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Subsequent Events
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9 Months Ended | 12 Months Ended |
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Sep. 30, 2012
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Dec. 31, 2011
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| Subsequent Events [Text Block] |
10. Subsequent
Events
Hiring
of Vice President, Global Sales and Marketing
In
November 2012, the Company hired a Vice President, Global
Sales and Marketing (the “VP of
Sales”). The related employment
agreement stipulates that in November 2012, the VP of
Sales will be granted stock options to purchase 300,000
shares of the Company’s common stock and that an
additional 100,000 options will be granted on both the
first and second anniversary dates of his starting date.
The employment agreement also provides for certain
payments in connection with a change of control
transaction. Pursuant
to the employment agreement, on November 10, 2012, the
Company granted the VP of Sales options to purchase
300,000 shares of the Company’s common stock at an
exercise price of $1.63 per share, such options having a
10 year term.
January
2013 Private Placement
In
January 2013, the Company entered into a securities
purchase agreement with certain investors for the
private placement of shares of the Company’s
common stock and warrants to purchase shares of the
Company’s common stock, at a purchase price of
$1.20 per unit (the “January Financing
Transaction”). Each unit consisted of
one share of common stock and a warrant to purchase
one-half share of common stock.
In
the January Financing Transaction, the Company sold to
the investors 9,201,684 shares of common stock,
together with warrants to purchase 4,600,842 shares of
common stock, for aggregate gross proceeds of
approximately $11 million, before commissions and
offering expenses. Each warrant is
exercisable for five years from the date of issuance
and has an exercise price of $1.75 per share, subject
to adjustment from time to time for stock splits or
combinations, stock dividends, stock distributions,
recapitalizations and other similar
transactions. In addition, in the event the
Company issues shares of its common stock or common
stock equivalents in a financing transaction after the
January Financing Transaction at a price below the then
prevailing warrant exercise price, the exercise price
of the warrants will be adjusted downward to the price
at which the Company issues the common stock or common
stock equivalents. Non-employee directors of
the Company invested a total of $402,000 in the January
Financing Transaction. The Company’s placement
agents for the January Financing Transaction earned
commissions of approximately $1.1 million.
In
connection with the January Financing Transaction, the
Company entered into a registration rights agreement
with the investors pursuant to which the Company agreed
to prepare and file a registration statement with the
SEC covering the resale of the shares of common stock
and the shares of common stock underlying the warrants
issued in the financing. The Company will
bear the costs, including legal and accounting fees,
associated with the registration of those
shares. Once the registration statement is
filed, the Company will be required to use its best
efforts to have the registration statement declared
effective as soon as practicable. In the
event the registration statement is not filed on or
prior to the filing deadline set forth in the
registration rights agreement, the registration
statement is not declared effective by the SEC on or
prior to the effectiveness deadline set forth in the
registration rights agreement, or if the Company fails
to continuously maintain the effectiveness of the
registration statement (with certain permitted
exceptions), the Company will incur certain damages to
the investors, up to a maximum amount of 12% of the
investors’ investment in the January Financing
Transaction, or approximately $1.3 million.
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13.
Subsequent Events
2011Unit
Offering (Note 8)
On
February 24, 2012, the Company ended its unit offering. In
the unit offering, the Company sold approximately
54.3 units in the aggregate, of which approximately
38 units were sold subsequent to December 31,
2011. In connection with the approximately 38 units
sold subsequent to year-end, the Company issued 2011 Unit
Offering Notes in the aggregate principal amount of
$3,805,500 and warrants to purchase 1,902,750 shares of
common stock.
Modification
of Terms of BSC Notes (Note 6)
Effective
February 2, 2012, the Company entered into a loan
modification with BSC pursuant to which (i) interest
accrued under each of the BSC Notes as of February 2,
2012 was added to the principal balance of the note,
(ii) beginning February 2, 2012, the interest
rate of each of the BSC Notes was reduced from 10% per
annum to 0%, and (iii) the maturity date of each of
the BSC Notes was extended by three years (until October
through December 2014). As such, relying upon guidance in
ASC 470-10, the outstanding aggregate loan balance and
the related accrued interest, as of December 31, 2011 have
been classified as long-term liabilities in the
accompanying balance sheets. As of February 2, 2012,
the outstanding aggregate loan balance, including principal
and interest, owed to Boston Scientific was
$4,338,601.
Modification
of Terms of BSC Neuro Agreement (Note 5)
In
connection with the February 2012 modification of the BSC
Notes, the Company and BSC Neuro also amended the terms of
the BSC Neuro Agreement. The amended BSC Neuro Agreement
reduces the aggregate future milestone-based payments the
Company could receive from $1,600,000 to $800,000, and it
reduces the prospective royalty payments the Company could
receive on net sales of licensed products. In addition, the
amended BSC Neuro Agreement requires the Company to meet
certain net working capital targets, be current on its
payroll obligations, and not suffer an event of default
under any indebtedness for borrowed money, in each case
while the BSC Notes remain outstanding. If the Company does
not meet those requirements while the BSC Notes are
outstanding, the Company will be required to assign certain
patents and patent applications to BSC Neuro. However, upon
any such assignment to BSC Neuro, BSC Neuro will grant to
the Company an exclusive, royalty-free, perpetual worldwide
license to the same patents and patent applications in all
fields of use other than neuromodulation and implantable
medical leads for cardiac applications.
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