SPRUCE BIOSCIENCES, INC. 10-Q

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Unregistered Sales of Equity Securities Stock Option Grants For the nine months ended September 30, 2020, we granted options to purchase 1,765,200 shares of our common stock to certain of our employees and directors with a weighted-average exercise price of $3.18 per share. The offer, sale and issuance of these options were deemed to be exempt from registration under the Securities Act in reliance on either Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701 or Section 4(a)(2) in that the issuance of securities was to accredited investors in a private placement transaction that did not involve a public offering. Issuance of Common Stock upon Conversion of Redeemable Convertible Preferred Stock On October 8, 2020, upon the closing of our IPO, all shares of our then-outstanding redeemable convertible preferred stock automatically converted into 15,492,019 shares of common stock. The common stock was issued pursuant to the exemption from the registration requirements of the Securities Act provided by Section 3(a)(9) or Section 4(2) of the Securities Act. Use of Proceeds We commenced our IPO pursuant to the registration statement on Form S-1 (File Nos. 333-248924 and 333-249397) that was declared effective on October 8, 2020 and registered an aggregate of 6,900,000 shares of our common stock. On October 8, 2020, we sold 6,900,000 shares of our common stock at a public offering price of $15.00 per share for an aggregate gross proceeds of $103.5 million. On October 8, 2020, we completed our IPO. Cowen and Company, LLC, SVB Leerink LLC, Credit Suisse Securities (USA) LLC, and RBC Capital Markets, LLC served as joint book-running managers. The net proceeds of the IPO were approximately $96.3 million, after deducting underwriting discounts and commissions of approximately $7.2 million and before deducting offering related expenses. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates. Upon receipt, the net proceeds from our IPO were held in cash and cash equivalents. Through November 18, 2020, we have not used any of the net proceeds from our IPO. We are investing these funds in a combination of short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. We expect to use the net proceeds from our IPO as described under “Use of Proceeds” in the Prospectus. We cannot predict with certainty all of the particular uses for the net proceeds from our IPO, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including our ability to access additional financing, the relative success and cost of our clinical trials. As a result, our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds from our IPO. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Mine Safety Disclosures Not Applicable.