Note 8— Other Equity and Common Stock Transactions
On March 1, 2011 the Company affected a 32 for one forward stock split of its authorized, issued and outstanding common stock. As a result, its authorized capital increased from 100,000,000 shares of common stock at $0.001 par value to 3,200,000,000 shares of common stock at $0.0001 par value, and its outstanding common stock has increased from 2,140,000 shares of common stock to 68,480,000 shares of common stock as of that date. The accompanying consolidated financial statements for the annual prior periods presented have been retroactively adjusted to reflect the effects of the forward stock split.
On March 22, 2011, 17,280,000 shares of common stock held by previous majority stockholders were returned to the Company for no consideration. The shares were not retired and are available for future issuance.
On May 9, 2011, the Board of Directors authorized the issuance of 200,000 fully vested shares of the Company’s common stock to a consultant in exchange for advisory services. The shares were valued at $332,000, based on the closing price of the Company’s common stock on the date of issuance, and are amortized over the service period of twelve months. During the three and six months ended January 31, 2012, $83,000 and $166,000, respectively, was recorded as consulting expense for these shares.
On September 28, 2011, in consideration for the Amendment entered into with Inovio, the Company issued to Inovio a warrant to purchase 1,000,000 shares of the Company’s common stock (see Note 6). The warrant has an exercise price of $1.20 per share, is exercisable immediately upon issuance and has an exercise term of five years. The warrant also contains a mandatory exercise provision allowing the Company to request the exercise of the warrant in whole provided that the Company’s Daily Market Price (as defined in the warrant) is equal to or greater than $2.40 for twenty consecutive trading days. The Company completed an evaluation of the warrant issued in connection with this private placement and determined the warrants should be classified as equity within the consolidated balance sheet. The fair value of the warrant is $228,509 (based on the Black-Scholes Option Pricing Model assuming no dividend yield, volatility of 87.62%, and a risk-free interest rate of 0.96%). In accordance with the guidance, the fair value of the warrants will be recorded as a discount to the acquisition obligation and amortized to interest expense over the remaining term of the modified obligation payable.
On January 23, 2012, the Company entered into a placement agent agreement with Rodman & Renshaw, LLC, whereby Rodman & Renshaw, LLC has agreed to act as the exclusive placement agent in connection with a potential future offering of registered securities of the Company. The placement agent will not be purchasing the securities offered, if any, and will not be required to sell any specific number or dollar amount of units, but will assist the Company in a future offering, if any, on a “best efforts” basis. The placement agent agreement terminates within 15 months of the date of the agreement and further provides that the agreement may be terminated by the placement agent at any time upon ten days prior written notice, or by the Company at any time after the end of the term upon ten days written notice. Neither the Company nor the placement agent are under any obligation to the consummate an offering, and an offering may not occur.
Upon the completion of an offering, if any, the Company would be obligated to pay the placement agent a placement fee equal to 6% of the aggregate gross proceeds from the sale of the common stock in the offering and a non-accountable expense allowance equal to 1% of the aggregate gross proceeds of the offering, if any. In addition to the cash fee, the Company has agreed to issue to the placement agent warrants to purchase up to an aggregate of 5% of the aggregate number of shares of common stock sold in the offering. Rodman & Renshaw, LLC, and the Company have also agreed that the Company may also choose to pay up to 30% of the amount of the 6% placement agent cash fee and issue up to 30% of the 5% placement agent warrants directly to other broker-dealers acting as placement agents or financial advisors in the offering, if any. The placement agent warrants would have the same terms as the warrants, if any, issued to the purchasers in the offering, except that the exercise price shall be 125% of the public offering price per share and the expiration date shall be five years from the effective date of the registration statement covering the shares sold in the offering. The placement agent warrants would not have antidilution protections and would not be transferable for six months from the date of the closing of the offering.
At January 31, 2012 the Company had outstanding warrants to purchase 14,696,000 shares of common stock, with exercise prices ranging from $0.75 to $1.20. These warrants expire at various times between February 2012 and September 2016. At January 31, 2012, 6,456,000 of these warrants were classified as equity instruments. The remaining warrants in the amount of 8,240,000 were recorded as derivative liabilities.
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during the periods presented.