The debentures mature the earlier of November 1, 2012 or the sale of the company. The debentures, together with all accrued and unpaid interest thereon, may be repaid, without premium or penalty, commencing on November 1, 2011. Starting on November 1, 2009 (or earlier sale of the company), any outstanding debenture may be converted at the option of the holder. The conversion price is fixed equal to $0.70 per share.
The debentures bear interest at the rate of 10% per annum, payable semi-annually either in cash or common stock of the company at the option of the company.
Under the terms of the offering, the company may raise gross proceeds up to an aggregate of $8 million from the sale of debentures in the placement (including the debentures issued at the initial closing). A second closing is targeted for no later than 45 days from the date of the initial closing.
The proceeds will be used for working capital, in particular for the ongoing Phase IIb trial for dextofisopam.