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STOCKHOLDERS' EQUITY
 9 Months Ended
Sep. 30, 2013
STOCKHOLDERS' EQUITY  
STOCKHOLDERS' EQUITY

8.   STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

As of September 30, 2013, there were 335,273 shares of the Company’s 6% Convertible Exchangeable Preferred Stock (“Preferred Stock”) issued and outstanding at an issue price of $10.00 per share. Dividends on the Preferred Stock are cumulative from the date of original issuance at the annual rate of 6% of the liquidation preference of the Preferred Stock, payable quarterly on the first day of February, May, August and November, commencing February 1, 2005. Any dividends must be declared by the Company’s Board of Directors (the “Board”) and must come from funds that are legally available for dividend payments. The Preferred Stock has a liquidation preference of $10 per share, plus accrued and unpaid dividends.

 

The Preferred Stock is convertible at the option of the holder at any time into the Company’s shares of common stock at a conversion rate of approximately 0.06079 shares of common stock for each share of Preferred Stock based on a price of $164.50. The Company has reserved 20,381 shares of common stock for issuance upon conversion of the remaining shares of Preferred Stock outstanding at September 30, 2013.

 

The Company may automatically convert the Preferred Stock into common stock if the closing price of the Company’s common stock has exceeded $246.75, which is 150% of the conversion price of the Preferred Stock, for at least 20 trading days during any 30-day trading period, ending within five trading days prior to notice of automatic conversion.

 

The Preferred Stock has no maturity date and no voting rights prior to conversion into common stock, except under limited circumstances.

 

The Company may, at its option, redeem the Preferred Stock in whole or in part, out of funds legally available at the redemption prices per share stated below, plus an amount equal to accrued and unpaid dividends up to the date of redemption:

 

Year from November 1, 2012 to October 31, 2013

 

$

10.12

 

Year from November 1, 2013 to October 31, 2014

 

$

10.06

 

November 1, 2014 and thereafter

 

$

10.00

 

 

The Preferred Stock is exchangeable, in whole but not in part, at the option of the Company on any dividend payment date beginning on November 1, 2005 (the “Exchange Date”) for the Company’s 6% Convertible Subordinated Debentures (“Debentures”) at the rate of $10 principal amount of Debentures for each share of Preferred Stock. The Debentures, if issued, will mature 25 years after the Exchange Date and have terms substantially similar to those of the Preferred Stock. No such exchanges have taken place to date.

 

Conversion of Convertible Preferred Stock

 

During the nine months ended September 30, 2013, the Company converted an aggregate of 877,869 shares of Preferred Stock into an aggregate of 1,684,471 shares of the Company’s common stock. The Company converted 85,409 shares of Preferred Stock into 170,818 shares of the Company’s common stock during the three months ended September 30, 2013. There were no conversions of the Company’s Preferred Stock into shares of common stock during the nine months ended September 30, 2012. Since the Company’s transaction with Xcyte Therapies, Inc. in 2006, holders have exchanged 1,711,540 shares of Preferred Stock into common stock as a result of arms-length negotiations between the Company and the other parties. The shares of previously-converted Preferred Stock have been retired, cancelled and restored to the status of authorized but unissued shares of preferred stock, subject to reissuance by the Board of Directors as shares of Preferred Stock of one or more series.

 

The table below provides details of the aggregate activities in 2013:

 

 

 

Nine
Months Ended
September 30,
2013

 

Preferred shares exchanged

 

877,869

 

Shares of common stock issued:

 

 

 

At stated conversion terms

 

53,366

 

Incremental shares issued under the exchange transaction

 

1,631,105

 

Total shares of common stock issued

 

1,684,471

 

 

As the Preferred stockholders received additional shares of common stock issued to them upon conversion as compared to what they would have been entitled to receive under the stated rate of exchange, the Company recorded the excess of (1) the fair value of all securities and other consideration transferred to the holders of the Preferred Stock and (2) the fair value of securities issuable pursuant to the original conversion terms as a deemed dividend resulting in an increase in the net loss attributable to common shareholders. Specifically, the Company recorded deemed dividends related to the additional shares issued under the exchange transactions of $0.7 million and $9.0 million for the three and nine months ended September 30, 2013, respectively.

 

On each of January 11, 2013, April 5, 2013, and July 8, 2013, the Board declared a quarterly cash dividend in the amount of  $0.15 per share on the Company’s Preferred Stock with respect to the fourth quarter of 2012, first quarter of 2013, and second quarter of 2013, respectively. The Company paid the dividends on February 1, 2013, May 1, 2013, and August 1, 2013, respectively.

 

Common Stock

 

May 2013 Underwriting Agreement

 

On May 16, 2013, the Company entered into an underwriting agreement relating to the public offering and sale of up to 6,666,667 shares of the Company’s common stock, par value $0.001, at a price to the public of $3.00 per share.  On May 21, 2013, the Company closed the public offering and completed the sale of 6,833,334 shares of its common stock, which includes 166,667 shares that were subject to the underwriters’ over-allotment option, at a price to the public of $3.00 per share, for proceeds, net of certain fees and expenses, of approximately $19.0 million.

 

Common Stock Bonus

 

During the nine months ended September 30, 2013, the Company issued 31,643 shares of common stock with a fair value of approximately $0.2 million to employees in lieu of cash in connection with bonuses recorded for the year ended December 31, 2012. There were no such stock issuances during the nine months ended September 30, 2012 or during the three months ended September 30, 2013.

 

December 2012 Stock Purchase Agreement

 

On December 14, 2012, the Company entered into a common stock purchase agreement with Aspire. Upon execution of the Purchase Agreement, Aspire purchased 158,982 shares of common stock for an aggregate purchase price of $1.0 million based the closing price of the Company’s common stock December 13, 2012, the date upon which the business terms were agreed. Under the terms of the Purchase Agreement, Aspire committed to purchase up to an additional 1,455,787 shares from time to time as directed by the Company over the next two years at prices derived from the market prices on or near the date of each sale. However, such commitment is limited to an additional $19.0 million of share purchases. In December 2012, in consideration for entering into the Purchase Agreement, the Company issued 74,548 shares of its common stock to Aspire in lieu of paying a commitment fee. During the nine months ended September 30, 2013, the Company sold all of the additional 1,455,787 shares of its common stock to Aspire allowed under the Purchase Agreement in consideration for aggregate proceeds of $6.6 million. The agreement terminated  on November 14, 2013 and no rights or obligations remain under the agreement.

 

March 2012 Sale of Common Stock and Economic Rights

 

On March 22, 2012, the Company entered into a purchase agreement with certain existing institutional stockholders, raising approximately $2.9 million of proceeds, net of certain fees and expenses. The proceeds from the financing were to be used to fund litigation-related expenses on certain intellectual property and for general corporate purposes.

 

Under the terms of the purchase agreement, the investors purchased 669,726 shares of the Company’s common stock at a price of $4.53, which is equal to the 10-day average closing price of the Company’s common stock for the period ending on March 21, 2012. In addition to the common stock, investors received contractual rights to receive cash equal to 10% of any litigation settlement related to the specified intellectual property, subject to a cap. In certain defined situations, the Company may have to issue either additional shares or warrants. These additional rights were settled in April 2013 in connection with the resolution of the Celgene matter. The shares issued at closing were subject to a lock-up period of one year from the date of issuance. See Note 3 - Fair Value for further details.

 

Common Stock Warrants

 

The following table summarizes information about warrants outstanding at September 30, 2013:

 

Issued in Connection With

 

Expiration
Date

 

Common
Shares
Issuable

 

Weighted
Average
Exercise
Price

 

February 2007 stock issuance

 

2014

 

151,773

 

$

59.08

 

July 2009 Series II stock issuance

 

2014

 

98,893

 

$

7.00

 

January 2010 stock issuance

 

2015

 

101,785

 

$

22.82

 

January 2010 stock issuance

 

2015

 

100,714

 

$

19.95

 

October 2010 stock issuance

 

2015

 

594,513

 

$

13.44

 

July 2011 stock issuance

 

2016

 

544,117

 

$

9.52

 

Total

 

 

 

1,591,795

 

$

17.06

 

 

There were no exercises of warrants during the three and nine months ended September 30, 2012 and 2013.