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Stockholders' Equity | 9 Months Ended
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Sep. 30, 2024
Equity [Abstract] |
Stockholders' Equity | Note 8. Stockholders’ Equity Preferred Stock The Company has 5,000,000 authorized shares of preferred stock with a par value of $0.001 per share: • Series X 1 non-voting convertible preferred stock, 515,000 shares designated; 110,086 shares issued and outstanding, respectively, at each of September 30, 2024 and December 31, 2023; and • Series X non-voting convertible preferred stock, 10,000 shares designated; 4,422 shares issued and outstanding, respectively, at each of September 30, 2024 and December 31, 2023. Each share of the Series X 1 or X non-voting convertible preferred stock (the “Preferred Stock”) is convertible into 55.5556 shares of common stock, at the option of the holder at any time, subject to certain limitations, including, that the holder will be prohibited from converting the Preferred Stock into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of common stock above a conversion blocker, which is initially set at 9.99% or 9.9% of the total common stock then issued and outstanding immediately following the conversion of such shares of Series X Preferred Stock or Series X 1 Preferred Stock, respectively. The holder of the Preferred Stock is entitled to receive dividends on shares of the Preferred Stock equal (on an as-if-converted-to-common-stock basis and without regard to any beneficial ownership limitations) to and in the same form as dividends actually paid on shares of the common stock. No other dividends will be paid on shares of the Preferred Stock. In the event of any liquidation, dissolution or winding up, the holder of the Preferred Stock will be entitled to receive out of the assets, whether capital or surplus, the same amount that a holder of common stock would receive if the Preferred Stock were fully converted to common stock, which amounts shall be paid pari passu with all holders of common stock. Shares of the Preferred Stock will generally have no voting rights, except as required by law and except that consent of a majority of the holders of either series of outstanding Preferred Stock will be required to amend the terms of such series. 2023 Securities Purchase Agreement On April 28, 2023, the Company entered into the 2023 Securities Purchase Agreement with certain investors, pursuant to which the Company agreed to issue and sell to the investors in the 2023 Private Placement (i) in an initial closing, (a) an aggregate of 15,151,518 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share, or pre-funded warrants in lieu thereof (the “Pre-Funded Warrants”), and (b) common stock warrants exercisable into an aggregate of 15,151,518 shares of common stock (or Pre-Funded Warrants in lieu thereof) (the “Common Warrants” and, together with the Pre-Funded Warrants, the “Warrants”); (ii) in the Second Closing, upon the satisfaction or waiver of specified conditions set forth in the 2023 Securities Purchase Agreement, an aggregate of 20,202,024 shares of common stock (or Pre-Funded Warrants); and (iii) in the Third Closing, upon the satisfaction or waiver of specified conditions set forth in the 2023 Securities Purchase Agreement, an aggregate of 25,252,530 shares of common stock (or Pre-Funded Warrants), in each case subject to customary adjustments as provided in the 2023 Securities Purchase Agreement, Pre-Funded Warrant or Common Warrant, as applicable. Each Common Warrant has an exercise price of $3.00 per share and expires five years after issuance. The Pre-Funded Warrants are exercisable immediately and until exercised in full, with an exercise price of $0.001 per share. The Pre-Funded Warrants and Common Warrants are subject to specified beneficial ownership limitations, which are generally set at 9.99% of the total common stock then issued and outstanding immediately following the exercise of such warrants, and provided that any beneficial ownership limitation may not exceed 19.99% unless otherwise permitted. The Shares, the Warrants, and the shares of common stock issuable upon the exercise of the Warrants, have not been registered under the Securities Act of 1933, as amended, and were offered pursuant to the exemption from registration provided in Section 4(a)(2) under the Securities Act of 1933, as amended, and Rule 506(b) promulgated thereunder. On May 5, 2023, the initial closing occurred and the Company received $35.0 million, or net proceeds of approximately $33.0 million after deducting offering costs, in exchange for 8,730,168 shares of common stock and Pre-Funded Warrants to purchase 6,421,350 shares of common stock. On July 8, 2024, the Second Closing occurred and the Company received gross proceeds of $2.1 million, or net proceeds of approximately $2.0 million after deducting offering costs, in exchange for 909,088 shares of common stock. On September 30, 2024 and October 1, 2024, the Third Closing occurred and the Company received gross proceeds of $4.0 million, or net proceeds of approximately $3.8 million after deducting offering costs, in exchange for 1,727,400 shares of common stock. In connection with the 2023 Private Placement, the Company filed on May 18, 2023, a registration statement on Form S-3 (the “2023 Registration Statement”) with the SEC to register for resale the Shares and the shares of common stock issuable upon the exercise of the Warrants. The 2023 Registration Statement became effective on June 2, 2023. In August 2024, the Company concluded that the Common Warrants, and the potential issuance of Pre-Funded Warrants in lieu of additional shares of common stock in the Second and Third Closings (the “Subsequent Closing Warrants”) do not meet the conditions to be classified as equity instruments under ASC 815-40 and must instead be recorded as liabilities on the Company’s consolidated balance sheets at their fair value and remeasured at fair value for each subsequent reporting period. The valuation of the Common Warrants and the Subsequent Closing Warrants is adjusted to fair value (Level 3) at each balance sheet date until the Common Warrants and the Subsequent Closing Warrants are settled or expired. The following table presents the assumptions used in the Black-Scholes option pricing model to determine the fair value of warrants as of September 30, 2024 as follows:
|  | September 30, 2024 |  |  | December 31, 2023 |
Risk-free interest rate |  | 3.58% |  |  | 3.84% - 3.88% |
Expected volatility |  | 93.46% - 98.39% |  |  | 89.08% - 94.28% |
Expected term (in years) |  | 3.75 - 5.25 |  |  | 4.5 - 6.0 |
Share price |  | $ | 2.49 |  |  | $ | 1.80 |
2024 Securities Purchase Agreement On May 6, 2024, the Company entered into a Securities Purchase Agreement (the “2024 Securities Purchase Agreement”) with certain institutional and accredited investors, pursuant to which the Company agreed to issue and sell to the investors in a private placement (the “2024 Private Placement”) an aggregate of 13,110,484 shares (the “2024 Shares”) of the Company’s common stock, $0.001 par value per share at a price of $2.37 per share, and pre-funded warrants (the “2024 Pre-Funded Warrants”) at a price of $2.369 per underlying share, which are exercisable to purchase 7,989,516 shar es of common stock at an exercise price of $0.001 per share. The 2024 Pre-Funded Warrants were issued in lieu of shares of common stock and are exercisable immediately and until exercised in full. The 2024 Pre-Funded Warrants are subject to specified beneficial ownership limitations (equal to 4.99% or 9.99% as determined by holder of each such warrant) of the total common stock then issued and outstanding immediately following the exercise of such warrants, and provided that any beneficial ownership limitation may not exceed 19.99% unless otherwise permitted. The 2024 Pre-Funded Warrants were classified as a component of permanent stockholders’ equity within additional paid-in-capital. The 2024 Pre-Funded Warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of common shares upon exercise, are indexed to the Company’s common stock and meet the equity classification criteria. In addition, the 2024 Pre-Funded Warrants do not provide any guarantee of value or return. The 2024 Private Placement resulted in gross proceeds to the Company of $50.0 million, or net proceeds of approximately $48.1 million after deducting offering costs. The Company intends to use the net proceeds from the 2024 Private Placement to fund pre-commercial activities for its products and general corporate purposes. In connection with the 2024 Private Placement, the Company filed on May 24, 2024, a registration statement on Form S-3 (the “2024 Registration Statement”) with the SEC to register for resale the Shares and the shares of common stock issuable upon the exercise of the Warrants. The 2024 Registration Statement became effective on June 5, 2024. 2024 Equity Distribution Agreement On September 20, 2024, the Company entered into an Open Market Sale Agreement (the “Sales Agreement”) with Guggenheim Securities, LLC (“Guggenheim Securities”) to sell shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), having aggregate sales proceeds of up to $75.0 million, from time to time, through an “at the market” equity offering program under which Guggenheim Securities will act as sales agent. In connection with the Sales Agreement, the Company filed on September 20, 2024 a registration statement on Form S-3 containing a prospectus and prospectus supplement (the “ATM Registration Statement”) with the SEC. The ATM Registration Statement became effective on October 2, 2024. The Company has not sold any shares under the Sales Agreement. 2023 Conversion Agreement of Non-Voting Convertible Preferred Stock On May 16, 2023, Cormorant Global Healthcare Master Fund LP provided notice to convert (i) 1,782 shares of Series X Non-Voting Convertible Preferred Stock for 99,000 shares of common stock in accordance with the Certificate of Designation of Preferences, Rights and Limitations of the Series X Non-Voting Convertible Preferred Stock, and (ii) 7,883.586 shares of Series X 1 Non-Voting Convertible Preferred Stock for 437,977 shares of common stock in accordance with the Certificate of Designation of Preferences, Rights and Limitations of the Series X 1 Non-Voting Convertible Preferred Stock. The conversion was completed on May 23, 2023. Exercise of Pre-Funded Warrants from 2023 Securities Purchase Agreement On July 10, 2023, Armistice Capital Master Fund Ltd. (the “Exercising Stockholder”) exercised Pre-Funded Warrants to purchase 501,197 shares of common stock at an exercise price of $0.001 per share, which were issued in conjunction with the 2023 Securities Purchase Agreement. On July 14, 2023, the Company issued 501,197 shares of common stock to the Exercising Stockholder in accordance with such exercise. On November 2, 2023, the Exercising Stockholder exercised Pre-Funded Warrants to purchase 653,000 shares of common stock at an exercise price of $0.001 per share, which were issued in conjunction with the 2023 Securities Purchase Agreement. On November 6, 2023, the Company issued 653,000 shares of common stock to the Exercising Stockholder in accordance with such exercise. On January 30, 2024, the Exercising Stockholder exercised Pre-Funded Warrants to purchase 600,000 shares of common stock at an exercise price of $0.001 per share, which were issued in conjunction with the 2023 Securities Purchase Agreement. On January 30, 2024, the Company issued 600,000 shares of common stock to the Exercising Stockholder in accordance with such exercise. On May 7, 2024, the Exercising Stockholder exercised Pre-Funded Warrants to purchase 583,000 shares of common stock at an exercise price of $0.001 per share, which were issued in conjunction with the 2023 Securities Purchase Agreement. On May 9, 2024, the Company issued 583,000 shares of common stock to the Exercising Stockholder in accordance with such exercise. On July 11, 2024, the Exercising Stockholder exercised Pre-Funded Warrants to purchase 240,000 shares of common stock at an exercise price of $0.001 per share, which were issued in conjunction with the 2023 Securities Purchase Agreement. On July 11, 2024, the Company issued 240,000 shares of common stock to the Exercising Stockholder in accordance with such exercise. Common Stock Warrants As of September 30, 2024, there were 28,121,237 warrants exercisable into common stock (after rounding for fractional shares and subject to beneficial ownership limitations). The following table shows the warrants to purchase common stock activity:
|  | Roll-Forward of Warrant Activity |
|  | Common Stock Warrants |  |  | Pre-Funded Warrants |  |  | All Other Warrants |  |  | Total |
Balance as of December 31, 2023 |  |  | 15,151,518 |  |  |  | 5,776,270 |  |  |  | 636,514 |  |  |  | 21,564,302 |
Issued |  |  | — |  |  |  | 7,989,516 |  |  |  | — |  |  |  | 7,989,516 |
Exercised |  |  | — |  |  |  | (1,423,000 | ) |  |  | — |  |  |  | (1,423,000 | )
Cancelled/Expired |  |  | — |  |  |  | — |  |  |  | (9,581 | ) |  |  | (9,581 | )
Balance as of September 30, 2024 |  |  | 15,151,518 |  |  |  | 12,342,786 |  |  |  | 626,933 |  |  |  | 28,121,237 |
Preferred Stock Warrants As of September 30, 2024, there were 50,207.419 warrants exercisable into Series X 1 Non-Voting Convertible Preferred Stock, which are convertible into 2,789,301 shares of common stock (after rounding for fractional shares and subject to beneficial ownership conversion limitations).
|  | Roll-Forward of Series X 1 Non-Voting Convertible Preferred Warrant Activity |
|  | Total |
Balance as of December 31, 2023 |  |  | 50,207.419 |
Issued |  |  | — |
Exercised |  |  | — |
Balance as of September 30, 2024 |  |  | 50,207.419 |

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