Bionovo, Inc. (NASDAQ: BNVI), a pharmaceutical company focused on the discovery and development of safe and effective treatments for women's health and cancer, today announced that it has entered into a $5 million securities purchase agreement with Socius CG II, Ltd. ("Socius"), a Bermuda-based subsidiary of Socius Capital Group, LLC.
"In a challenging economic environment, we are pleased to have the necessary financial resources to continue the development of our drug candidate, Menerba," stated Isaac Cohen, OMD, Bionovo's chairman and CEO. "With this funding, we will continue the phase 3 clinical trial for Menerba, our drug candidate for the treatment of menopausal hot flashes. We also will be able to continue discussions with strategic partners to provide a stronger financial base."
Under the terms of the agreement, the Company has the right, in its sole discretion, over a term of two (2) years and subject to certain closing conditions and limitations, to sell to Socius up to a total of $5 million of redeemable Series A Preferred Stock of the Company (the "Preferred Stock"), payable in tranches. The Preferred Stock will accrue a 10% dividend per annum from the date of issuance. Pursuant to the purchase agreement, in addition to the Preferred Stock, Socius shall receive warrants to purchase shares of the Company's common stock valued at 35% of the Preferred Stock amount. The exercise price of the warrants will equal the closing bid price of the Company's common stock on the preceding day.
When Preferred Stock is sold, Socius is also obligated to exercise an additional investment right to purchase a number of shares of common stock valued at 100% of the amount of Preferred Stock purchased at a per share price equal to the exercise price of the warrants received in the sale of Preferred Stock. Both the warrants and additional investment right are exercised when the Company elects to sell a tranche of Preferred Stock to Socius.
Upon exercise, Socius must pay for the shares underlying the additional investment right and the warrants, at its option, either in cash or by delivering a full-recourse secured promissory note. Any such promissory note will bear interest at 2.0% per year calculated on a simple interest basis and be secured by certain securities owned by Socius with a fair market value equal to the principal amount of the promissory note.
The Company may redeem the Preferred Stock at any time and, at the option of either the Company or Socius, all outstanding promissory notes may be offset, exchanged and cancelled for all outstanding shares of Preferred Stock then held by Socius.
The securities, other than the Preferred Stock, under the purchase agreement were offered through a prospectus supplement pursuant to Bionovo's effective shelf registration statement and base prospectus contained therein. The Preferred Stock is not convertible into shares of common stock and neither the additional investment right nor the warrants will be listed on any national securities exchange.
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