Item 3.02 Unregistered Sales of Equity Securities.
As previously disclosed by Peak Bio, Inc., a Delaware corporation (the “Company”), on its Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2023 (the “December 22, 2023 Current Report”) the Company and certain investors (the “Convertible Note Investors”) entered into a convertible note subscription agreement dated December 18, 2023 (the “Convertible Note Subscription Agreement”) pursuant to which (i) the Convertible Note Investors purchased and the Company issued to the Convertible Note Investors convertible promissory notes (the “Convertible Notes”) in the aggregate principal amount of $1,000,000 and (ii) certain convertible notes previously issued by the Company on or about April 28, 2023 in the aggregate original principal amount of $180,000 were exchanged for new Convertible Notes.
As previously disclosed on the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2024, the Company closed a second financing under the Convertible Note Subscription Agreement with a Convertible Note Investor pursuant to which a Convertible Note Investor purchased and the Company issued to the Convertible Note Investor Convertible Notes in the aggregate principal amount of $500,000.
On January 31, 2024, the Company closed an additional financing under the Convertible Note Subscription Agreement with Convertible Note Investors pursuant to which (i) Convertible Note Investors purchased and the Company issued to the Convertible Note Investors Convertible Notes in the aggregate principal amount of $675,000 and (ii) certain convertible notes previously issued by the Company on or about April 28, 2023 in the aggregate original principal amount of $240,000 were exchanged for new Convertible Notes.
The Convertible Notes carry an interest rate of 10% per annum, have a maturity date occurring on the 12-month anniversary date of the initial closing date of December 18, 2023 (the “Initial Closing Date”), and provide for automatic conversion, optional conversion and registration rights as follows:
Automatic Conversion:
If a Business Combination (defined below) occurs while the Convertible Notes are outstanding, then the outstanding principal amount of the Convertible Notes and all accrued and unpaid interest shall automatically convert into common stock, par value $0.0001 per share (the “Common Stock”) of the Company immediately prior to the closing of the Business Combination at the Conversion Price (defined below) where:
“Business Combination” means any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock of the Company is converted into or exchanged for securities of another entity (the “Surviving Company”) that are traded on a Public Exchange (the “Surviving Company Securities”).
“Conversion Price” means the price per share for the Company’s Common Stock determined by reference to the purchase price payable in connection with such Business Combination, multiplied by the Discount Rate, where the price per share of the Common Stock is determined by reference to the 30-day volume weighted average price of the Surviving Company Securities on the Public Exchange immediately prior to conversion and the exchange ratio (the “Exchange Ratio”) used in the Business Combination.
“Discount Rate” means 70%.
“Public Exchange” means the Nasdaq Stock Market, the New York Stock Exchange or another public exchange or marketplace approved by the Company’s Board of Directors.
Optional Conversion:
If a Business Combination does not occur prior to the maturity date of the Convertible Notes and if the Company’s Common Stock is listed on a Public Exchange as of such date, then the Convertible Note Investors will have the right, at their option, to convert the outstanding principal amount of the Convertible Notes (and all accrued and unpaid interest thereof) into fully paid and nonassessable shares of Common Stock of the Company at a price equal to the 30-day volume weighted average price of the Company’s Common Stock on the Public Exchange on which it is traded multiplied by 90%.