What changed in this filing

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Item 1. Financial Statements

2021-05-10 compared with 2020-11-09 · 117 added, 108 removed, 227 unchanged (50% of the section changed)

2 unchanged sentences

Condensed Balance Sheets

September 30,

Current Assets:

19 unchanged sentences

2,500,000 shares authorized;

0 shares issued and outstanding as of September 30, 2020 and December 31, 2019

0 shares issued and outstanding as of March 31, 2021 and December 31, 2020

Common stock, $ 0.001 par value:

25,000,000 shares authorized;

10,289,253 and 10,253,988 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

12,287,896 and 10,299,822 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

7 unchanged sentences

Condensed Statements of Operations

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Operating expenses:

5 unchanged sentences

( 2,310,813 )

( 7,004,828 )

( 5,907,537 )

Other income (expense)

1 unchanged sentence

Interest income

Loss on sale of fixed assets

Other income, net

2 unchanged sentences

( 2,246,995 )

( 6,923,282 )

( 5,550,339 )

Income tax benefits

1 unchanged sentence

$ ( 2,246,995 )

$ ( 6,923,282 )

$ ( 5,550,339 )

Net loss per share, basic and diluted

3 unchanged sentences

Condensed Statements of Changes in Stockholders' Equity

Three and Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Additional Paid-In

Balance at December 31, 2020

1 unchanged sentence

Stock-based compensation

( 2,246,995 )

Balance at March 31, 2020 (unaudited)

( 19,094,401 )

Stock-based compensation

Employee stock purchases

Exercise of common stock warrants

Exercise of common stock options, net of shares withheld for exercise price

Issuance of common stock upon closing of follow-on offering, net of underwriting discounts and offering costs

Issuance of common stock in an at-the-market ("ATM") offering

2 unchanged sentences

( 2,791,668 )

Balance at June 30, 2020 (unaudited)

( 21,296,390 )

Stock-based compensation

Issuance costs associated with ATM offering

( 2,474,298 )

Balance at September 30, 2020 (unaudited)

Balance at March 31, 2021 (unaudited)

$ ( 29,113,249 )

2 unchanged sentences

Condensed Statements of Changes in Stockholders' Equity

Three and Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Additional Paid-In

Balance at December 31, 2019

1 unchanged sentence

Stock-based compensation

Exercise of common stock options

( 2,246,995 )

2 unchanged sentences

$ ( 19,094,401 )

Stock-based compensation

Exercise of common stock options, net of shares withheld for exercise price

Employee stock purchases

( 1,720,177 )

Balance at June 30, 2019 (unaudited)

( 13,054,127 )

Stock-based compensation

Exercise of common stock options, net of shares withheld for exercise price

( 1,984,254 )

Balance at September 30, 2019 (unaudited)

$ ( 15,038,381 )

See accompanying notes to the financial statements

1 unchanged sentence

Condensed Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Stock-based compensation

Non-cash interest income, net of cash received

Loss on sale of fixed assets

Changes in operating assets and liabilities:

7 unchanged sentences

Cash flows from investing activities:

Proceeds from sale of investments

Purchases of property and equipment

Net cash provided by (used for) investing activities

Proceeds from sale of property and equipment

Net cash used for investing activities

Cash flows from financing activities:

Proceeds from exercise of employee stock options

Proceeds from employee stock purchases

Proceeds from exercise of common stock warrants

Proceeds from follow-on offering, net of underwriting discounts and offering costs

Gross proceeds from an ATM offering

1 unchanged sentence

Payments for finance leases

Net cash provided by financing activities

Net cash provided by (used for) financing activities

Net change in cash and cash equivalents

5 unchanged sentences

Property and equipment included in accounts payable

Offering and registration statement costs included in accounts payable

See accompanying notes to the financial statements

1 unchanged sentence

NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)

(For the Three and Nine Months Ended September 30, 2020 and 2019)

(For the Three Months Ended March 31, 2021 and 2020)

Nature of Business

Celcuity Inc., a Delaware corporation (the “Company”), is a clinical stage biotechnology company translating discoveries of new cancer sub-types into pioneering companion diagnostics and expanded therapeutic options for cancer patients.

The Company’s proprietary CELsignia diagnostic platform analyzes living tumor cells to untangle the complexity of the cellular activity driving a patient’s cancer.

This allows Celcuity to discover new cancer sub-types molecular diagnostics cannot detect.

Celcuity is driven to improve outcomes for patients and to transform how pharmaceutical companies define the patient populations for their targeted therapies.

Celcuity Inc., a Delaware corporation (the “Company”), is a clinical-stage biotechnology company seeking to extend the lives of cancer patients by pursuing an integrated companion diagnostic (CDx) and therapeutic (Rx) strategy.

Our CELsignia companion diagnostic platform is uniquely able to analyze live patient tumor cells to identify new groups of cancer patients likely to benefit from targeted therapies.

This enables a CELsignia CDx to support advancement of new indications for already approved targeted therapies.

Our therapeutic efforts are focused on in-licensing and developing molecularly targeted therapies that address the same cancer driver our companion diagnostics can identify.

By pursuing an integrated companion diagnostic and therapeutic strategy, we believe we are uniquely positioned to achieve our goal of helping cancer patients receive the therapeutic best suited to treat their cancer driver.

The Company was co-founded in 2012 by Brian F.

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These unaudited condensed financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2020 and the related footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

Follow-on Offering

On February 26, 2021, the Company completed a follow-on offering whereby it sold 1,971,100 shares of common stock (including 257,100 shares of common stock in connection with the full exercise of the underwriters’ option to purchase additional shares) at a public offering price of $ 14.00 per share.

The aggregate gross proceeds from the sale of shares in the follow-on offering, including the sale of shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, was approximately $ 27.6 million before deducting underwriting discounts of approximately $ 1.6 million and offering expenses of approximately $ 0.2 million.

Accounting Estimates

4 unchanged sentences

Risks and Uncertainties

The Company is subject to risks common to companies in the development stage including, but not limited to, dependency on the clinical and commercial success of its diagnostic tests, ability to obtain regulatory approval of its diagnostic tests, the need for substantial additional financing to achieve its goals, uncertainty of broad adoption of its approved products, if any, by physicians and consumers, and significant competition.

The Company is subject to risks common to companies in the development stage including, but not limited to, dependency on the clinical and commercial success of its diagnostic tests, ability to obtain regulatory approval of its diagnostic tests, the clinical and commercial success of its initial drug product, gedatolisib, the need for substantial additional financing to achieve its goals, uncertainty of broad adoption of its approved products, if any, by physicians and consumers, and significant competition.

Clinical Trial Costs

11 unchanged sentences

As a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for public companies that are not emerging growth companies.

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance.

The original guidance required application on a modified retrospective basis with the earliest period presented.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-11, Targeted Improvements to ASC 842, which included an option to not restate comparative periods in transition and elect to use the effective date of ASC 842 as the date of initial application of transition, which the Company elected.

As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both operating lease right-of-use (ROU) assets of $ 356,539 and lease liabilities of $ 404,931 and eliminated deferred rent of $ 63,875 and prepaid rent of $ 15,483 .

The adoption of ASC 842 had no impact on the Company’s Condensed Statement of Operations and Condensed Statement of Cash Flows for the three- and nine-month period ended September 30, 2020.

In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed the Company to carry forward the historical lease classification.

Additional information and disclosures required by this new standard are contained in Note 4.

Net Loss Per Common Share

2 unchanged sentences

Therefore, the weighted-average shares outstanding used to calculate both basic and diluted loss per common share are the same.

For the three and nine months ended September 30, 2020 and 2019, potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding were options to purchase 810,725 and 577,469 shares of common stock, respectively, warrants to purchase 353,585 and 353,980 shares of common stock, respectively, and 15,686 and 0 shares of restricted common stock, respectively.

For the three months ended March 31, 2021 and 2020, potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding were options to purchase 855,072 and 630,889 shares of common stock, respectively, warrants to purchase 352,400 and 353,585 shares of common stock, respectively, and 15,686 and 0 shares of restricted common stock, respectively.

Operating and Finance Leases

1 unchanged sentence

In September 2017, the Company entered into a non-cancelable operating lease agreement for building space.

The lease commenced, and the Company moved to the facility, in May 2018, in conjunction with the termination of its then existing lease.

The new lease commenced, and the Company moved to the facility in May 2018, in conjunction with the termination of its then existing lease.

Rent expense is recorded on a straight-line basis over the lease term.

The original lease agreement was set to terminate on April 30, 2021, but in July 2020 the Company signed an amendment to extend the lease through April 30, 2022.

In July 2020 the Company signed an amendment to extend this lease through April 30, 2022.

The lease amendment provides for monthly rent, real estate taxes and operating expenses.

As a result of the lease amendment, the Company recorded an incremental $ 197,211 in the operating ROU asset and lease liability.

The lease amendment includes the option to extend the term for one additional year.

The option to extend is at the Company’s discretion and because it has not been determined if the option to extend will be exercised, the extended lease term is not included in the ROU assets and lease liabilities.

The Company regularly evaluates the renewal option and when it is reasonably certain of exercise, the Company will include the renewal period in the lease term.

As a result of the lease amendment, the Company recorded an incremental $ 197,211 in the operating right-of-use (“ROU”) asset and lease liability.

The lease agreement, as amended, includes the option to extend the term for one additional year.

The option to extend is at the Company’s discretion and because the Company has not determined if the option to extend will be exercised, the extended lease term is not included in the ROU assets and lease liabilities.

The Company regularly evaluates the renewal options and when it is reasonably certain of exercise, the Company will include the renewal period in its lease term.

In May 2018, the Company entered into a non-cancelable finance lease agreement for office equipment with a five-year term.

2 unchanged sentences

When an implicit rate is not provided, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

Supplemental balance sheet information consisted of the following at September 30, 2020:

Supplemental balance sheet information consisted of the following at March 31, 2021:

Operating Lease

10 unchanged sentences

Long term portion

Maturity analysis under lease agreements consisted of the following as of September 30, 2020:

Maturity analysis under lease agreements consisted of the following as of March 31, 2021:

Operating Leases

Finance Leases

Total minimum lease payments

Present value discount

Less amount representing services

Amount representing services

Present value of net minimum lease payments

Weighted Average

Remaining Lease Term

Discount Rate

Operating lease

Finance lease

Lease costs for the period ended September 30, 2020:

Lease costs for the period ended March 31, 2021:

Three-month Period

Operating lease cost

1 unchanged sentence

Variable lease cost

Supplemental cash flow information related to leases for the period ended September 30, 2020:

Supplemental cash flow information related to leases for the period ended March 31, 2021:

Three-month Period

Cash paid for amounts included in operating and finance leases:

4 unchanged sentences

In May 2017, the Company entered into an agreement with a clinical research organization to conduct a clinical research study.

The Company made payments of $ 50,000 , $ 200,000 and $ 350,000 in 2019, 2018 and 2017, respectively.

The Company made payments of approximately $ 275,000 and $ 100,000 in 2021 and 2020, respectively, and $ 600,000 prior to 2020.

Additional payments will be due as certain milestones are met and clinical sites are added.

1 unchanged sentence

In October 2018, the Company entered into an agreement with a biopharmaceutical company and a cancer research center to conduct a clinical research study.

The Company made payments of approximately $ 70,000 in 2019.

The Company made payments of approximately $ 70,000 prior to 2020.

Additional payments of approximately $ 112,000 will be due as certain milestones are met.

In December 2020, the Company entered into an agreement with a biopharmaceutical company and a cancer research center to conduct a clinical research study.

The Company made zero payments in 2021 and 2020.

Future payments of approximately $ 740,000 will be due as certain milestones are met.

In January 2021, the Company entered into an agreement with a biopharmaceutical company and a cancer research center to conduct a clinical research study.

The Company made zero payments in 2021.

Future payments of approximately $ 1,210,600 will be due as certain milestones are met.

In March 2021, the Company entered into an agreement with two biopharmaceutical companies and a cancer research center to conduct a clinical research study.

The Company made zero payments in 2021.

Future payments of approximately $ 1,548,000 will be due as certain milestones are met.

Stockholders’ Equity

On June 5, 2020, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with B.

1 unchanged sentence

(the “Agent”).

Pursuant to the ATM Agreement, the Company may offer and sell from time to time, at its option, shares of common stock having an aggregate offering price of up to $ 10,000,000 , par value $ 0.001 per share (the “Placement Shares”), through the Agent.

The Placement Shares have been registered under the Securities Act of 1933, as amended, pursuant to the Registration Statement on Form S-3 (File No.

Pursuant to the ATM Agreement, the Company was able to offer and sell from time to time, at its option, shares of common stock having an aggregate offering price of up to $ 10,000,000 , par value $ 0.001 per share (the “Placement Shares”), through the Agent.

The Placement Shares were registered under the Securities Act of 1933, as amended, pursuant to the Registration Statement on Form S-3 (File No.

333-227466), which was originally filed with the SEC on September 21, 2018 and declared effective by the SEC on October 4, 2018, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed on June 5, 2020.

Sales of the Company’s common stock, if any, under this prospectus supplement may be made by any method deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

During the three months ended September 30, 2020, the Company sold zero shares of common stock pursuant to the ATM Agreement.

During the nine months ended September 30, 2020, the Company sold 14,901 shares of common stock pursuant to the ATM Agreement, at an average selling price of $ 10.34 per share.

Sales of the Company’s common stock, if any, under this prospectus supplement were able to be made by any method deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

During the three months ended March 31, 2021, the Company sold 3,082 shares of common stock pursuant to the ATM Agreement, at an average selling price of $ 12.64 per share.

On February 23, 2021, in conjunction with the Company’s follow-on offering, the ATM Agreement was terminated.

Stock-Based Compensation

The following table summarizes the activity for all stock options outstanding for the nine months ended September 30:

The following table summarizes the activity for all stock options outstanding for the three months ended March 31:

Weighted Average Exercise Price

1 unchanged sentence

Options outstanding at beginning of year

Balance at September 30

Options exercisable at September 30:

Balance at March 31

Options exercisable at March 31:

Weighted Average Grant Date Fair Value for options granted during the period:

The following table summarizes additional information about stock options outstanding and exercisable at September 30, 2020:

The following table summarizes additional information about stock options outstanding and exercisable at March 31, 2021:

Options Outstanding

2 unchanged sentences

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price

Weighted Average

Exercise Price

Aggregate Intrinsic Value

2 unchanged sentences

Aggregate Intrinsic Value

The Company recognized stock-based compensation expense for stock options of $ 410,544 and $ 288,087 for the three months ended September 30, 2020 and 2019, respectively, and $ 1,275,481 and $ 625,785 for the nine months ended September 30, 2020 and 2019, respectively.

The Company recognized stock-based compensation expense for stock options of $ 418,192 and $ 450,664 for the three months ended March 31, 2021 and 2020, respectively.

In May 2020, the Company modified the exercise price on 203,750 stock option awards to $ 5.10 , the closing market price on the Nasdaq Capital Market on May 14, 2020.

No director or officer awards were modified.

The effect on stock-based compensation for the three and nine months ended September 30, 2020 was approximately $ 19,000 and $ 70,000 , respectively.

The effect on stock-based compensation was $ 13,449 and $ 0 for the three months ended March 31, 2021 and 2020, respectively.

The effect on stock-based compensation over the remaining service period will be approximately $ 122,000 .

The Black-Scholes option-pricing model was used to estimate the fair value of equity-based awards with the following weighted-average assumptions for the nine months ended September 30:

The Black-Scholes option-pricing model was used to estimate the fair value of equity-based awards with the following weighted-average assumptions for the three months ended March 31:

Risk-free interest rate

2 unchanged sentences

Expected volatility

73.3 % - 77.1

78.1 % - 80.0

Expected life (years)

9 unchanged sentences

In the event the Company terminates any of its consulting agreements, the unvested options issued in connection with the agreements would also be cancelled.

Restricted stock awards were granted to two members of the Company’s board during the nine months ended September 30, 2020.

The Company had 15,686 and 0 shares of restricted stock outstanding as of September 30, 2020 and 2019, respectively, and 0 and 2,571 shares of restricted stock vested during the nine months ended September 30, 2020 and 2019.

The Company recognized stock-based compensation expense for restricted stock of $ 20,904 and $ 0 for the three months ended September 30, 2020 and 2019, respectively, and $ 31,815 and $ 17,047 for the nine months ended September 30, 2020 and 2019, respectively.

The Company initially reserved a maximum of 750,000 shares of common stock for issuance under the 2017 Stock Incentive Plan (the “2017 Plan”).

The number of shares reserved for issuance was automatically increased by 102,540 shares on January 1, 2020 and will increase automatically on January 1 of each of 2021 through 2027 by the number of shares equal to 1.0% of the aggregate number of outstanding shares of Company common stock as of the immediately preceding December 31.

No restricted stock awards were granted during the three months ended March 31, 2021 and 2020.

The Company had 15,686 and 0 shares of restricted stock outstanding as of March 31, 2021 and 2020, respectively, and 0 shares of restricted stock vested during the three months ended March 31, 2021 or 2020.

The Company recognized stock-based compensation expense for restricted stock of $ 20,456 and $ 0 for the three months ended March 31, 2021 and 2020, respectively.

The Company initially reserved a maximum of 750,000 shares of common stock for issuance under the 2017 Amended and Restated Stock Incentive Plan (the “2017 Plan”).

The number of shares reserved for issuance was automatically increased by 102,540 shares on January 1, 2020 and by 102,998 shares on January 1, 2021 and will increase automatically on January 1 of each of 2022 through 2027 by the number of shares equal to 1.0% of the aggregate number of outstanding shares of Company common stock as of the immediately preceding December 31.

However, the Company’s board may reduce the amount of the increase in any particular year.

The total remaining shares available for grant under the Company’s 2017 Plan as of September 30, 2020 is 238,146 .

The total remaining shares available for grant under the Company’s 2017 Plan as of March 31, 2021 was 266,800 .

Total unrecognized compensation cost related to stock options and restricted stock is estimated to be recognized as follows:

Total estimated compensation cost to be recognized

The Company recognized stock-based compensation expense related to its employee stock purchase plan of $ 17,499 and $ 15,157 for the three months ended September 30, 2020 and 2019, respectively and $ 29,493 and $ 37,302 for the nine months ended September 30, 2020 and 2019, respectively.

The Company recognized stock-based compensation expense related to its employee stock purchase plan of $ 10,450 and $ 13,985 for the three months ended March 31, 2021 and 2020, respectively.

The Company initially reserved a total of 100,000 shares for issuance under the employee stock purchase plan.

The number of shares reserved for issuance was automatically increased by 51,270 shares on January 1, 2020 and will increase automatically on each subsequent January 1 by the number of shares equal to 0.5% of the total outstanding number of shares of Company common stock as of the immediately preceding December 31.

The number of shares reserved for issuance was automatically increased by 51,270 shares on January 1, 2020 and 51,499 shares on January 1, 2021 and will increase automatically on each subsequent January 1 by the number of shares equal to 0.5% of the total outstanding number of shares of Company common stock as of the immediately preceding December 31.

However, the Company’s board may reduce the amount of the increase in any particular year.

The total remaining shares available for issuance under the employee stock purchase plan as of September 30, 2020 is 119,956 .

The Company recognized total stock-based compensation expense as follows for the three and nine months ended September 30:

The total remaining shares available for issuance under the employee stock purchase plan as of March 31, 2021 was 163,710 .

The Company recognized total stock-based compensation expense as follows for the three months ended March 31:

Three Months Ended

Nine Months Ended

September 30,

Stock-based compensation expense in operating expenses:

1 unchanged sentence

General and administrative

Subsequent Events

On April 8, 2021, the Company entered into a license agreement (the “License Agreement”) with Pfizer, Inc.

(“Pfizer”), pursuant to which the Company acquired exclusive (including as to Pfizer) worldwide sublicensable rights to research, develop, manufacture, and commercialize gedatolisib, a potent, well-tolerated, reversible dual inhibitor that targets PI3K and mTOR, for the treatment, diagnosis and prevention of all diseases.

Pursuant to the License Agreement, the Company is obligated to use commercially reasonable efforts to develop and seek regulatory approval for at least one product in the United States and if regulatory approval is obtained, to commercialize such product in the United States and at least one international major market.

The Company paid Pfizer a $ 5.0 million upfront fee upon execution of the License Agreement and, pursuant to an Equity Grant Agreement, issued to Pfizer $ 5.0 million of shares of the Company’s common stock.

The number of shares issued was 349,406 and was calculated by dividing $5.0 million by $ 14.31 , the closing price of a share of the Company’s common stock on the Nasdaq Capital Market on April 8, 2021.

The Company is also required to make milestone payments to Pfizer upon achievement of certain development and commercial milestone events, up to an aggregate of $330.0 million .

Additionally, the Company will pay Pfizer tiered royalties on sales of gedatolisib at percentages ranging from the low to mid-teens, which may be subject to deductions for expiration of valid claims, amounts due under third-party licenses and generic competition.

Unless earlier terminated, the License Agreement will expire upon the expiration of all royalty obligations.

The royalty period will expire on a country-by-country basis upon the later of (a) 12 years following the date of first commercial sale of such product in such country, (b) the expiration of all regulatory or data exclusivity in such country for such product or (c) the date upon which the manufacture, use, sale, offer for sale or importation of such product in such country would no longer infringe, but for the license granted in the License Agreement, a valid claim of a licensed patent right.

The Company has the right to terminate the License Agreement for convenience upon 90 days’ prior written notice.

Pfizer may not terminate the agreement for convenience.

Either the Company or Pfizer may terminate the License Agreement if the other party is in material breach and such breach is not cured within the specified cure period.

In addition, either the Company or Pfizer may terminate the License Agreement in the event of specified insolvency events involving the other party.

Also, on April 8, 2021, the Company entered into a loan and security agreement (the “Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP, a Delaware limited partnership (“Innovatus”), as collateral agent and the Lenders listed on Schedule 1.1 thereto, pursuant to which Innovatus, as a Lender, has agreed to make certain term loans to the Company in the aggregate principal amount of up to $ 25.0 million (the “Term Loans”).

Funding of the first $ 15.0 million tranche occurred on April 8, 2021.

The Company will be eligible to draw on a second tranche of $ 5.0 million upon achievement of certain milestones, including meeting the primary end points of either the FACT-1 or FACT-2 clinical trials and receipt of unrestricted net cash proceeds of at least $ 50.0 million from the issuance and sale of the Company’s equity securities.

The Company will be eligible to draw on a third tranche of $ 5.0 million upon the achievement of certain additional milestones, including commencement of certain Phase 3 clinical trials and the receipt of unrestricted net cash proceeds of at least $ 75.0 million from the issuance and sale of the Company’s equity securities.

Innovatus has the right, at its election, after June 1, 2021 and until the third anniversary of the Loan Agreement, to convert up to 20% of the outstanding principal amount of all Terms Loans made under the Loan Agreement into shares of the Company’s common stock at a price per share equal to the volume weighted average closing price of the Company’s stock for the 5-trading day period ending on the last trading day immediately preceding the execution of the Loan Agreement (the “Conversion Right”).

The Company is entitled to make interest-only payments for thirty-six months, or up to forty-eight months if certain conditions are met.

The Term Loans will mature on the fifth anniversary of the initial funding date and will bear interest at a rate equal to sum of (a) the greater of (i) Prime Rate (as defined in the Loan Agreement) or (ii) 3.25%, plus (b) 5.70%.

Additionally, the Company elected to make 2.7% of the interest rate as payable in-kind, which shall accrue as principal monthly.

Other fees include a 1.0% facility fee on the funded loan amount, paid at closing and a final fee of 4.5% of the funded loan amount due at the maturity date or earlier if the Company prepays the loan.

The Company has the option to prepay the loan at any time following the first anniversary of the loan closing, with tiered prepayment fees ranging from 0 – 2% based on when the prepayment would occur .

The Loan Agreement is secured by all assets of the Company.

Proceeds will be used for working capital purposes and to fund the Company’s general business requirements.

The Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to liquidity and trailing twelve months revenue.

In connection with each funding of the Term Loans, the Company is required to issue to Innovatus a warrant (the “Warrants”) to purchase a number of shares of the Company’s common stock equal to 2.5% of the principal amount of the relevant Term Loan funded divided by the exercise price, which will be based on the lower of (i) the volume weighted average closing price of the Company’s stock for the 5-trading day period ending on the last trading day immediately preceding the execution of the Loan Agreement or (ii) the closing price on the last trading day immediately preceding the execution of the Loan Agreement.

For the second and third tranches only the exercise price will be based on the lower of (i) the exercise price for the first tranche or (ii) the volume weighted average closing price of the Company’s stock for the 5-trading day period ending on the last trading day immediately preceding the relevant Term Loan funding.

The Warrants may be exercised on a cashless basis and are exercisable through the 10 th anniversary of the applicable funding date.

The number of shares of common stock for which each Warrant is exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in such Warrant.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements