The 12,000,000 (12M) is a $12M dollar investment in APDN guaranteed by issuance of stock.
The $1.8M is the fee for issuance of the stock. This is a 15% fee.
There is an allowance for a 25% over allotment. This would be another $3M investment in the company. This additional stock would also carry a 15%(? maybe higher) fee which would be approx. $450K.
They are saying that the whole transaction shouldn't add up to more than $17.5M. Math doesn't add up perfectly, but the fees are only estimates, the $17.5M is a worst case.
The stock would be allotted at the current prevailing p/s when the transaction takes place. They also said that they believe the transaction would take place post the RS.
Either way, the transaction will be an IMMEDIATE loss for the investor since the issuing p/s will be the then current p/s and the stock issues will be additive to the total outstanding stock.
Example, 900M shares outstanding at $0.10 - company value is $90M (900M X $0.10). New investor receives issuance of $12M of stock at $0.10 - they receive 120M shares of stock. New total shares outstanding is 900M +120M = 1,020M shares of stock. Cost of the transaction is $1.8M which is paid for by APDN, thus, APDN is worth $90M - $1.8M = $88.2M value for the company. $88.2M divided by 1,020 shares of outstanding stock is a new pps of 0.08647. So, technically, this is an immediate loss for the new investor of [($0.10 - 0.08647) X 120,000,000 shares] = $1,623,600 or a 13.53% immediate loss. So, obviously, whoever the new investor is in APDN, they are looking for a bigger score. Note that they will get more shares this way than if they were to try and purchase 120M shares in the market without diluting the company. If they did this, we would all get rich. I know this, because when I was making my initial investment purchasing 20,000 to 100,000 shares a day (off and on) over many months, it took diligence to keep the p/s from climbing significantly and not drag out my purchases over multiple days (incurring additional transaction fees).
Caveat: the market is not a realistic predictor of the value of a penney stock company. The new value of the company will be whatever an investor is willing to buy or sell the stock for at the end of the day after the issuance of the new shares.
This could be easily manipulated if the average dollar value of stock being traded daily is similar to current. A person or company, knowing when the transaction will take place could dump $1M worth of shares (in the case above, 100M shares), at market rate, 5 minutes before the market closes. This would drive the p/s down. Thus the laws pertaining to insider information.
On the other hand, outside manipulators, realizing the transaction is imminent, could drive the price up at the end of the day for a couple of weeks straight with minimal share purchases at the end of each day. This would deflate the number of shares equivalent to $12M, thus minimize their loss assuming the p/s floats back down to what it was a couple of weeks prior to the issuance of new shares.
Thus the peril of investing in penney stocks and small companies.