STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2012

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

6.          Stockholders’ Equity

On January 5, 2011, we entered into a securities purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which we sold in a registered direct offering 1,851,852 shares of our common stock to LPC at a price per share of $0.27, for gross proceeds of $500,000 before offering expenses (the "Registered Offering"). As part of the Registered Offering, we also issued to LPC, for no additional consideration, a warrant to purchase 740,741 shares of common stock at an exercise price of $0.38 per share (the "LPC Warrant"). Subject to certain ownership limitations, the LPC Warrant is exercisable until January 7, 2016. The exercise price of the LPC Warrant is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

The Registered Offering was made pursuant to an S-3 shelf registration statement on (SEC File No. 333-150675), which was declared effective by the SEC on May 16, 2008, pursuant to a prospectus supplement filed with the SEC on January 7, 2011.

The Registered Offering closed on January 7, 2011. No discounts or placement agent fees were payable in connection with the Registered Offering, and the Company used the proceeds from the Registered Offering for preclinical and clinical development of the Company's drug candidates and for general corporate purposes, including working capital.

On January 5, 2011, we entered into three separate securities purchase agreements (each, a "Sigma-Tau Purchase Agreement" and together, the "Sigma-Tau Purchase Agreements") with affiliates of Sigma-Tau Group, our largest stockholder (the "Sigma-Tau Purchasers"), with respect to the private placement (the "Private Placement") of an aggregate of 3,518,519 shares of common stock (the "Sigma-Tau Shares") at a price per share of $0.27, for gross proceeds of $950,000. No discounts or placement agent fees were payable in connection with the Private Placement, and we used the net proceeds of the Private Placement for working capital and other general corporate purposes.

In connection with the Private Placement, we also issued to the Sigma-Tau Purchasers warrants (the "Sigma-Tau Warrants") to purchase an aggregate of 1,407,407 additional shares of common stock at an exercise price of $0.38 per share. The Sigma-Tau Warrants are exercisable until January 7, 2016. The exercise price of the Sigma-Tau Warrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The Private Placement closed on January 7, 2011.

In connection with the Private Placement, on January 5, 2011, we and the Sigma-Tau Purchasers entered into an agreement (the "Warrant Amendment") to amend the terms of certain outstanding warrants held by the holders of such warrants (the "Holders"). Under the Warrant Amendment, all outstanding warrants held by the Holders that were issued between March 2006 and December 2008, exercisable for an aggregate of 3,046,453 shares of Common Stock and with exercise prices between $1.60 per share and $4.06 per share, were amended to reduce their exercise prices to $0.38 per share and to extend their expiration dates to December 31, 2011. The incremental fair value transferred to the holders pursuant to the Warrant Amendment was not material. All of the amended warrants expired unexercised on December 31, 2011.

On January 4, 2011, we and LPC also 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 through October 2013 (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 began 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 2011, we sold 1,500,000 shares of common stock to LPC as Purchase Shares for $348,200 in net proceeds. We also issued 30,336 Additional Commitment Shares in connection with this purchase. At December 31, 2011 additional sales to LPC were not available as our share price was less than $0.15 per share. During the nine months ended September 30, 2012 we did not sell any shares to LPC, and we may not sell additional shares to LPC until such time as we have filed a post-effective amendment to the original registration statement and such amendment has been declared effective by the SEC.