STOCKHOLDERS' EQUITY |
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| STOCKHOLDERS' EQUITY |
6. STOCKHOLDERS’ EQUITY
April 2011 Private Placement
Concurrently
with and conditioned upon 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 included a requirement that the
Company file with the SEC no later than October 5, 2011 (the
“Filing Deadline”), 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 commercially reasonable efforts to
have the registration statement declared effective by December 4,
2011 (the “Effectiveness Deadline”), 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 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.
On
November 3, 2011, a majority of purchasers in the April Private
Placement, which majority constituted the requisite holders, as
defined by the applicable securities purchase agreement, consented
to extend the Filing Deadline to the 180th
day following the final prospectus of a public offering of
securities contemplated by the Company and to extend the
Effectiveness Deadline to the 240th
day following the final prospectus of the public offering. As of
September 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 will use its reasonable best
efforts to register the shares as may be permitted by the SEC until
such time as all of these shares either have been registered or may
be sold without restriction in reliance on Rule 144 under the
Securities Act.
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 September 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) 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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