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EnteroMedics Completes $6.3 Million Convertible Preferred Stock Offering
ST. PAUL, MN – September 30, 2010
EnteroMedics Inc. (NASDAQ: ETRM), the
developer of medical devices using neuroblocking technology to treat obesity and other gastrointestinal disorders, today
announced that it has entered into binding securities purchase agreements in a private placement transaction with several
accredited investors for a Series A non-voting convertible preferred stock offering, with gross proceeds of $6.3 million, before
deducting offering expenses, and expects to close the transaction today. The offer includes the sale and issuance of
approximately 3.4 million shares of the convertible preferred stock at a purchase price of $1.72 per share, the closing bid price
of the Company's common stock as reported on the Nasdaq Capital Market on September 29, 2010. Each share of preferred
stock is convertible into one share of the Company's common stock. The Company intends to use the net proceeds of this
offering for general working capital purposes. Canaccord Genuity Inc. acted as the sole placement agent for the offering.
In addition to the shares purchased, approximately 3.4 million warrants of common stock were issued. The warrants, which
represent the right to acquire one share of EnteroMedics' common stock, have an exercise price per share of 125% of the
original purchase price of the convertible preferred stock. The purchase price for each warrant will equal $0.125 per share of
common stock underlying the warrant. The warrants will become exercisable upon the later to occur of the following: (i) the date
that is six months and one day after the issuance of the warrants, or (ii) the closing of an offering of equity securities producing
gross proceeds of at least $15 million (excluding proceeds from the convertible preferred stock offering).
The offer and sale of the shares of the Company's common stock and warrants have not been registered under the Securities
Act of 1933, as amended, and the shares and warrants may not be offered or sold in the United States absent registration
under such act and applicable state securities laws or an applicable exemption from those registration requirements. The
securities were offered and will be sold only to a limited number of accredited investors. Pursuant to the securities purchase
agreements, the Company agreed to file a registration statement with the Securities and Exchange Commission following the
conversion of the convertible preferred stock into shares of common stock, registering for resale a certain number of the
shares of common stock and common stock issuable upon exercise of the warrants sold to certain of the investors in the
private placement. This press release is being issued pursuant to Rule 135(c) under the Securities Act of 1933, as amended,
and shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities
laws of any such jurisdiction.
About EnteroMedics Inc.
EnteroMedics is a development stage medical device company focused on the design and development of devices that use
neuroblocking technology to treat obesity and other gastrointestinal disorders. EnteroMedics' proprietary neuroblocking
technology, VBLOC(R) vagal blocking therapy, is designed to intermittently block the vagus nerves using high-frequency, lowenergy,
electrical impulses. These electrical impulses are delivered by a neuroregulator which is powered either by an external
controller (Maestro RF System) or an integrated rechargeable battery (EnteroMedics' second-generation Maestro RC System).
EnteroMedics is currently conducting a feasibility study examining VBLOC Therapy's effects on blood glucose levels in diabetic
patients outside of the United States. For more information, visit www.enteromedics.com.
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