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Item 2. Unregistered Sales of Equity Securities

2025-08-18 compared with 2025-05-15 · 53 added, 10 removed, 12 unchanged (84% of the section changed)

4 unchanged sentences

The Shares issued pursuant to the Subscription Agreements were not registered under the Securities Act of 1933, as amended, in in reliance upon exemptions provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder.

Conversion of Senior Secured Notes for Unregistered Shares of Common Stock and Unregistered Warrants

On March 28, 2024, the Company entered into a senior secured note purchase agreement (the “Note Purchase Agreement”) with the Purchasers (as defined in the Note Purchase Agreement), pursuant to which we agreed to issue senior secured notes in an aggregate principal amount of up to $10.0 million (“Secured Notes”) to certain accredited investors, including unrelated parties as well as officers and directors of the Company.

As of March 31, 2024, the Company had an initial closing and issued $2.0 million in Initial Secured Notes.

As of June 30, 2024, all existing investors approved an Amended and Restated Note Purchase Agreement (“Amended and Restated Note Purchase Agreement”), with terms described below.

As of September 30, 2024, the Amended and Restated Note Purchase Agreement was amended to extend the last closing date to issue Additional Secured Notes to October 31, 2024.

See Exhibit 10.25.

No other terms were amended.

The material terms of the Additional Secured Notes are identical to the terms of the Initial Secured Notes.

As of October 31, 2024, the Company issued an aggregate of $6.9 million of Secured Notes, with $2.9 million from the Company’s officers and members of the Board of Directors, including $2.4 million purchased by Dr.

Wong, Founder and Chief Executive Officer;

$220,000 purchased by Rebecca Byam, Chief Financial Officer;

$140,000 purchased by Scott T.

Garrett, Chairman of the Board of Directors;

$60,000 purchased by Gary M.

Winer, who was a member of the Board of Directors at the time he made this investment;

$25,000 purchased by Lee Flowers, Senior Vice President for Business Development;

and $25,000 purchased by Rick S.

Greene, member of the Board of Directors.

The Secured Notes bear interest at a rate of 9% per annum, payable quarterly in arrears, and mature on August 30, 2026 (the “Maturity Date”), on which date the principal balance, accrued but unpaid interest, and other amounts that may be due under the terms of the Amended and Restated Note Purchase Agreement shall be due and payable.

The Secured Notes may be prepaid on or prior to December 31, 2024, but will be subject to a 5% prepayment penalty (“Premium Amount”).

Thereafter, the Secured Notes may be repaid upon a Mandatory Redemption event or at the end of the term.

As a condition to entering into the Amended and Restated Note Purchase Agreement, the Company, Mercedes M.

(“Escrow Agent”), and the Purchasers entered into that certain Escrow Agreement and Amended and Restated Pledge Agreement, dated July 2, 2024, pursuant to which the Company agreed to pledge our equity ownership interest in Wugen, which was equivalent to a 5.6% ownership stake in that company as of December 31, 2024 (the “Pledged Collateral”), to be held and released by Escrow Agent according to the terms of the Escrow Agreement, as security for the Secured Notes.

Upon a qualifying event involving a transaction such as an acquisition, merger or initial public offering in which the Pledged Collateral can be sold or liquidated prior to the Maturity Date, subject to certain limitations (such as a threshold price per share in the case of an initial public offering), the Company agreed to repay all indebtedness (including accrued interest) related to the Secured Notes plus a Bonus Payment (as defined in the Amended and Restated Note Purchase Agreement).

If there is no such mandatory redemption prior to the Maturity Date, the Company agreed to pay the holders of Secured Notes a Bonus Payment under certain circumstances.

Upon an Event of Default (as defined in the Amended and Restated Note Purchase Agreement), the Company will have a thirty (30) day cure period (the “Cure Period”), and if the Event of Default is not so cured at the end of the Cure Period, the Company is required to distribute the Pledged Collateral to the Purchasers on a pro rata basis, determined based on the issuance of $10.0 million in Secured Notes, in full satisfaction of the indebtedness evidenced by the Secured Notes.

The foregoing descriptions of the Amended and Restated Note Purchase Agreement, Amended and Restated Senior Secured Notes, Escrow Agreement and Amended and Restated Pledge Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Form of Amended and Restated Senior Secured Note Purchase Agreement, Form of Senior Secured Promissory Note, Form of the Amended and Restated Pledge Agreement and Form of Amended and Restated Escrow Agreement, copies of which are filed as Exhibit 10.21 (and Exhibit 10.25 for the first amendment thereto as amended on September 30, 2024), Exhibit 10.22, Exhibit 10.23 and Exhibit 10.24, respectively, to our Annual Report and on Form 10-K are incorporated herein by reference.

The issuance of the Additional Secured Notes was exempt from the registration requirements of the Securities Act of 1933, as amended, in accordance with Section 4(a)(2), as a transaction by an issuer not involving a public offering.

In addition, our Board of Directors and the Audit Committee of our Board of Directors reviewed the transaction under our policy for Related Party Transactions (the “Policy”) and determined that the issuance of the Additional Secured Notes was in compliance with the Policy.

On February 20, 2025, the Company and certain Noteholders agreed to Principal Terms for Conversion of their Secured Notes.

Noteholders and the Company agreed that, subject to stockholder approval, at least $6.6 million principal amount of the Secured Notes will be converted into shares of our Common Stock at a conversion price of $0.65 per share ($26.00 per share, as adjusted for the Reverse Stock Split).

As part of the conversion, the Company will issue warrants to purchase shares of our Common Stock to the converting Noteholders for up to an additional $3.3 million of shares of our Common Stock, at an exercise price of $0.65 per share ($26.00 per share, as adjusted for the Reverse Stock Split).

Upon conversion, converting Noteholders would be subject to a lock-up period of 180 days from the date of conversion.

Further, the Escrow Agreement will be amended such that the proceeds from the Pledged Collateral will be allocated among the Company and the converting Noteholders, as provided for in the Principal Terms.

The conversion of principal amount of the Secured Notes will result in a dollar-for-dollar increase in stockholders’ equity (partially offset by the carrying value of the portion of the Company’s investment in the Pledged Collateral the proceeds of which will be paid to converting Noteholders), contributing to the Company’s plan to gain compliance with the Nasdaq Minimum Shareholder Equity Rule and to maintaining listing of the our Common Stock on Nasdaq.

The Principal Terms of Conversion were approved at a Special Meeting of Stockholders held on March 31, 2025 and were effected pursuant to the terms of that certain Second Amendment to Amended and Restated Senior Secured Note Purchase Agreement and Related Agreements dated as of May 1, 2025 (the “Conversion Amendment”).

On May 7, 2025, pursuant to the Conversion Amendment, the Secured Notes held by the participating noteholders were cancelled, and the Company issued unregistered shares of Common Stock and warrants to purchase an up to $3.3 million of Common Stock with terms as agreed in the Principal Terms for Conversion.

The Company issued 253,083 unregistered shares of Common Stock and Common Stock Warrants to purchase up to 126,540 shares of Common Stock to the noteholders who converted.

In addition, the Company transferred the right to receive the proceeds of the liquidation or sale of 1,067,796 of the Company’s Wugen shares, if that occurs, which was recorded as a contingent liability at a fair value of $1.6 million as of June 30, 2025.

If no such event occurs by August 2030, then the converting noteholders will receive the 1,067,796 shares of Wugen common stock.

Shares of Common Stock, including those underlying the Common Stock Warrants, are subject to a 180-day lockup from date of issuance.

Sale of Unregistered Warrants

On November 18, 2024, the Company entered into a securities purchase agreement (“SPA”) with a single institutional investor (the "Purchaser") pursuant to which the Company agreed to offer and sell (i) in a registered direct offering (the “Registered Offering”) (x) 4,160,000 shares (the “Shares”) of the Company’s Common Stock and (y) pre-funded warrants to purchase up to 2,557,000 shares of Common Stock (the “Pre-Funded Warrants”) and (ii) in a concurrent private placement (the “Private Placement” and together with the Registered Offering, the “Offering”), unregistered warrants to purchase up to an aggregate of 6,717,000 shares of Common Stock (“Common Stock Warrants”).

The combined purchase price for each Share and accompanying Common Stock Warrant to purchase one share of common stock was $1.03 per Share and the combined purchase price for each Pre-Funded Warrant and accompany Common Stock Warrant to purchase one share of Common Stock is $1.0299.

The gross proceeds to the Company from the Offering are approximately $6.9 million before deducting the placement agent’s fees and other offering expenses payable by the Company.

The Offering closed on November 20, 2024.

On November 20, 2024, the Company closed on a $6.9 million offering with a single institutional investor (the “Investor”) for the issuance and sale of (i) 104,000 shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) and (ii) pre-funded warrants to purchase up to 63,925 shares of Common Stock (the “Pre-Funded Warrants”) in a registered direct offering (the “Registered Offering”), pursuant to a shelf registration statement on Form S-3 (File No.

333-266991), which was declared effective by the SEC on August 26, 2022.

The Registered Offering was made by means of a prospectus supplement filed with the SEC on November 20, 2024 that forms a part of such registration statement.

All Pre-Funded Warrants issued in the Registered Offering were exercised on November 20, 2024.

In a concurrent private placement (the “Private Placement” and together with the Registered Offering, the Company also issued unregistered warrants to purchase up to an aggregate of 167,925 shares of Common Stock (“Common Stock Warrants”) for $41.20 per share.

Share amounts and exercise price per share reflect the adjustment for the Reverse Stock Split that was effective on April 11, 2025.

On April 16, 2025, the SEC declared the registration statement effective which registered the 167,925 shares of Common Stock underlying the Common Stock Warrants.

On May 15, 2025, the Company entered into a privately negotiated agreement with the holder of these Common Stock Warrants to reduce the exercise price of such warrants from $41.20 per share to $7.45 per share.

Issuance of Unregistered Shares of Common Stock for Commitment Shares

The Company issued 384,615 shares of the Company’s Common Stock on March 12, 2025, which were subject to an adjustment for the Reverse Stock Split.

These shares were issued in connection with an Equity Purchase Agreement (“EPA”) and a Registration Rights Agreement (the “RRA”) the Company entered into with Square Gate Capital Master Fund, LLC – Series 4, a series limited liability company organized in the State of Delaware (the “Investor”).

Pursuant to Section 6.4(a) of the EPA, following expiration of the Investor’s Due Diligence Period (as defined in the EPA), the Company is obligated to pay to the Investor a commitment fee of $150,000 (the “Commitment Fee”), which is required to be in the form of a number of shares of the Company’s Common Stock, valued at the closing share price of the Common Stock on The Nasdaq Stock Market on February 19, 2025.

On April 16, 2025, the SEC declared the registration statement effective which registered the Commitment Shares, and the shares were transferred to the Investor.

The Company released the Commitment Shares to the Investor, without restrictions.

The number of shares issued to the Investor reflected the Reverse Stock Split, which was effective on April 11, 2025.

The Company issued 9,616 shares of the Company’s Common Stock on March 12, 2025, reflecting the adjustment for the Reverse Stock Split that was effective on April 11, 2025.

Pursuant to Section 6.4(a) of the EPA, following expiration of Square Gates’s Due Diligence Period (as defined in the EPA), the Company is obligated to pay to Square Gate a commitment fee of $150,000 (the “Commitment Fee”), which is required to be paid in the form of a number of shares of the Company’s Common Stock, valued at the closing share price of the Common Stock on The Nasdaq Stock Market on February 19, 2025 (“Commitment Shares”).

On April 16, 2025, the SEC declared the registration statement effective which registered the Commitment Shares, and the Commitment Shares were transferred to Square Gate, without restrictions.

Issuer Repurchases of Equity Securities

4 unchanged sentences

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What changed 10-Q

Item 2. Unregistered Sales of Equity Securities