Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' EQUITY

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STOCKHOLDERS' EQUITY
 3 Months Ended
Mar. 31, 2013
Equity [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]

3. STOCKHOLDERS’ EQUITY

 

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 our common stock at an exercise price of $0.50 per share which will be exercisable for five years from issuance, and warrants to purchase up to an aggregate of 5,500,000 shares of our common stock at an exercise price of $0.50 per share which will be 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 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 fair value of $5,720,000 was recorded as a derivative liability during the three months ended March 31, 2013. The fair value upon issuance exceeded the net proceeds received in the offering. The excess of $744,957, after allocation of par value, was recorded as a loss on issuance of derivative warrants on the Company’s consolidated statement of operations for the three months ended March 31, 2013. The Company utilized a modified option pricing model to determine the fair value of the warrants (see Note 2). In the February 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.

 

Common Stock Warrants

 

The following table summarizes information with regard to outstanding warrants to purchase common stock as of March 31, 2013.

 

Offering  

 

Number of Shares

Issuable Upon

Exercise of

Outstanding

Warrants

    

Exercise

Price

  

 

 

Expiration Date
               
February 2013 Public Offering (1)     11,000,000     $ 0.50   February 20, 2018
February 2013 Public Offering (1)     5,500,000     $ 0.50   February 20, 2014
February 2013 Public Offering – Placement Agents     770,000     $ 0.625   February 4, 2018
November 2012 Private Placement     1,000,000     $ 1.25   November 2, 2017
June 2012 Public Offering     2,981,440     $ 1.25   June 13, 2017
December 2011 Underwritten Offering     9,248,334     $ 0.60   December 6, 2016
April 2011 Private Placement     6,058,811     $ 0.75   March 31, 2016
Legacy warrants (1)     27,310     $ 0.50   July 27, 2015
Legacy warrants     105,040     $ 16.065   July 27, 2015
Legacy warrants     91,524     $ 99.45-100.98   December 31, 2015
                   
Total     36,782,459            

 

(1) The exercise prices of these warrants are subject to adjustment for “down-rounds” and have been accounted for as derivative instruments as described in Note 2.

 

On January 31, 2013, warrants to purchase 2,000,000 shares of common stock at an exercise price of $1.00 per share expired unexercised.