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Convertible Preferred Stock and Stockholders’ Equity
 11 Months Ended
Dec. 31, 2024
Convertible Preferred Stock and Stockholders’ Equity [Abstract]  
Convertible Preferred Stock and Stockholders’ Equity

8. Convertible Preferred Stock and Stockholders’ Equity

 

Pre-Funded Warrants

 

In August 2024, pursuant to the Subscription Agreement and immediately prior to the Closing, certain new and current investors purchased pre-funded warrants, which, at the effective time of the Merger, were exercisable for 5,522,207 shares of Company Common Stock at a purchase price of approximately $9.70 per warrant. After the Merger, there are 5,522,207 pre-funded warrants outstanding and are exercisable for 5,522,207 shares of the Company Common Stock at an exercise price of $0.01 per share.

 

In September 2024, in connection with the PIPE Financing, the Company issued and sold 680,000 pre-funded warrants, at a purchase price of $22.999 per warrant, exercisable for 680,000 shares of Company Common Stock at an exercise price of $0.001 per share.

 

The pre-funded warrants were recorded as a component of stockholders’ equity within additional paid-in-capital and have no expiration date. As of December 31, 2024, none of the pre-funded warrants have been exercised and 6,202,207 pre-funded warrants remain outstanding.

 

Employee Warrants

 

In July 2024, Pre-Merger Oruka entered into a Subscription Agreement that provided for, among other things, the issuance of warrants to certain of Pre-Merger Oruka’s employees and directors immediately prior to the closing of the Merger. During the period from February 6, 2024 (inception) to December 31, 2024, 3,054,358 employee warrants were issued at an exercise price of $7.80 per warrant. These warrants vest over a period of four years. Per the terms of the Employee Warrant Agreement, the holders of the Company’s warrants shall not have any of the rights or privileges of a stockholder of the Company in respect of any shares purchasable upon the exercise of the warrant or any portion thereof unless and until a certificate or certificates representing such shares have been issued or a book entry representing such shares has been made and such shares have been deposited with the appropriate registered book-entry custodian. The Company recognizes compensation cost related to warrants on a straight-line basis over the requisite service period, which is the period in which the related services are received. As of December 31, 2024, none of the warrants have been exercised and 3,054,358 warrants remain outstanding.

 

Convertible Preferred Stock

 

In March 2024, Pre-Merger Oruka issued and sold an aggregate of 20,000,000 shares of Pre-Merger Oruka Series A Preferred Stock to Fairmount (see Note 15), at a purchase price of approximately $0.15 per share, for aggregate gross proceeds of $3.0 million. Pre-Merger Oruka incurred less than $0.1 million of issuance costs in connection with this transaction. Upon the issuance of the Pre-Merger Oruka Series A Preferred Stock, the Company assessed the embedded conversion and liquidation features of the securities as described below and determined that such features did not require the Company to separately account for these features.

 

In August 2024, upon the closing of the Merger, the Company converted the Pre-Merger Oruka Series A Preferred Stock to 137,138 shares of Company Series B Preferred Stock.

 

In September 2024, in connection with the PIPE Financing, the Company issued and sold an aggregate of 2,439 shares of the Company Series A Preferred Stock at a purchase price of $23,000.00 per share. In November 2024, the 2,439 shares of the Company Series A Preferred Stock were converted to 2,439,000 shares of Company Common Stock. As of December 31, 2024, there are no outstanding shares of Company Series A Preferred Stock.

As of December 31, 2024, convertible preferred stock consisted of the following (in thousands, except share data):

 

   December 31, 2024 
  

Preferred
Stock
Authorized

   Preferred
Stock Issued
and
Outstanding		   Carrying
Value		   Common Stock
Issuable
Upon
Conversion		 
Series B convertible preferred stock   251,504    137,138    2,931    11,428,149 

 

Pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series A Non-Voting Convertible Preferred Stock (the “Series A Certificate of Designation”) filed in connection with the PIPE Financing, holders of Company Series A Preferred Stock were entitled to receive dividends on shares of Company Series A Preferred Stock equal to, on an as-if-converted-to-Company Common Stock basis, and in the same form as, dividends actually paid on shares of Company Common Stock. Except as provided in the Series A Certificate of Designation or as otherwise required by law, the Company Series A Preferred Stock did not have voting rights. The Company Series A Preferred Stock shall rank on parity with the Company Common Stock and Company Series B Preferred Stock upon any liquidation, dissolution or winding-up of the Company. Subject to the terms and limitations contained in the Series A Certificate of Designation, the Company Series A Preferred Stock issued in the PIPE Financing will not become convertible until the Company’s stockholders approve the conversion of the Company Series A Preferred Stock into shares of Company Common Stock in accordance with the listing rules of the Nasdaq Stock Market (the “Stockholder Approval”), which, on issuance, resulted in the Company Series A Preferred Stock being classified outside of stockholders’ equity on the Company’s consolidated balance sheet. Following the Stockholder Approval in November 2024, each share of Company Series A Preferred Stock was automatically converted into 1,000 shares of Company Common Stock.

 

Pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series B Non-Voting Convertible Preferred Stock (the “Series B Certificate of Designation”) filed in connection with the Merger, holders of Company Series B Preferred Stock are entitled to receive dividends on shares of Company Series B Preferred Stock equal to, on an as-if-converted-to-Company Common Stock basis, and in the same form as, dividends actually paid on shares of Company Common Stock. Except as provided in the Series B Certificate of Designation or as otherwise required by law, the Company Series B Preferred Stock does not have voting rights. The Company Series B Preferred Stock shall rank on parity with the Company Common Stock as to the distribution of assets upon any liquidation, dissolution, or winding-up of the Company. Each share of Company Series B Preferred Stock is convertible at the option of the holder, at any time, and without the payment of additional consideration by the holder. As of December 31, 2024, each outstanding share of Company Series B Preferred Stock was convertible into common stock at a ratio of approximately 83.3332:1.

 

Paruka Warrant

 

On December 31, 2024, the Company settled its 2024 obligations under the Paruka Warrant Obligation (defined below) by issuing Paruka a warrant to purchase 596,930 shares of Company Common Stock at an exercise price of $19.39 per share. The warrant has a term of 10 years, is fully vested, and is exercisable in part or full at any time during the term of the warrant. As of December 31, 2024, the warrant issued under the Paruka Warrant Obligation is outstanding and unexercised. See Note 9 for additional information on the Paruka Warrant Obligation.

 

Common Stock

 

As of December 31, 2024, the Certificate of Incorporation provides for 545,000,000 authorized shares of Company Common Stock. As of December 31, 2024, 37,440,510 shares of Company Common Stock were issued and outstanding, including 2,207,553 shares of RSAs issued and outstanding.

As of December 31, 2024, the Company had common stock reserved for future issuance as follows: 

 

   December 31,
2024		 
Shares issuable on conversion of Company Series B Preferred Stock   11,428,149 
Shares issuable upon exercise of pre-funded warrants   6,202,207 
Shares issuable upon exercise of warrant under the Paruka Warrant Obligation   596,930 
Outstanding and issued stock options   1,567,760 
Outstanding and issued employee warrants   3,054,358 
Shares available for grant under 2024 Stock Incentive Plan   4,246,324 
Shares available for grant under 2024 Employee Stock Purchase Plan   460,529 
Total shares of common stock reserved   27,556,257