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SUBSEQUENT EVENTS
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9 Months Ended | |
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Sep. 30, 2013
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| Subsequent Events [Abstract] | ||
| Subsequent Events [Text Block] | 10. SUBSEQUENT EVENTS
Management Transition On October 4, 2013, the employment of Mr. Palmin was terminated without cause in accordance with his employment agreement, as amended, and Mr. Palmin resigned as a Class III Director of the Company. In connection with Mr. Palmin’s termination, he received payments totaling $250,000 and will receive continuation of health and dental benefits for six months following the termination date. All of Mr. Palmin’s unvested options were vested on his termination date and the exercise period was extended for an additional 18 months until April 4, 2015. In connection with this modification of options, the Company anticipates recognizing incremental stock-based compensation expense of approximately $105,000 and will recognize the remaining unrecognized stock-based compensation expense of approximately $561,000 related to these options in the fourth quarter of 2013.
On October 4, 2013, Dr. Simon Pedder was appointed as Acting Chief Executive Officer and elected as a Class III Director replacing Mr. Palmin. The Company entered into a consulting agreement with Dr. Pedder for the period from October 4, 2013 through March 31, 2014 under which the Company will pay Dr. Pedder a consulting fee of $30,000 per month, granted Dr. Pedder a non-qualified stock option to purchase up to 3,360,000 shares of common stock having an exercise price of $0.33 per share and vesting equally over four years and granted a non-qualified stock option to purchase up to 1,925,573 shares of common stock having an exercise price of $0.75 per share, exercisable as shares of the Company’s common stock are issued following the exercise of outstanding warrants to purchase up to 36,585,895 shares of the Company’s common stock, in the ratio of one option share for each 19 shares issued upon warrant exercise. Both non-qualified stock options expire on October 4, 2023 unless earlier exercised or terminated.
The Company also entered into an employment agreement with Dr. Pedder effective as of April 1, 2014, pursuant to which Dr. Pedder will serve as President and Chief Executive Officer of the Company at a base salary rate of $350,000 per year beginning April 1, 2014. Dr. Pedder will also receive a monthly reimbursement for temporary living costs not to exceed $4,000 per month during the first 6 months of employment.
Waiver Agreement
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 under the Securities Purchase Agreement dated November 1, 2012 for the construction of additional manufacturing facilities for its LIGHT compound. The Company has agreed to use the proceeds for the development of its LIGHT 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. As a result of the designation of the remaining proceeds to fund ordinary operating activities rather than the previously contemplated construction project, the Company has reclassified $1,878,232 from restricted cash to cash and cash equivalents on the accompanying balance sheet as of September 30, 2013.
Restructuring of Board of Directors
On November 7, 2013, Michael F. Tweedle resigned from the Company’s board of directors and from his committee appointments. Paul L. Berns was appointed as a Class II director to fill the vacancy created by Dr. Tweedle’s resignation. In connection with his appointment, Mr. Berns received an option to purchase 100,000 shares of the Company’s common stock at $0.39 per share, vesting in equal quarterly installments over three years and expiring on November 7, 2023. Effective November 8, 2013, Thomas Rockwell Mackie, James S. Manuso, John E. Niederhuber and Howard M. Schneider resigned from the Company’s board of directors and from their respective committee appointments. Also on November 8, 2013, Stephen A. Hill and John Neis were redesignated and elected as Class I directors and the number of directors was reduced to five from nine. In connection with their resignations, all of the unvested options held by Messrs. Mackie, Manuso, Niederhuber, Schneider and Tweedle were vested and the exercise period was extended to three years from date of resignation. In connection with this modification of options, the Company estimates that an additional $274,000 in stock-based compensation expense will be recognized in the fourth quarter of 2013.
Stockholder Meeting
On November 8, 2013, the Company’s board of directors scheduled a special meeting in lieu of annual meeting of stockholders for December 12, 2013 at 2:00 P.M. central time (the “Special Meeting”) at the Company’s offices at 3301 Agriculture Drive, Madison, Wisconsin 53716. Stockholders of record at the close of business on November 8, 2013 are entitled to receive notice of, and to vote at, the Special Meeting and any adjournment of the meeting. The agenda for the Special Meeting consists of the election of a Class II director (Mr. Berns having been nominated for re-election), the approval of an amendment of the Company’s 2006 Stock Incentive Plan increasing the number of shares authorized for issuance thereunder to 14,000,000 and the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered accounting firm for 2013.
Relocation of the Company’s Principal Executive Offices
On November 8, 2013, the Company’s board of directors voted to relocate the Company’s principal executive offices from Newton, Massachusetts to its corporate headquarters in Madison, Wisconsin. In connection with the relocation, and in order to consolidate operations and contain costs, the Newton office will be closed and the roles and responsibilities of the three employees located in Newton, Massachusetts, including Chris Pazoles, Vice President of Research and Development and Joanne Protano, Vice President of Finance, Chief Financial Officer and Treasurer, will be transitioned to Madison, Wisconsin by the end of April 2014. The Company estimates that approximately $330,000 in cash payments will be incurred for exit costs, consisting principally of severance. In addition, the Company will also record incremental stock-based compensation associated with the modification of options upon the termination of employees. The amount of such incremental stock-based compensation can’t be estimated at this time.
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