Stockholders Equity (Deficit), Common and Preferred Shares

6 Months Ended

Jun. 30, 2011

Stockholders' Equity (Deficit), Common and Preferred Shares [Abstract]

Stockholders' Equity (Deficit), Common and Preferred Shares

4. Stockholders’ Equity (Deficit), Common and Preferred Shares

     The Company had 300,000,000 shares of common stock authorized as of June 30, 2011 and December 31, 2010. As of June 30, 2011, the Company had approximately 11,687,000 shares of common stock issued and outstanding.

     In July 2010, the Company entered into an “at the market” (ATM) equity offering sales agreement with MLV, pursuant to which it may issue and sell shares of its common stock from time to time through MLV acting as its sales agent and underwriter. Sales of the Company’s common stock through MLV are made on the Company’s principal trading market by means of ordinary brokers’ transactions at market prices, in block transactions or as otherwise agreed by MLV and the Company. MLV uses its commercially reasonable efforts to sell the Company’s common stock from time to time, based upon instructions from the Company (including any price, time or size limits the Company may impose). The Company has paid MLV a commission rate of up to 7.0% of the gross sales price per share of any common stock sold through MLV as agent under the sales agreement. The Company has also provided MLV with customary indemnification rights. During the six months ended June 30, 2011, the Company sold approximately 4,623,000 shares of common stock pursuant to the ATM sales agreement resulting in net proceeds to the Company of approximately $10,396,000. From July 1, 2011 through August 5, 2011, the Company sold approximately 2,665,000 shares of common stock pursuant to the ATM sales agreement resulting in net proceeds to the Company of approximately $6,032,000. Under our current prospectus supplement to Form S-3 dated July 8, 2011, there remains approximately $751,000 in net proceeds available to be sold under the ATM arrangement. No assurance can be given that the Company will sell any additional shares under the ATM sales agreement, or, if it does, as to the price or amount of shares that it will sell, or the dates on which any such sales will take place.

     Reverse Stock Split

     In February 2011, the Company’s board of directors voted unanimously to implement a 1:20 reverse stock split of the Company’s common stock, following authorization of the reverse split by a shareholder vote on December 21, 2010. The reverse split became effective on February 22, 2011. All of the share and per share values discussed and shown in the consolidated financial statements prior to this date have been adjusted to reflect the effect of this reverse stock split.

     Warrant Exchange Agreements

     On January 18, 2011, OXiGENE entered into separate Warrant Exchange Agreements (Private Placement Warrant Exchange) with each of the holders of Series A and Series C warrants to purchase shares of common stock, issued in March 2010, pursuant to which, at the initial closing, the warrant holders exchanged their outstanding Series A and Series C warrants having “ratchet” price-based anti-dilution protections for (A) an aggregate of 1,096,933 shares of common stock and (B) Series E Warrants to purchase an aggregate of 1,222,623 shares of common stock. The Series E Warrants were not exercisable for six months, had an exercise price of $4.60 per share (reflecting the market value of the shares of common stock as of the close of trading on January 18, 2011, prior to the entry into the Warrant Exchange Agreements), and did not contain any price-based anti-dilution protections. In addition, the Company agreed to seek shareholder approval to issue, in exchange for the Series E Warrants, up to 457,544 additional shares of common stock to the warrant holders in a subsequent closing. The initial closing occurred on January 20, 2011, and the subsequent closing took place on March 21, 2011, following a stockholder meeting on March 18, 2011. As a result, there were no Series A, Series C or Series E warrants outstanding as of the subsequent closing date nor for any period thereafter. Similar to the Series A and Series C warrants, the Series E Warrants were classified as a liability during the period that they were outstanding.

     In connection with the warrant exchange, the Company also amended its Stockholder Rights Agreement with American Stock Transfer & Trust Company, LLC, dated as of March 24, 2005, as amended as of October 1, 2008, October 14, 2009 and March 10, 2010, to provide that the provisions of the Stockholder Rights Agreement shall not apply to the transactions contemplated by the Warrant Exchange Agreements.

     The following table summarizes the number of shares of common stock of the Company issued and the proceeds received during the six month period ended June 30, 2011:

Shares Issued in Connection with:	Shares Issued		Net Proceeds
	(in thousands)
Director fees		8	$	—
ATM		4,623		10,396
Private Placement Warrant Exchange		1,554		—
Other		1		—
Totals		6,186	$	10,396

     Share issuances to our directors under the Director Compensation policy are described below. The shares issued in connection with the Private Placement Warrant Exchange during the six month period ended June 30, 2011 relate to the Warrant Exchange Agreements described above.

Warrants, Options, Non-Vested Stock, 2009 ESPP and Director Compensation Policy

     Warrants

     The following is a summary of the Company’s warrant-related derivative liability activity for the six months ended June 30, 2011 (in thousands):

	(In thousands)
Derivative liability outstanding at December 31, 2010	$	7,611
Impact of warrant exchange agreements		(6,071	)
CEFF warrants — amounts reclassified to equity		(3	)
Net decrease in fair value of all warrants		(1,489	)
Derivative liability outstanding at June 30, 2011	$	48

     The table below summarizes the value of the warrant-related derivative liabilities recorded on the Company’s balance sheet (in thousands):

	As of June 30, 2011		As of December 31, 2010
Warrants Issued in Connection with:	Long-term		Long-term
Committed Equity Financing Facility	$	—	$	6
Direct Registration Series I Warrants		48		107
Private Placement Series A Warrants		—		4,143
Private Placement Series C Warrants		—		3,355
Total derivative liability	$	48	$	7,611

The gain (loss) from the change in fair value of warrants and other financial instruments for the three and six month periods ended June 30, 2011 and 2010 is summarized below (in thousands):

	Three months ended June 30,					Six months ended June 30,
	2011			2010		2011		2010
Committed Equity Financing Facility Warrants	$	—		$	88	$	3	$	90
Direct Registration Warrants		(31	)		1,753		59		1,978
Excess of value of the Private Placement Warrants at issuance over the net proceeds of the offering		—			—		—		(4,433	)
Gain recognized in connection with warrant exchange agreements		—			—		690		—
Private Placement Warrants		—			5,698		1,427		5,271
Total gain (loss) on change in fair market value of derivatives	$	(31	)	$	7,539	$	2,179	$	2,906

     The following is a summary of the Company’s outstanding common stock warrants as of June 30, 2011 and December 31, 2010:

				Number of Warrants outstanding as of:
		Average Exercise		(in thousands)
Warrants Issued in Connection with:	Date of Issue	Price		June 30, 2011		December 31, 2010
Committed Equity Financing Facility	February 19, 2008	$	54.80		13		13
Direct Registration Series I Warrants	July 20, 2009	$	42.00		141		141
Private Placement Series A Warrants	March 11, 2010	$	5.60		—		1,536
Private Placement Series C Warrants	March 11, 2010	$	5.60		—		1,229
Total Warrants outstanding					154		2,919

     Note that as of December 31, 2010, the Committed Equity Financing Facility warrants were accounted for as a liability. Effective with the Warrant Exchange described above, these warrants have been reclassified as equity.

Private Issuance of Public Equity “PIPE” Warrants

     On March 11, 2010, the Company completed a definitive agreement with certain institutional investors to sell shares of its common stock and four separate series of warrants to purchase common stock in a private placement. Gross proceeds of the financing were approximately $7,500,000, before deducting placement agent fees and estimated offering expenses, and excluding the subsequent exercises of the warrants.

     The four separate series of warrants consisted of the following:

     (A) Series A Warrants to initially purchase 328,947 shares of common stock, which were exercisable immediately after issuance, had a 5-year term and had an initial per share exercise price of $30.40;

     (B) Series B Warrants to initially purchase 328,947 shares of common stock, which were initially exercisable at a per share exercise price of $22.80, on the earlier of the six month anniversary of the closing date or the date on which the Company’s stockholders approved the issuance of shares in the transaction, and expired on the later of three months from the effective date of the resale registration statement covering such shares and seven months from the closing date. These warrants expired on October 12, 2010;

     (C) Series C Warrants to initially purchase 328,947 shares of common stock, and which would be exercisable upon the exercise of the Series B Warrants and on the earlier of the six month anniversary of the closing date or the date on which the Company’s stockholders approved the issuance of shares in the transaction, would expire five years after the date on which they become exercisable, and had an initial per share exercise price of $22.80; and

     (D) Series D Warrants to purchase shares of common stock. The Series D Warrants were not immediately exercisable. The Company registered for resale 337,757 shares of common stock issuable upon exercise of the Series D Warrants pursuant to an agreement with the warrant holders. All of the Series D Warrants were exercised by November 4, 2010 and there are no Series D Warrants outstanding after that date.

     The Series A, B and C warrants listed above contained full ratchet anti-dilution features based on the price and terms of any financings completed after March 11, 2010 as described in the warrant agreements. All of the warrants listed above contained a cashless exercise feature as described in the warrant agreements.

     The Company determined that in accordance with Accounting Standards Codification (ASC) 480, Distinguishing Liabilities from Equity, the Series A, B, and C warrants qualify for treatment as liabilities due to provisions of the related warrant agreements that call for the number of warrants and their exercise price to be adjusted in the event that the Company issues additional shares of common stock, options or convertible instruments at a price that is less than the initial exercise price of the warrants. The Company also determined that, in accordance with ASC 815, Derivatives and Hedging, the Series D Warrants meet the definition of a derivative. The issuance date fair market value of the Series A, B, C and D warrants of $11,868,000 was recorded as a liability. The approximately $4,933,000 excess of the fair value of the liability recorded for these warrants over the net proceeds received was recorded as a charge to earnings and is included in “Change in fair value of warrants and other financial instruments” within the Statement of Operations. Changes in the fair market value from the date of issuance to the exercise date and reporting date, until exercised or cancelled will be recorded as a gain or loss in the statement of operations.

     As of December 31, 2010, all Series B and D warrants had either been exercised or expired.

     On January 18, 2011, OXiGENE entered into separate Warrant Exchange Agreements with each of the holders of Series A and Series C warrants to purchase shares of common stock, issued in March 2010, pursuant to which, at the initial closing, the warrant holders exchanged their outstanding Series A and Series C warrants having “ratchet” price-based anti-dilution protections for (A) an aggregate of 1,096,933 shares of common stock and (B) Series E Warrants to purchase an aggregate of 1,222,623 shares of common stock. The Series E Warrants were not exercisable for six months, had an exercise price of $4.60 per share (reflecting the market value of the shares of common stock as of the close of trading on January 18, 2011, prior to the entry into the Warrant Exchange Agreements), and did not contain any price-based anti-dilution protections. In addition, the Company agreed to seek shareholder approval to issue, in exchange for the Series E Warrants, up to 457,544 additional shares of common stock to the warrant holders in a subsequent closing. The Series E Warrants were accounted for as a liability from the date of issuance to the date of exchange, all of which occurred during the first quarter of fiscal 2011. The initial closing occurred on January 20, 2011, and the subsequent closing took place on March 21, 2011, following the stockholder meeting on March 18, 2011. The Company determined that in accordance with Accounting Standards Codification (ASC) 480, Distinguishing Liabilities from Equity, the Series E warrants qualify for treatment as a liability during the period that they were outstanding due to provisions of the related warrant agreement that allow for the warrants to be net settled in shares of the Company’s common stock under certain circumstances as described in the agreement. There were no Series A, Series C or Series E warrants outstanding as of June 30, 2011.

     On January 20, 2011, the date of the initial closing of the Warrant Exchange Agreements, the Company marked the existing Series A and C warrants to market at a combined fair value of $6,633,000. These warrants were exchanged for Series E warrants, valued at $1,555,000, and shares of common stock valued at $4,388,000. The difference between these items was recorded as a gain on the transaction of $690,000. On the date of the subsequent closing, the fair value of the Series E warrants was equal to the value of the 457,544 shares of common stock issued in the exchange, and therefore there was no gain or loss on the transaction.

     The table below summarizes the factors used to determine the value of the Series A and C warrants outstanding during the six month period ended June 30, 2011. The Company established the fair value of the Series A and C warrants using the Black-Scholes option valuation model:

	Warrant Valuation on date of Warrant Exchange
	January 19, 2011						Total Fair
	Series A			Series C			Market Value
Stock Price	$	4.32		$	4.32
Exercise Price	$	5.60		$	5.60
Contractual life (in Years)	4.1 years			4.5 years
Expected volatility		82	%		79	%
Risk-free interest rate		1.53	%		1.68	%
Fair market value (in thousands)	$	3,663		$	2,970		$	6,633

	Warrant Valuation as of
	December 31, 2010						Total Fair
	Series A			Series C			Market Value
Stock Price	$	4.60		$	4.60
Exercise Price	$	5.60		$	5.60
Contractual life (in Years)	4.2 years			4.5 years
Expected volatility		81	%		80	%
Risk-free interest rate		2.01	%		2.01	%
Fair market value (in thousands)	$	4,143		$	3,355		$	7,498

     Management determined the fair value of the Series E Warrants on the date of the initial closing to be $1,555,000. This fair value was estimated based upon the $4.00 per share fair value of the 457,544 shares of common stock expected to be exchanged for the Series E Warrants upon shareholder approval adjusted for a 15% discount for lack of marketability which existed until the expected shareholder vote. Management determined the fair value of the Series E warrants on the date of the subsequent closing to be $993,000. This fair value was estimated based upon the $2.17 per share fair value of the 457,544 shares of common stock exchanged for the Series E Warrants.

Committed Equity Financing Facility (“CEFF”) with Kingsbridge Capital Limited

     In February 2008, OXiGENE entered into a Committed Equity Financing Facility (“CEFF”) with Kingsbridge Capital Limited (“Kingsbridge”), which was subsequently amended in February 2010 to increase the commitment period, increase the draw down discount price and increase the maximum draw period.

     Under the terms of the amended CEFF, Kingsbridge committed to purchase, subject to certain conditions, up to 285,401 shares of the Company’s common stock during the period which ends May 15, 2012. Under the CEFF, OXiGENE is able to draw down in tranches of the lesser of (i) $10,000,000 or (ii) a maximum of 3.75 percent of its closing market value at the time of the draw down or the alternative draw down amount calculated pursuant to the common stock purchase agreement, whichever is less, subject to certain conditions. The purchase price of these shares is discounted between 5 and 14 percent from the volume weighted average price of our common stock for each of the eight trading days following the election to sell shares. Kingsbridge is not obligated to purchase shares at prices below $0.75 per share or at a price below 85% of the closing share price of OXiGENE stock in the trading day immediately preceding the commencement of the draw down, whichever is higher. In connection with the CEFF, the Company issued a warrant to Kingsbridge to purchase 12,500 shares of its common stock at a price of $54.80 per share exercisable beginning six months after February 19, 2008 and for a period of five years thereafter. As of June 30, 2011, there remain a total of 253,671 shares available for sale under the CEFF.

     Due to the initially indeterminate number of shares of common stock underlying the warrants issued in connection with the Company’s private placement on March 11, 2010, OXiGENE concluded that the CEFF warrants should be recorded as a liability effective with the date of the private placement. The fair value of the warrants on this date was reclassified from equity to derivative liabilities. Changes in the fair market value from the date of the private placement to the reporting date were recorded as a gain or loss in “Change in fair value of warrants and other financial instruments” in the Statement of Operations. Effective with the warrant exchange agreements executed in January 2011 in connection with the March 2010 private placement as described above, the number of shares underlying the warrants issued in connection with the Company’s private placement was no longer indeterminable, and the CEFF warrants were reclassified to equity. The Company revalued these warrants on the effective date of the exchange and recorded the gain in the Statement of Operations. The Company established the fair value of the CEFF warrants using the Black-Scholes option valuation model as reflected in the table below:

	Warrant Valuation as of:
	Date of Warrant Exchange
	January 19, 2011			December 31, 2010
Stock Price	$	4.32		$	4.60
Exercise Price	$	54.80		$	54.80
Contractual life (in Years)	2.6 years			2.6 years
Expected volatility		87	%		96	%
Risk-free interest rate		0.82	%		1.02	%
Fair market value (in thousands)	$	3		$	6

Direct Registration Warrants

     On July 20, 2009, OXiGENE raised approximately $10,000,000 in gross proceeds, before deducting placement agents’ fees and other offering expenses, in a registered direct offering (the “Offering”) relating to the sale of 312,500 units, each unit consisting of (i) one share of common stock, (ii) a five-year warrant (“Direct Registration Series I”) to purchase 0.45 shares of common stock at an exercise price of $42.00 per share of common stock and (iii) a short-term warrant (“Direct Registration Series II”) to purchase 0.45 shares of common stock at an exercise price of $32.00 per share of common stock (the “Units”). The short-term warrants expired on September 24, 2010 consistent with the terms of the warrant, without being exercised.

     OXiGENE determined that the Direct Registration Series I warrants should be classified as a liability as they require delivery of registered shares of common stock and thus could require net-cash settlement in certain circumstances. Accordingly, these warrants were recorded as a liability at their fair value as of the date of their issuance and are revalued at each subsequent reporting date.

     The fair value of the direct registration warrants was determined using the Black-Scholes option valuation model applying the following assumptions:

	Series I Warrant Valuation as of:
	June 30, 2011			December 31, 2010
	Series I			Series I
Stock Price	$	2.48		$	4.60
Exercise Price	$	42.00		$	42.00
Contractual life (in Years)	3.1 years			3.6 years
Expected volatility		103	%		86	%
Risk-free interest rate		0.81	%		1.02	%
Fair market value (in thousands)	$	48		$	107

Options

     The Company’s 2005 Stock Plan provides for the award of options, restricted stock and stock appreciation rights to acquire up to 375,000 shares of the Company’s common stock. This number includes shares of its common stock, if any, that were subject to awards under the Company’s 1996 Plan as of the date of adoption of the 2005 Plan but which became or will become unissued upon the cancellation, surrender or termination of such award. Currently, the 2005 Plan allows for awards of up to 37,500 shares that may be granted to any participant in any fiscal year. For options subject to graded vesting, the Company elected the straight-line method of expensing these awards over the service period.

     The following is a summary of the Company’s stock option activity under its 1996 Plan and 2005 Plan for the six-month period ended June 30, 2011:

						Weighted
						Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Shares			Exercise Price		Life		Intrinsic Value
	(In thousands)					(Years)		(In thousands)
Options outstanding at December 31, 2010		326		$	28.49		8.63
Granted		—
Exercised		—
Forfeited and expired		(19	)	$	17.38
Options outstanding at June 30, 2011		307		$	29.15		8.08	$         —
Options exercisable at June 30, 2011		134		$	42.34		7.17
Options vested or expected to vest at June 30, 2011		191		$	34.86		7.67

     During the six months ended June 30, 2011, 4,000 options expired. As of June 30, 2011, there was approximately $708,000 of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over a weighted average period of 2.4 years.

     No stock options were granted during the six month periods ended June 30, 2011 and 2010.

Restricted Stock

     The Company recorded expense of approximately $25,000 and $50,000 during the three month periods ended June 30, 2011 and June 30, 2010, respectively, related to restricted stock awards granted in June 2007. The Company recorded expense of approximately $19,000 and $60,000 during the six month periods ended June 30, 2011 and June 30, 2010, respectively. The restricted stock awards were valued based on the closing price of the Company’s common stock on their respective grant dates. Compensation expense has been recognized on a straight-line basis over the 4 year vesting period of the awards.

Employee Stock Purchase Plan (2009 ESPP) In May 2009, the Company’s stockholders approved the 2009 Employee Stock Purchase Plan (the “2009 ESPP”). Under the 2009 ESPP, employees have the option to purchase shares of the Company’s common stock at 85% of the closing price on the first day of each purchase period or the last day of each purchase period (as defined in the 2009 ESPP), whichever is lower, up to specified limits. Eligible employees are given the option to purchase shares of the Company’s common stock, on a tax-favored basis, through regular payroll deductions in compliance with Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). Currently, an aggregate of 125,000 shares of common stock may be issued under the 2009 ESPP, subject to adjustment each year pursuant to the terms of the 2009 ESPP. The Company recorded expense relating to the 2009 ESPP for the three month periods ended June 30, 2011 and 2010 of approximately $1,000 and $1,000, respectively. The Company recorded expense relating to the 2009 ESPP for the six month periods ended June 30, 2011 and 2010 of approximately $1,000 and $3,000, respectively. Pursuant to the 2009 ESPP provisions, each year beginning in 2010 there will be an annual increase in the number of shares available for issuance under the ESPP on the first day of the new year in an amount equal to the lesser of: 25,000 shares or 5% of the shares of Common Stock outstanding on the last day of the preceding fiscal year.

Director Compensation Policy

     In December 2009, the Board of Directors approved the amended and restated policy which established compensation to be paid to non- employee directors of the Company, to provide an inducement to obtain and retain the services of qualified persons to serve as members of the Company’s Board of Directors. As a result of this plan, each of the Company’s non-employee Directors are granted 1,250 fully vested shares of common stock on both January 2 and July 1 of each year they are a director. The Company recorded expense for the three month periods ended June 30, 2011 and 2010, of $0 and $100,000, respectively for these shares. The Company recorded expense of approximately $35,000 and $200,000 during the six month periods ended June 30, 2011 and June 30, 2010, respectively.