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Common Stock
3 Months Ended
Apr. 30, 2012
Stockholders' Equity Note [Abstract]  
Common Stock

7.         Common Stock

 

On October 24, 2011, we entered into a one year service agreement for investor relations services. We issued 150,000 shares of our common stock, with a value of $97,000, for these services. The value was capitalized to prepaid expenses and is being amortized over the term of the agreement. During the three and nine months ended April 30, 2012, we recognized $24,000 and $48,000, respectively, of expense related to these services.

 

In April 2011, we entered into a sales agreement with an investment banking firm. On December 14, 2011, we terminated such sales agreement and, consequently, there have been no sales of our common stock under the sales agreement since its termination. Under the terms of the sales agreement, we were permitted to offer and sell shares of our common stock having an aggregate offering price of up to $7,000,000. The sales were made, from time to time, through the investment bank in “at the market” offerings, as defined by the SEC, and were made pursuant to our effective shelf registration statement previously filed with the SEC. During the three and nine months ended April 30, 2012, we sold zero and 1,337,091 shares, respectively, of our common stock pursuant to these offerings, for net proceeds of zero and $948,000, respectively.

 

On December 14, 2011, we entered into a purchase agreement, or the $7.5M Purchase Agreement, and a related registration rights agreement with Lincoln Park Capital Fund, LLC, or Lincoln Park, pursuant to which Lincoln Park agreed to purchase from us up to $7,500,000 in shares of our common stock subject to the satisfaction of certain conditions, including the SEC declaring effective a registration statement for the resale of such shares. On April 10, 2012, we filed the resale registration statement with the SEC, but it has not been declared effective. On May 18, 2012, we delivered notice to Lincoln Park of our termination of the $7.5M Purchase Agreement and, consequently, there have been, and there will be, no sales of our common stock to Lincoln Park under the $7.5M Purchase Agreement. As consideration for its commitment to purchase shares of our common stock pursuant to the $7.5M Purchase Agreement, in December 2011, we issued to Lincoln Park 470,711 shares of our common stock as restricted securities.

 

On December 15, 2011, we entered into an additional purchase agreement, or the $2.5M Purchase Agreement, with Lincoln Park, pursuant to which Lincoln Park agreed to purchase from us up to $2,500,000 in shares of our common stock. Under the terms of the $2.5M Purchase Agreement, the shares were to be sold to Lincoln Park from time to time at a purchase price per share based on the prevailing market prices of our common stock and were registered pursuant to our shelf registration statement previously filed with the SEC, as supplemented by our registration statement on Form S-3MEF. That shelf registration statement expired on May 8, 2012, and on May 18, 2012, concurrently with our notice of termination of the $7.5M Purchase Agreement, we delivered notice to Lincoln Park of our termination of the $2.5M Purchase Agreement. Accordingly, since the date of the notice, there have been, and there will be, no further sales of our common stock to Lincoln Park under the $2.5M Purchase Agreement. As consideration for its commitment to purchase shares of our common stock under to the $2.5M Purchase Agreement, in December 2011, we issued to Lincoln Park an additional 156,904 shares of our common stock. Such shares were registered pursuant to our then-effective shelf registration statement. During the three and nine months ended April 30, 2012, we sold 3,400,000 and 5,747,709 shares, respectively, of our common stock to Lincoln Park pursuant to the $2.5M Purchase Agreement. Net proceeds from the sale of these shares were $990,000 and $1,719,000, respectively.

 

In connection with our agreements with Lincoln Park, as of April 30, 2012, we recorded deferred offering costs of $424,000. Of this amount, $128,000 represents fees associated with the offering, and $296,000 represents the fair market value of the 627,615 shares of our common stock issued to Lincoln Park as commitment shares. The deferred offering costs were recorded on our balance sheet and have been amortized as we have utilized the purchase agreements. During the three and nine months ended April 30, 2012, we amortized $83,000 and $137,000, respectively, of the deferred offering costs.

 

In connection with the sale of our common stock to Lincoln Park pursuant to the $2.5M Purchase Agreement and the $7.5M Purchase Agreement, we agreed to pay a cash fee to Wharton Capital Markets LLC, or Wharton, pursuant to an engagement letter dated December 8, 2011, in an amount equal to 6% of the aggregate gross proceeds to us from the issuance and sale of shares pursuant to our agreements with Lincoln Park. Total fees recognized during the three and nine months ended April 30, 2012 were $72,000 and $122,000, respectively. Such amounts became due and payable to Wharton at the time that we actually received funds from Lincoln Park pursuant to such agreements, subject to our receipt of written confirmation that the Corporate Finance Department of the Financial Industry Regulatory Authority, Inc., or FINRA, had determined not to raise any objection with respect to the fairness or reasonableness of the compensation terms of our arrangement with Wharton. We have received no funds from Lincoln Park since our last sale of our common stock to Lincoln Park under the $2.5M Purchase Agreement and, because there will be no further sales of our common stock under either of the purchase agreements with Lincoln Park, no additional amounts will be paid to Wharton pursuant to the engagement letter. The engagement letter also provided that we issue to Wharton a warrant, or the Warrant, to purchase 200,000 shares of our common stock with an exercise price of 110% of the closing sale price of our common stock on the date of the issuance of the Warrant, subject to our receipt of no-objection confirmation from FINRA as described above. On February 3, 2012, we received that written confirmation from FINRA and, consequently, issued to Wharton the Warrant as of that date at an exercise price of $0.451 per share. A fair value of $53,000 was estimated for the Warrant using the Black-Sholes valuation method. Neither the Warrant issued to Wharton nor the shares to be issued upon exercise thereof have been or are to be registered for sale or resale under the Securities Act of 1933 (the “Securities Act”) and will be issued in reliance on an exemption from registration under the Securities Act pursuant to Section 4(2) thereof.

 

Our agreements with Lincoln Park and Wharton are described in more detail in our Current Report on Form 8-K, which we filed with the SEC on December 15, 2011. Additionally, those agreements and the Warrant issued to Wharton were filed as exhibits to our Quarterly Report on Form 10-Q for the period ended January 31, 2012, which we filed with the SEC on March 16, 2012.

 

On April 10, 2012, we entered into a four-month agreement with a consultant for investor relations services. We issued 160,000 shares of our common stock to the consultant, with a value of $45,000, for these services. The value was capitalized to prepaid expenses and is being amortized over the term of the agreement. During the three and nine months ended April 30, 2012, we recognized $11,000 of expense related to these services.