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STOCKHOLDERS' EQUITY
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Jun. 30, 2011
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| STOCKHOLDERS' EQUITY |
April 2011 Private Placement
Concurrently
with the execution of the Merger Agreement, the Company entered
into a Securities Purchase Agreement with certain accredited
investors under which the Company sold an aggregate of 6,846,537
units, each unit consisting of one share of its common stock and a
warrant to purchase one share of its common stock, at a price of
$0.75 per unit, for gross proceeds of approximately $5,135,000 (the
“April Private Placement”). The warrants
have an exercise price of $0.75 and expire on March 31,
2016. The warrant exercise price and/or the common stock
issuable pursuant to such warrant will be subject to adjustment
only for stock dividends, stock splits or similar capital
reorganizations so that the rights of the warrant holders after
such event will be equivalent to the rights of warrant holders
prior to such event. The relative fair value of the
warrants issued to the investors at the date of issuance was
$2,124,286 and has been included as a component of
stockholders’ equity. The Company uses the
Black-Scholes option pricing model to value warrants and applies
assumptions that consider, among other variables, the fair value of
the underlying stock, risk-free interest rate, volatility, expected
life and dividend rates in estimating fair value for the warrants.
Assumptions used are generally consistent with those disclosed for
stock-based compensation (see Note 7).
The
Securities Purchase Agreement includes a requirement that the
Company file with the SEC no later than October 5, 2011, a
registration statement covering the resale of the shares of common
stock, and the shares of common stock underlying the warrants,
issued pursuant to the Securities Purchase Agreement that are not
otherwise saleable under an available exemption from registration
requirements. The Company is also required to use our
commercially reasonable efforts to have the registration statement
declared effective by December 4, 2011, and to keep the
registration statement continuously effective under the Securities
Act of 1933, as amended (the “Securities Act”), until
the earlier of the date when all the registrable securities covered
by the registration statement have been sold or the second
anniversary of the closing.
In
the event the Company fails to file the registration statement
within the timeframe specified by the Securities Purchase
Agreement, or if it fails to obtain effectiveness of this
registration on or prior to the December 4, 2011 (if there is no
review by the SEC) or by January 3, 2012 (if there is review by the
SEC) with respect to the maximum number of shares permitted to be
registered by the SEC, the Company will be required to pay to the
purchasers liquidated damages equal to 1.5% per month (pro-rated on
a daily basis for any period of less than a full month) of the
aggregate purchase price of the units purchased until the
registration statement is filed or declared effective, as
applicable, not to exceed 5% of the aggregate purchase
price. The Company will be allowed to suspend the use of
the registration statement for not more than 30 consecutive days,
on not more than two occasions, in any 12-month
period. The Company has also granted piggy-back
registration rights with respect to any shares of common stock that
it is required to exclude from the registration statement as a
condition of its effectiveness, and has also agreed to file further
registration statements with respect to any such shares six months
after the effective date of the initial registration statement. As
of June 30, 2011, and through the date of this filing, the Company
has not concluded that it is probable that damages will become due;
therefore, no accrual for damages has been recorded.
The
Company paid to Rodman, the placement agent for the financing, a
cash fee equal to $200,000 and issued warrants to purchase 192,931
shares of its common stock (having an exercise price of $0.75 and
which expire March 31, 2016) in consideration for their advisory
services with respect to the financing pursuant to the placement
agency agreement between Rodman and the Company. Rodman
is entitled to registration rights with respect to the shares of
common stock issuable upon exercise of these
warrants. The cash fee was recorded as a reduction of
gross proceeds received. The estimated fair value of the
warrants issued to the placement agent was $112,096 and was
recorded as a component of stockholders’
equity. The Company uses the Black-Scholes option
pricing model to value warrants and applies assumptions that
consider, among other variables, the fair value of the underlying
stock, risk-free interest rate, volatility, expected life and
dividend rates in estimating fair value for the warrants.
Assumptions used are generally consistent with those disclosed for
stock-based compensation (see Note 7).
Common Stock Warrants — The following
table summarizes information with regard to outstanding warrants to
purchase common stock as of June 30, 2011. The Company
issued warrants to purchase 7,039,468 shares of common stock in
connection with the April Private Placement. In
addition, outstanding warrants to purchase 315,164 shares of common
stock, originally issued in connection with Novelos equity and debt
financings from 2007 through 2010, remained outstanding subsequent
to the Acquisition.
(1) The
exercise price of these warrants was adjusted to $0.75 per share in
connection with the private placement completed on April 8,
2011. This warrant is treated as a derivative instrument
as described in Note 1.
On
May 4, 2011, 18,153 shares of common stock were issued in
connection with the cashless exercise of warrants to purchase
27,310 shares of common stock at $0.75 per share. The
Company reclassified $48,339 from the derivative liability to
additional paid-in capital upon the exercise of the
warrants.
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