Item 3.02Unregistered Sales of Equity Securities.
The Company is providing this disclosure because, as of May 24, 2022, its unregistered sales of equity securities that were not previously reported, in the aggregate, exceeded 1% of the shares of its Common Stock outstanding as of May 23, 2022.
Private Placement of Common Stock and Warrants through Placement Agent
As of the date of this report, the Company has received binding subscription agreements for an estimated total of approximately 34.6 million units from accredited investors in a private offering (the “Offering”) through a placement agent. Each unit consists of one share of Common Stock and three-quarters of a warrant to purchase one share of Common Stock. The warrants will have a five-year term and will be exercisable in full when issued. The warrants, other than as described above, will be substantially similar to the form of warrant filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021.
The aggregate gross proceeds received under the executed subscription agreements as of the date of this report are $8,834,500. The final purchase price per unit and the exercise price of the warrants will be equal to 85% of the intraday volume weighted average price of the Common Stock on April 29, 2022, or the date of the final closing of the Offering, whichever is lower.
Pursuant to the subscription agreements, the Company has agreed to use commercially reasonable efforts to prepare and file with the Securities and Exchange Commission (the “SEC”), and cause the SEC to declare effective, within ninety (90) days following the final closing of the Offering, a registration statement under the Securities Act covering the resale of all of the shares and warrants to purchase shares of Common Stock sold in the Offering.
As a fee to the placement agent, the Company has agreed to pay a cash fee equal to 13% of the gross proceeds received from qualified investors in the Offering, as well as a one-time non-accountable expense fee of $50,000 in the aggregate for all closings in the Offering. The Company also agreed to issue to the placement agent or its designees warrants with a 10-year term to purchase 13% of the total number of shares of Common Stock, including shares subject to warrants, sold to qualified investors in the Offering.
The Company is relying on the exemption provided by Rule 506 of Regulation D and Section 4(a)(2) of the Securities Act in connection with the Offering.
Issuance of Shares to Former Executive Officer
The Company issued to a former executive officer a total of 23,651 shares of Common Stock to satisfy its obligation to make a severance payment of $8,042 for the payroll period ended May 15, 2022, net of payroll deductions and withholding taxes. The number of shares issued was based on the closing price of the Common Stock on that date. The Company relied on the exemption from registration afforded by Section 4(a)(2) of the Securities Act in connection with the issuance of the shares.