
|
$
|
7,612
|
|
|
|
|
|
$
|
7,612
|
|
|
|
Level 3
|
|
|
Balance at Inception
|
|
$
|
|
|
Balance at December 31, 2011
|
|
|
|
|
Derivative warrants issued to I/P’s shareholders in connection with the Merger, July 19, 2012
|
|
|
21,954
|
|
Fair value of derivative warrants issued by Legal Parent
|
|
|
3,162
|
|
Fair value adjustment, prior to exercise of warrants, included in statement of operations
|
|
|
156
|
|
Exercise of derivative warrants
|
|
|
(10,657)
|
|
Fair value adjustment at end of period, included in statement of operations
|
|
|
(7,003)
|
|
Balance at December 31, 2012
|
|
|
7,612
|
|
Net impact of removal of down-round clause in Series 1 Warrant (see Note 6)
|
|
|
(2,300)
|
|
Fair value adjustment, prior to exercise of warrants, included in statement of operations
|
|
|
15
|
|
Exercise of derivative warrants
|
|
|
(790)
|
|
Fair value adjustment at end of period, included in statement of operations
|
|
|
(411)
|
|
Balance at September 30, 2013
|
|
$
|
4,126
|
|
11 | ||
|
Description
|
|
Valuation technique
|
|
Unobservable inputs
|
|
Range
|
|
|
|
|
|
Volatility
|
|
51.91% 57.04%
|
|
|
|
|
|
Risk free interest rate
|
|
0.16% 0.98%
|
|
Special Bridge Warrants, Conversion Warrants,
|
|
Black-Scholes-Merton and the
|
|
Expected term, in years
|
|
1.24 3.80
|
|
Preferential Reload Warrants and the derivative Series 1 Warrants
|
|
Monte-Carlo models
|
|
Dividend yield
|
|
0%
|
|
|
|
|
|
Probability and timing of down-round triggering event
|
|
5% occurrence in December 2013
|
|
|
|
Allocation of purchase price
|
|
|
|
Current assets, net of current liabilities
|
|
$
|
2,586
|
|
|
Long-term deposit
|
|
|
8
|
|
|
Property and equipment
|
|
|
124
|
|
|
Technology
|
|
|
10,133
|
|
|
Goodwill
|
|
|
65,965
|
|
|
Total assets acquired, net
|
|
|
78,816
|
|
|
|
|
|
|
|
|
Fair value of outstanding warrants granted by Legal Parent prior to the Merger, classified as a long-term derivative liability
|
|
|
(3,162)
|
|
|
Total liabilities assumed, net
|
|
|
(3,162)
|
|
|
|
|
|
|
|
|
|
|
|
75,654
|
|
|
Measurement of consideration:
|
|
|
|
|
|
Fair value of vested stock options granted to employees, management and consultants, classified as equity
|
|
|
7,364
|
|
|
Fair value of outstanding warrants granted by the Legal Parent prior to the Merger, classified as equity
|
|
|
10,079
|
|
|
Fair value of Vringo shares of common stock and vested penny options granted to employees, management and consultants
|
|
|
58,211
|
|
|
Total estimated purchase price
|
|
$
|
75,654
|
|
|
12 | ||
|
|
|
Cumulative from Inception
to September 30, 2013 |
|
Nine month period ended
September 30, 2012 |
|
Three month period ended
September 30, 2012 |
|
||||||||||||
|
|
Revenue
|
|
Net Loss
|
|
Revenue
|
|
Net Loss
|
|
Revenue
|
|
Net Loss
|
|
||||||
Total amount
|
|
$
|
2,285
|
|
$
|
(73,855)
|
|
$
|
487
|
|
$
|
(18,298)
|
|
$
|
281
|
|
$
|
(6,632)
|
|
|
|
Shares of common stock
|
|
|
Balance as of June 8, 2011 (Inception)
|
|
|
|
|
Grant of shares at less than fair value to officers, directors and consultants
|
|
|
8,768,014
|
|
Issuance of shares of common stock
|
|
|
8,204,963
|
|
Balance as of December 31, 2011
|
|
|
16,972,977
|
|
Conversion of Series A Preferred Convertible Preferred stock, classified as mezzanine equity
|
|
|
890,192
|
|
Grant of shares to consultants
|
|
|
265,000
|
|
Legal Parent’s shares of common stock, recorded upon Merger
|
|
|
15,206,118
|
|
Exercise of 250,000 warrants, issued and exercised prior to the Merger
|
|
|
754,400
|
|
Post-Merger exercise of warrants
|
|
|
6,832,150
|
|
Exercise of stock options and vesting of RSUs
|
|
|
726,346
|
|
Conversion of Series A Preferred Convertible Preferred stock, classified as equity
|
|
|
20,136,445
|
|
Issuance of shares of common stock in connection with $31,148 received in a private financing round, net of issuance cost of $52
|
|
|
9,600,000
|
|
Issuance of shares of common stock in connection with $44,962 received in a private financing round, net of issuance cost of $39
|
|
|
10,344,998
|
|
Shares issued for acquisition of patents, see Note 3
|
|
|
160,600
|
|
Balance as of December 31, 2012
|
|
|
81,889,226
|
|
Exercise of warrants
|
|
|
421,493
|
|
Exercise of stock options and vesting of RSUs
|
|
|
1,810,005
|
|
Balance as of September 30, 2013
|
|
|
84,120,724
|
|
13 | ||
|
Title
|
|
Grant date
|
|
No. of
options |
|
Exercise price
|
|
Share price at
grant date |
|
Vesting terms
|
|
Assumptions used in Black-Scholes option pricing
model |
|
||||||||
Management, Directors and Employees
|
|
|
January-September 2013
|
|
|
3,090,833
|
|
|
$2.85-$3.24
|
|
|
$2.85-$3.24
|
|
|
Over 0.67-3 years
|
|
|
Volatility
|
|
61.93%-70.51%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk free interest rate
|
|
0.85%-2.06%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected term, in years
|
|
5.71-10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend yield
|
|
0.00%
|
|
Consultants
|
|
|
January-June 2013
|
|
|
132,500
|
|
|
$2.90-$3.30
|
|
|
$2.90-$3.30
|
|
|
Over 0-2.5 years
|
|
|
Volatility
|
|
63.87%-65.96%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk free interest rate
|
|
2.16%-2.62%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining expected term, in years
|
|
9.25-9.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend yield
|
|
0.00%
|
|
Title
|
|
Grant date
|
|
No. of RSUs
|
|
Exercise price
|
|
Share price at grant
date |
|
Vesting terms
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management, directors and employees
|
|
|
February-May 2013
|
|
|
656,250
|
|
|
|
|
|
$2.95-$3.18
|
|
|
Over 0.67-3 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consultants
|
|
|
January 2013
|
|
|
33,000
|
|
|
|
|
|
$3.26
|
|
|
Over 0.75 years
|
|
|
|
RSUs
|
|
Options
|
|
||||||||||||||
|
|
No. of
RSUs |
|
Weighted average
grant date fair value |
|
No. of
options |
|
Weighted average
exercise price |
|
Exercise price
range |
|
Weighted average
grant date fair value |
|
||||||
Outstanding at January 1, 2013
|
|
|
3,125,000
|
|
$
|
3.72
|
|
|
9,149,105
|
|
$
|
3.33
|
|
|
$0.01 $5.50
|
|
$
|
2.57
|
|
Granted
|
|
|
689,250
|
|
$
|
3.17
|
|
|
3,223,333
|
|
$
|
3.14
|
|
|
$2.85 $3.30
|
|
$
|
2.22
|
|
Vested/Exercised
|
|
|
(1,092,270)
|
|
$
|
3.62
|
|
|
(717,735)
|
|
$
|
1.36
|
|
|
$0.01 $3.18
|
|
$
|
2.96
|
|
Forfeited
|
|
|
(310,209)
|
|
$
|
3.66
|
|
|
(417,821)
|
|
$
|
3.51
|
|
|
$0.01 $5.50
|
|
$
|
2.44
|
|
Expired
|
|
|
|
|
|
|
|
|
(954,868)
|
|
$
|
5.04
|
|
|
$0.01 $5.50
|
|
$
|
1.58
|
|
Outstanding at September 30, 2013
|
|
|
2,411,771
|
|
$
|
3.61
|
|
|
10,282,014
|
|
$
|
3.24
|
|
|
$0.01 $5.50
|
|
$
|
2.53
|
|
Exercisable at September 30, 2013
|
|
|
|
|
|
|
|
|
5,099,098
|
|
$
|
3.04
|
|
|
$0.01 $5.50
|
|
|
|
|
14 | ||
|
|
|
No. of warrants
|
|
Weighted average
exercise price |
|
Exercise
price range |
|
|||
Outstanding at January 1, 2013
|
|
|
18,863,261
|
|
$
|
3.11
|
|
|
$0.94 $5.06
|
|
Exercised
|
|
|
(421,493)
|
|
$
|
1.34
|
|
|
$0.94 $1.76
|
|
Outstanding at September 30, 2013
|
|
|
18,441,768
|
|
$
|
3.15
|
|
|
$0.94 $5.06
|
|
15 | ||
|
Period ending December 31,
|
|
Amount
|
|
|
2013 (three months ending December 31, 2013)
|
|
$
|
56
|
|
2014
|
|
|
179
|
|
2015
|
|
|
104
|
|
|
|
$
|
339
|
|
(a)
|
|
New legislation, regulations or rulings that impact the patent enforcement process or the rights of patent holders, could negatively affect the Company’s current business model. For example, limitations on the ability to bring patent enforcement claims, limitations on potential liability for patent infringement, lower evidentiary standards for invalidating patents, increases in the cost to resolve patent disputes and other similar developments could negatively affect the Company’s ability to assert its patent or other intellectual property rights.
|
|
|
|
(b)
|
|
As part of the Company’s ongoing legal proceedings, the validity and/or enforceability of its patents is often challenged in a court or an administrative proceeding, as it is almost universal practice for the defendant in a patent litigation to seek to challenge the validity of the patent asserted in the same or a parallel proceeding and/or in an administrative proceedings before the relevant jurisdiction’s patent office. Currently, several of the Company’s patents are being challenged in several jurisdictions.
|
|
|
|
(c)
|
|
Financial instruments which potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, short-term investments and accounts receivable. The Company maintains its cash, cash equivalents and short-term investments with various major financial institutions. These major financial institutions are located in the United States, Germany and Israel, and the Company’s policy is designed to limit exposure to any one institution.
|
(d)
|
|
A portion of the Company’s expenses are denominated in NIS, British Pound and Euro. If the value of the U.S. dollar weakens against the value of these currencies, there will be a negative impact on the Company’s operating costs. In addition, the Company is subject to the risk of exchange rate fluctuations to the extent it holds monetary assets and liabilities in these currencies.
|
16 | ||
|
|
•
|
licensing,
|
|
•
|
strategic partnerships, and
|
|
•
|
litigation.
|
17 | ||
|
18 | ||
|
19 | ||
|
20 | ||
|
21 | ||
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
Cumulative from
Inception through September 30, |
|
|||||||||||||||
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
50,000
|
|
$
|
266,000
|
|
$
|
(216,000)
|
|
$
|
1,276,000
|
|
$
|
266,000
|
|
$
|
1,010,000
|
|
$
|
1,645,000
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
Cumulative from
Inception through September 30, |
|
|||||||||||||||
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services provided
|
|
$
|
23,000
|
|
$
|
18,000
|
|
$
|
5,000
|
|
$
|
73,000
|
|
$
|
18,000
|
|
$
|
55,000
|
|
$
|
120,000
|
|
Amortization of intangibles
|
|
$
|
1,276,000
|
|
$
|
878,000
|
|
$
|
398,000
|
|
$
|
3,800,000
|
|
$
|
1,189,000
|
|
$
|
2,611,000
|
|
$
|
6,583,000
|
|
Operating legal
|
|
$
|
5,426,000
|
|
$
|
2,519,000
|
|
$
|
2,907,000
|
|
$
|
15,684,000
|
|
$
|
4,769,000
|
|
$
|
10,915,000
|
|
$
|
26,927,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,725,000
|
|
$
|
3,415,000
|
|
$
|
3,310,000
|
|
$
|
19,557,000
|
|
$
|
5,976,000
|
|
$
|
13,581,000
|
|
$
|
33,630,000
|
|
22 | ||
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
Cumulative from
Inception through September 30, |
|
|||||||||||||||
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
700,000
|
|
$
|
997,000
|
|
$
|
(297,000)
|
|
$
|
2,110,000
|
|
$
|
997,000
|
|
$
|
1,113,000
|
|
$
|
3,850,000
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
Cumulative from
Inception through September 30, |
|
|||||||||||||||
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing, general and administrative
|
|
$
|
3,801,000
|
|
$
|
6,364,000
|
|
$
|
(2,563,000)
|
|
$
|
11,806,000
|
|
$
|
7,508,000
|
|
$
|
4,298,000
|
|
$
|
23,876,000
|
|
23 | ||
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
Cumulative from
Inception through September 30, |
|
|||||||||||||||
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense), net
|
|
$
|
645,000
|
|
$
|
7,310,000
|
|
$
|
(6,665,000)
|
|
$
|
(1,220,000)
|
|
$
|
7,303,000
|
|
$
|
(8,523,000)
|
|
$
|
2,754,000
|
|
24 | ||
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
Cumulative from
Inception through September 30, |
|
|||||||||||||||
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense)
|
|
$
|
(29,000)
|
|
$
|
76,000
|
|
$
|
(105,000)
|
|
$
|
(47,000)
|
|
$
|
76,000
|
|
$
|
(123,000)
|
|
$
|
(102,000)
|
|
|
|
Nine months ended September 30,
|
|
Cumulative
from Inception through September 30, |
|
||||||||
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(17,384,000)
|
|
$
|
(5,962,000)
|
|
$
|
(11,422,000)
|
|
$
|
(33,380,000)
|
|
Net cash used in investing activities
|
|
$
|
(692,000)
|
|
$
|
(19,419,000)
|
|
$
|
18,727,000
|
|
$
|
(23,573,000)
|
|
Net cash provided by financing activities
|
|
$
|
1,539,000
|
|
$
|
29,717,000
|
|
$
|
(28,178,000)
|
|
$
|
97,378,000
|
|
25 | ||
|
26 | ||
|
|
|
Valuation
|
|
Unobservable
|
|
|
|
Description
|
|
Technique
|
|
Inputs
|
|
Range
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
51.91% 57.04%
|
|
Special Bridge Warrants, Conversion Warrants,
|
|
|
|
Risk free interest rate
|
|
0.16% 0.98%
|
|
Preferential Reload Warrants and the derivative
|
|
Black-Scholes-Merton and the
|
|
Expected term, in years
|
|
1.24 3.80
|
|
Series 1 Warrants
|
|
Monte-Carlo models
|
|
Dividend yield
|
|
0%
|
|
|
|
|
|
Probability and timing of down-round triggering event
|
|
5% occurrence in December 2013
|
|
27 | ||
|
28 | ||
|
29 | ||
|
30 | ||
|
|
•
|
implement or execute our current business plan, or demonstrate that our business plan is sound; and/or
|
|
•
|
raise sufficient funds in the capital markets to effectuate our long-term business plan.
|
31 | ||
|
|
•
|
There is a significant time lag between acquiring a patent portfolio and recognizing revenue from those patent assets, if at all. During that time lag, material costs are likely to be incurred that would have a negative effect on our results of operations, cash flows and financial position.
|
32 | ||
|
|
•
|
The integration of a patent portfolio is a time consuming and expensive process that may disrupt our operations. If our integration efforts are not successful, our results of operations could be harmed. In addition, we may not achieve anticipated synergies or other benefits from such acquisition.
|
|
•
|
patent applications we may file may not result in issued patents or may take longer than we expect to result in issued patents;
|
|
•
|
we may be subject to opposition proceedings in the U.S. or foreign countries;
|
|
•
|
any patents that are issued to us may not provide meaningful protection;
|
|
•
|
we may not be able to develop additional proprietary technologies that are patentable;
|
|
•
|
other companies may challenge patents issued to us;
|
|
•
|
other companies may have independently developed and/or patented (or may in the future independently develop and patent) similar or alternative technologies, or duplicate our technologies;
|
|
•
|
other companies may design around patents we have developed; and
|
|
•
|
enforcement of our patents could be complex, uncertain and very expensive.
|
33 | ||
|
•
|
our applications for patents, trademarks and copyrights may not be granted and, if granted, may be challenged or invalidated;
|
•
|
issued trademarks, copyrights, or patents may not provide us with any competitive advantages versus potentially infringing parties;
|
•
|
our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology; or
|
•
|
our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we acquire and/or prosecute.
|
34 | ||
|
35 | ||
|
36 | ||
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
|
31.1*
|
|
Certification of Principal Executive Officer Pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2*
|
|
Certification of Principal Financial Officer Pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1**
|
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2**
|
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
*
|
|
Filed herewith.
|
**
|
|
Furnished herein.
|
37 | ||
|
VRINGO, INC.
|
|
|
|
By:
|
/s/
Anastasia Nyrkovskaya
|
|
Anastasia Nyrkovskaya
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
38 | ||
|
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