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STOCKHOLDERS' EQUITY
 3 Months Ended
Mar. 31, 2012
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]

NOTE 4 - STOCKHOLDERS' EQUITY

 

Preferred Stock

 

Our amended and restated certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock, $0.001 par value, with rights senior to those of our common stock, issuable in one or more series. Upon issuance, the Company can determine the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.

 

There were 1,108,816 shares of Company Preferred Stock outstanding as of March 31, 2012. In connection with the Exchange Transaction, the Company filed a Certificate of Designation with respect to its Company Preferred Stock with the Secretary of State of the State of Delaware.  The Company Preferred Stock ranks senior to the Common Stock with regard to dividend rights, and has a liquidation preference of $20 per share over the Common Stock and any other junior securities. The Company Preferred Stock is automatically convertible into 8.89 shares of Common Stock provided that, prior to conversion, the Company has sufficient authorized Common Stock to effect such conversion.  The Company Preferred Stock also automatically converts upon a change of control of the Company or the sale of substantially all of the assets of the Company.  The Company Preferred Stock votes on an as-converted basis with the Common Stock.

 

In conjunction with the reverse split effected on April 30, 2012 (as discussed in Note 1), our Company Preferred Stock automatically converted to 9,856,259 shares of Common Stock as of that date.

 

Common Stock

 

Our amended and restated certificate of incorporation authorizes the issuance of up to 500,000,000 shares of $0.001 par value common stock.

 

On December 30, 2011, we completed the first closing of the private placement of our securities, issuing 4,929,523 shares of Common Stock at a price per share of $2.25 for total gross proceeds, before placement commissions and expenses, of $11,091,425 (the “2011 Equity PIPE”). Investors also received warrants to purchase 1,232,381 shares of Common Stock. The warrants have an exercise price of $2.25 per share and are exercisable for five years.

 

In 2012, we completed two additional closings of the 2011 Equity PIPE. These closings were held on January 31, 2012, and February 24, 2012. In these closings, the Company issued 695,428 shares of our Company Preferred Stock at a price per share of $20.00 for total gross proceeds, before placement commissions and expenses, of $13,908,560. Each share of Company Preferred Stock is convertible into 8.89 shares of Common Stock provided that such conversion rights are subject to sufficient available authorized shares of Common Stock. Investors also received warrants to purchase 1,545,396 shares of Common Stock. The warrants have an exercise price of $2.25 per share and are exercisable for five years. The shares of Company Preferred Stock and warrants sold in these closings were offered and sold to accredited investors, including members of management, without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(2) of the Securities Act, and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws. Accordingly, the securities issued in the offering have not been registered under the Securities Act, and until so registered, these securities may not be offered or sold in the United States absent registration or availability of an applicable exemption from registration. The placement agent received cash commissions equal to 10% of the gross proceeds of the offering, five-year warrants to purchase shares of the Company’s stock equal to 10% of shares sold in the offering, and a non-accountable expense allowance equal to two percent of the gross proceeds of the offering for their expenses.  

 

Equity Incentive Plans

 

A summary of the status of the Company’s stock options as of March 31, 2012 and changes during the period then ended is presented below:

 

Stock Options

 

The following table summarizes stock option activity for the three months ended March 31, 2012:

 

   

 

Number

of shares

    

Weighted-

average

exercise price

    

Weighted-

average

Contractual

Term

    

 

Aggregate

Intrinsic
Value

  
                (in years)        
Outstanding at December 31, 2011     3,379     $ 1,315.62       6.39          
Granted     —       —                  
Exercised     —       —                  
Forfeited     (2,475 )     720.45                  
Expired     —       —                  
Outstanding at March 31, 2012     904     $ 2,945.09       2.49     $ —  
                                 
Vested and expected to vest at March 31, 2012     904     $ 2,945.09       2.49     $ —  
Exercisable at March 31, 2012     898     $ 2,963.46       2.43     $ —  

 

As of March 31, 2012, the total compensation cost related to unvested option awards not yet recognized is less than $1,000. The weighted average period over which it is expected to be recognized is approximately 1 year.

 

Restricted Stock

 

Certain employees have been awarded restricted Company Preferred Stock. The restricted stock vesting consists of milestone and time-based vesting. The following table summarizes restricted share activity for the three months ended March 31, 2012:

 

     

 

Number of Shares

Restricted Series 

A Preferred

Stock(1)

    

Weighted 

Average

Grant Date 

Fair Value

    

Aggregate

Intrinsic

Value

  
Outstanding at December 31, 2011       129,375     $ 20.00          
Granted       —       —          
Vested       —       —          
Forfeited       —       —          
Outstanding at March 31, 2012       129,375     $ 20.00     $ 7,762,500  

 

(1) The restricted Company Preferred Stock listed in the table above was granted in connection with the Exchange Transaction to certain executives as discussed above. Each share of Company Preferred Stock is convertible into 8.89 shares of the Company’s Common Stock, provided that such conversion right is subject to sufficient available authorized shares of the registrant’s common stock.

 

Total expense associated with restricted stock was $188,509 during the three months ended March 31, 2012.

 

Warrants

 

The following table summarizes warrant activity for the three months ended March 31, 2012:

 

     

 

Warrants

    

Weighted-

average

exercise price

     Aggregate
Intrinsic
Value		  
Outstanding at December 31, 2011       2,118,768     $ 4.62          
Issued       2,163,555       2.31          
Exercised       —       —          
Expired       (1,449 )   2,812.50    
Outstanding at March 31, 2012       4,280,874     $ 2.50     $ —  

 

During the three months ended March 31, 2011, as part of the 2011 Equity PIPE, we issued warrants to purchase up to 1,545,396 shares of our Company Common Stock to investors in the 2011 Equity PIPE, none of which have been exercised as of March 31, 2012. The warrants have an exercise price of $2.25 per warrant share. In addition, we issued to the placement agent in the transaction warrants to purchase up to 618,159 shares of our Company Common Stock at an exercise price of $2.48 per warrant share, none of which have been exercised as of March 31, 2012.

 

Stock-Based Compensation

 

The fair value of stock options granted is estimated at the date of grant using the Black-Scholes pricing model. The expected term of options granted is derived from historical data and the expected vesting period. Expected volatility is based on the historical volatility of our common stock. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. We have assumed no expected dividend yield, as dividends have never been paid to stock or option holders and will not be paid for the foreseeable future. The Company did not grant any stock options during the three months ended March 31, 2012.

 

The following table summarizes stock-based compensation expense information about stock options and restricted stock for the three months ended March 31, 2012:

 

Stock-based compensation expense associated with restricted stock   $ 188,509  
Stock-based compensation expense associated with option grants     —  
    $ 188,509