Stockholders' Equity

6 Months Ended

Jun. 30, 2011

Stockholders' Equity

Stockholders' Equity

6. Stockholders' Equity

On January 4, 2011, we and Lincoln Park Capital Fund, LLC ("LPC") entered into a committed equity facility (the "LPC Equity Facility"), together with a Registration Rights Agreement (the "Registration Rights Agreement"), whereby we have the right to sell to LPC up to $11,000,000 of our common stock over a 30-month period (any such shares sold being referred to as the "Purchase Shares"). Under the Registration Rights Agreement, we filed a registration statement related to the transaction with the SEC covering the Purchase Shares and the Additional Commitment Shares (as defined below), which was declared effective by the SEC on February 11, 2011. We will generally have the right, but not the obligation, over a 30-month period that commenced in April 2011, to direct LPC to periodically purchase the Purchase Shares in specific amounts under certain conditions. The purchase price for the Purchase Shares will be the lower of (i) the lowest trading price on the date of sale or (ii) the arithmetic average of the three lowest closing sale prices for the common stock during the 12 consecutive business days ending on the business day immediately preceding the purchase date. In no event, however, will the Purchase Shares be sold to LPC at a price of less than $0.15 per share.

In consideration for entering into the LPC Equity Facility, we issued to LPC 958,333 shares of common stock as an initial commitment fee (the "Initial Commitment Shares") and are required to issue up to 958,333 shares of common stock as additional commitment shares on a pro rata basis (the "Additional Commitment Shares") as we direct LPC to purchase our shares under the Equity Facility over the term of the agreement. The LPC Equity Facility may be terminated by us at any time at our discretion without any cost to us. The proceeds that may be received by us under the LPC Equity Facility are expected to be used for preclinical and clinical development of our drug candidates and for general corporate purposes, including working capital.

Under the LPC Equity Facility, we have agreed that, subject to certain exceptions, we will not, during the term of the LPC Equity Facility, effect or enter into an agreement to effect any issuance of common stock or securities convertible into, exercisable for or exchangeable for common stock in a "Variable Rate Transaction," which means a transaction in which we:

• issue or sell any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of common stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of common stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to our business or the market for the common stock; or

• enter into any agreement, including, but not limited to, an equity line of credit, whereby we may sell securities at a future determined price.

We have also agreed to indemnify LPC against certain losses resulting from our breach of any of our representations, warranties or covenants under the agreements with LPC.

During the three months ended June 30, 2011 we sold 100,000 shares of common stock to LPC as Purchase Shares for $18,600 in net proceeds. We also issued 1,620 Additional Commitment Shares in connection with this purchase.