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STOCKHOLDERS' EQUITY
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Dec. 31, 2013
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| Stockholders' Equity Note Disclosure [Text Block] |
8. STOCKHOLDERS’ EQUITY
June 2012 Public Offering
On June 13, 2012, pursuant to securities purchase agreements entered into with investors on June 7, 2012, the Company completed a registered public offering of an aggregate of 5,420,800 shares of its common stock, warrants to purchase up to an aggregate of 5,420,800 at an exercise price of $1.00 per share, exercisable for 90 days from issuance (the “Class B Warrants”), and warrants to purchase up to an aggregate of 2,710,400 shares of its common stock at an exercise price of $1.25 per share, exercisable for five years from issuance, for total gross proceeds of $5,420,800 and net proceeds of $4,870,978 after deducting transaction costs (the “June Offering”). The warrant exercise price and the common stock issuable pursuant to such warrants are subject to adjustment only for stock dividends, stock splits and similar capital reorganizations, in which event the rights of the warrant holders would be adjusted as necessary so that they would be equivalent to the rights of the warrant holders prior to such event. The relative fair value of the warrants issued to the investors was $1,994,631 at issuance and was 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 9). In the June Offering, the Company paid a cash fee of $379,456 and issued warrants to purchase 271,040 shares of its common stock at an exercise price of $1.25 per share expiring on June 13, 2017 to the placement agent. The cash fee along with other legal and accounting costs associated with the offering were recorded as a reduction of the gross proceeds received. The estimated fair value of the warrants issued to the placement agent was $255,703 and was recorded as a component of stockholders’ equity.
On September 10, 2012, the Company amended the terms of the Class B Warrants with investors who held warrants to purchase 5,255,000 shares of common stock to extend the expiration date for the exercise of such warrants until October 11, 2012. The modification of the expiration date of the warrants resulted in a deemed dividend to warrant holders of $543,359 that was calculated as the difference between the fair value of the warrants immediately before and after the modification using the Black-Scholes option pricing model. The deemed dividend is reflected as an adjustment to net loss to arrive at net loss attributable to common stockholders in the twelve months ended December 31, 2012. Since the Company had an accumulated deficit at the time of the modification, there was no impact to the components of stockholders’ equity as a result of the recognition of the deemed dividend.
During the year ended December 31, 2012, Class B Warrants were exercised for an aggregate of 1,088,300 shares of common stock and the Company received aggregate cash proceeds of $1,088,300 in respect of those exercises. The balance of the Class B Warrants, exercisable for up to 4,332,500 shares of common stock, expired.
November 2012 Private Placement
On November 2, 2012, the Company completed a private placement of 2,000,000 shares of its common stock, warrants to purchase up to an aggregate of 2,000,000 shares of common stock at an exercise price of $1.00 per share, exercisable for 90 days from issuance, and warrants to purchase up to an aggregate of 1,000,000 shares of its common stock at an exercise price of $1.25 per share, exercisable for five years from issuance, for total gross proceeds of $2,000,000 (the “November Private Placement”). The proceeds were designated for use in the construction of an in-house manufacturing facility for one of the Company’s product candidates, I-124-CLR1404. The warrant exercise price and the common stock issuable pursuant to such warrants are subject to adjustment only for stock dividends, stock splits and similar capital reorganizations, in which event the rights of the warrant holders would be adjusted as necessary so that they would be equivalent to the rights of the warrant holders prior to such event. The relative fair value of the warrants issued to the investor was $742,491 at issuance and was 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 9). The warrants to purchase 2,000,000 shares of common stock at $1.00 per share expired unexercised on January 31, 2013.
On October 9, 2013, the Company entered into a Waiver Agreement with Renova Assets Ltd. (“Renova”), under which Renova has waived the obligations of the Company to use the proceeds from the sale of securities for the construction of additional manufacturing facilities for its I-124-CLR1404 compound. The Company has agreed to use the proceeds for the development of the compound and to invite two representatives, designated by Renova, to act as board observers through December 31, 2014. The Company paid $40,000 to Renova as reimbursement for administrative and other costs in connection with the Waiver Agreement. During the year ended December 31, 2013, the Company utilized approximately $122,000 of restricted cash from the November 2012 private placement for the evaluation of construction of the in-house facility. As a result of the designation of the remaining proceeds to fund ordinary operating activities rather than the previously contemplated construction project, the Company reclassified the remaining $1,878,000 from restricted cash to cash and cash equivalents on the accompanying balance sheet as of December 31, 2013. As of December 31, 2012, the gross proceeds of $2,000,000 was classified as a long-term restricted asset as a result of the initial contractual designation on the proceeds (see Note 2).
February 2013 Public Offering
On February 20, 2013, pursuant to securities purchase agreements entered into with investors on February 12, 2013, the Company completed a registered public offering of an aggregate of 11,000,000 shares of its common stock, warrants to purchase up to an aggregate of 11,000,000 shares of its common stock at an exercise price of $0.50 per share which are exercisable for five years from issuance, and warrants to purchase up to an aggregate of 5,500,000 shares of its common stock at an exercise price of $0.50 per share which are exercisable for one year from issuance, for gross proceeds of $5,500,000 and net proceeds of $4,975,153 after deducting transaction costs, which include placement agent fees and legal and accounting costs associated with the offering (the “February 2013 Offering”). The warrant exercise price and the common stock issuable pursuant to such warrants are subject to adjustment for stock dividends, stock splits and similar capital reorganizations, in which event the rights of the warrant holders would be adjusted as necessary so that they would be equivalent to the rights of the warrant holders prior to such event. The exercise price of the warrants is also subject to adjustment for dilutive issuances. The warrants did not meet the criteria for equity classification as a result of the down-round protection. Accordingly the initial fair value of the warrants totaling $5,720,000 was recorded as a derivative liability on the date of issuance. The fair value upon issuance exceeded the net proceeds received in the offering. The excess of $744,957 was recorded as a loss on issuance of derivative warrants on the Company’s consolidated statement of operations for the twelve months ended December 31, 2013. The Company measures the change in market value of the derivative instruments at each reporting period utilizing a modified option-pricing model to determine the fair value of the warrants (see Note 3). The change in fair value from the date of issuance through December 31, 2013 of $2,365,000 is recorded as a gain on derivatives in the twelve months ended December 31, 2013. In the February 2013 Offering, the Company paid a cash fee of $385,000 and issued warrants to purchase 770,000 shares of its common stock at an exercise price of $0.625 per share expiring on February 4, 2018 to the placement agent. The placement agent warrants do not contain down-round protection. On February 20, 2014, warrants to purchase 5,500,000 shares of common stock expired, unexercised.
Registration Rights
In connection with securities purchase agreements entered into on April 8, 2011 with certain accredited investors, the Company is subject to certain registration requirements. The Company filed a registration statement with the SEC on July 17, 2012 covering the resale of 4,000,000 shares of common stock pursuant to the registration requirements and this registration statement was declared effective on July 26, 2012. The Company is required 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 such time as all the registrable securities covered by the registration statement can be sold under Rule 144 without any volume limitations. 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 “Allowed Delay”). If the Company suspends the use of the registration for longer than the Allowed Delay, it may 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 use of the registration statement is no longer suspended, not to exceed 5% of the aggregate purchase price. As of December 31, 2013, 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.
Additionally, in connection with registered offerings of common stock and warrants during 2012 and 2013, the Company has entered into certain securities purchase agreements which require the Company to use commercially reasonable efforts to keep the applicable registration statements effective for the issuance of shares of common stock pursuant to the exercise of warrants issued in the offering as long as the warrants remain outstanding.
Common Stock Warrants
The following table summarizes information with regard to outstanding warrants to purchase common stock as of December 31, 2013.
On February 6, 2014, in connection with a private placement of securities, we issued warrants to purchase 8,000,000 shares of common stock at $1.00 per share expiring on February 6, 2019 (see Note 17).
Reserved Shares
The following shares were reserved for future issuance upon exercise of stock options and warrants:
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