Item
3.02.
Unregistered
Sales of Equity Securities.
On
October 19, 2007, we completed a private placement of equity securities to
three
affiliated funds managed by Kingdon Capital Management, LLC (the “Investors”),
pursuant to the terms of a Securities Purchase Agreement (the “Purchase
Agreement”). Pursuant to the Purchase Agreement, we sold an aggregate of
12,500,000 shares of our series A preferred stock (“Preferred Stock”) and
received gross proceeds of $10,000,000. The Preferred Stock is initially
convertible into an equal number of shares of our common stock (the “Common
Stock”) and has the rights, preferences and privileges set forth in the form of
Certificate of Designation, Preferences and Rights attached hereto as Exhibit
3.1.
As
part
of the transaction, we issued to the Investors warrants to purchase an aggregate
of up to 6,500,000 shares of Common Stock at an exercise price of $1.25 per
share (the “Market Warrants”) and warrants to purchase an aggregate of up to
5,000,000 shares of Common Stock at an exercise price of $1.80 per share (the
“Premium Warrants” and, together with the Market Warrants, the “Warrants”). The
Warrants are exercisable for five years, contain customary change of control
buy-out provisions, cashless exercise provisions and are not redeemable. The
Preferred Stock and Warrants also contain full ratchet anti-dilution provisions
for the first 18 months after issuance and weighted average protection for
issuances of capital stock below the respective conversion or exercise prices,
except in specified cases.
The
net
proceeds from the private placement will be used by us to expand our global
sales and marketing team and for general corporate purposes.
Under
the
Purchase Agreement, the Investors will be entitled to designate one member
to
our Board of Directors, so long as the Investors own a majority of the shares
of
the Preferred Stock originally acquired.
We
agreed
to file a registration statement with the U.S. Securities and Exchange
Commission within 30 days for purposes of registering the resale of the shares
of Common Stock issuable upon the conversion of the Preferred Stock and exercise
of the Warrants sold in the transaction.
The
securities sold in the private placement have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”), and were issued and
sold in reliance upon the exemption from registration contained in Section
4(2)
of the Securities Act and Regulation D promulgated thereunder. These securities
may not be offered or sold in the United States in the absence of an effective
registration statement or exemption from the registration requirements under
the
Securities Act.
The
foregoing descriptions of the Purchase Agreement, the Certificate of Designation
and Warrants are qualified in their entirety by reference to the full text
of
such documents, a copy of each of which is attached as an exhibit hereto and
each of which is incorporated herein in its entirety by reference.
We
announced the closing of the private placement in a press release issued on
October 22, 2007, a copy of which is attached as Exhibit 99.1 hereto and is
incorporated in its entirely by reference.