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Item 3.02
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Unregistered Sales of Equity Securities.
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The Company is subject to this disclosure because, as of
January 26, 2023, its unregistered sales of equity securities
that were not previously reported, in the aggregate, exceeded 5% of
the shares of its common stock outstanding as of January 9,
2023.
Issuance of Shares in Convertible Note Exchange Transaction
On January 23, 2023, the Company and the holder of its secured
convertible promissory note issued April 2, 2021 (the “April 2
Note”), in satisfaction of a redemption, entered into an exchange
agreement pursuant to which the April 2 Note was partitioned
and a new note was issued in the principal amount of
$0.5 million. The new note was exchanged concurrently for
approximately 2.5 million newly issued shares of common stock.
The Company relied on the exemption afforded by
Section 3(a)(9) of the Securities Act of 1933, as amended (the
“Securities Act”), for the exchange transaction described
above.
Private Placement of Common Stock and Warrants through Placement
Agent
In January 2023, the Company commenced a private offering (the
“Offering”) to accredited investors of units through a placement
agent. Each unit will consist of one share of common stock and one
warrant to purchase one share of common stock. The final purchase
price per unit will be equal to 90% of (i) the intraday volume
weighted average price of the common stock as of the first closing,
which occurred on January 13, 2023, or (ii) the intraday
volume weighted average price of the common stock on the date of
the final closing in the Offering, whichever is lower. As of
January 31, 2023, the Company had received binding
subscription agreements to purchase units at a total purchase price
of approximately $7.9 million, or an estimated total of
approximately 34.2 million units based on a purchase price of
$0.23 per unit.
The warrants to be issued in the Offering will have a five-year
term and an exercise price of $0.50 per share. The warrants will be
exercisable in full when issued. Except as described above, the
terms of the warrants 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 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, a registration
statement under the Securities Act covering the resale 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 12% of the gross proceeds received from qualified
investors in the Offering, as well as a one-time non-accountable
expense fee of $25.0 thousand in the aggregate for all closings in
the Offering. The Company has also agreed to issue to the placement
agent or its designees warrants with a 10-year term to purchase 15%
of the total number of shares of common stock 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.
Down Round Provision Issuance
During December 2022, shares previously issued in November 2022 to
certain accredited investors directly by the Company in connection
with a private warrant exchange became subject to a down round
provision included in the securities purchase agreements. The
required adjustments resulted in the issuance of a total of
approximately 0.5 million additional shares of common stock. The
Company relied on the exemption from registration provided by
Section 4(a)(2) of the Securities Act and Rule 506
promulgated by the SEC thereunder for the original issuances and
the make-whole transactions.