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Subsequent Events
6 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events

NOTE 12 – Subsequent Events

 

Amendment of 2019 Paulson Notes

 

On April 24, 2020, the Company and holders of a majority in aggregate principal amount of the 2019 Paulson Notes entered into an amendment to the 2019 Paulson Notes (the "Second Paulson Amendment") to, among other things:

 

  i. Extend the Maturity DateThe Second Paulson Amendment extends the maturity date of the 2019 Paulson Notes from May 1, 2020 to November 1, 2020 (in either case, unless a change of control transaction happens prior to such date);

 

  ii. Revise Optional Conversion TermsThe Second Paulson Amendment provides that the amount of shares to be received upon the a subscriber's optional conversion of the 2019 Paulson Notes prior to a 2019 Qualified Financing (as defined in the 2019 Paulson Notes) will be equal to: (1) the Outstanding Balance of such subscriber's 2019 Paulson Note elected by the subscriber to be converted divided by (2) an amount equal to 0.6 multiplied by the volume weighted average price of the common stock for the ten (10) trading days immediately preceding the date of conversion; and

 

  iii. Revise the Registration Date – The Second Paulson Amendment provides that promptly following the earlier of (1) May 1, 2020, if the applicable subscriber has converted all or a majority of the Outstanding Balance of such subscriber's 2019 Paulson Note prior to such date; (2) the final closing a 2019 Qualified Financing; and (3) the maturity date, the Company will enter into a registration rights agreement with the applicable subscriber containing customary and usual terms pursuant to which the Company shall agree to prepare and file with the SEC a registration statement on or prior to the 90th calendar day following the registration date, covering the resale of any common stock received on conversion of such 2019 Paulson Notes, and shares of common stock underlying the Warrants.

 

There were no other significant changes to terms under the Second Paulson Amendment.

 

2019 Paulson Note Conversion

 

Between April 24, 2020 and May 1, 2020, certain holders elected to convert outstanding principal and accrued and unpaid interest of 2019 Paulson Notes in the amount of $2,633,280 into 2,054,245 shares of common stock.

 

Paulson 2020 Convertible Note Financing 

 

On April 30, 2020, the Company entered into a subscription agreement with certain accredited investors, pursuant to which the Company, in a private placement (the "2020 Paulson Private Placement"), agreed to issue and sell to the investors up to $3 million of 13% convertible promissory notes (each, a "2020 Paulson Note" and collectively, the "2020 Paulson Notes") and warrants (each, a "2020 Paulson Warrant" and collectively, the "2020 Paulson Warrants") to purchase shares of the Company's common stock. 

 

Between April 30, 2020 and May 8, 2020, the Company issued 2020 Paulson Notes in an aggregate principal amount of $2,469,800 to the Subscribers. The Company may conduct any number of additional closings so long as the aggregate amount of gross proceeds does not exceed $6,000,000 or a higher amount determined by the Board.

 

The 2020 Paulson Notes bear interest at a fixed rate of 13% per annum and require the Company to repay the principal and accrued and unpaid interest thereon on the earlier of (i) six months following the final closing of the 2020 Paulson Private Placement, (ii) six months following July 31, 2020, and (iii) a change of control transaction. If the Company raises more than $5,000,000 in an equity financing before the maturity date (the "2020 Qualified Financing"), without any action on the part of the Subscribers, all of the outstanding principal and accrued and unpaid interest of the Notes (the "Outstanding Balance") shall convert into that number of shares of the securities issued by the Company in the closing on the date a 2020 Qualified Financing occurs equal to: (i) the Outstanding Balance divided by (ii) the lower of 0.6 multiplied by (A) the actual per share price of the securities issued by the Company in the closing on the date a 2020 Qualified Financing occurs and (B) the volume weighted average price of the common stock for ten (10) trading days immediately preceding the 2020 Qualified Financing.

 

If the Company announces a transaction between the Company and any other company (or an affiliate of any such company) that is included in the S&P 500 Health Care Index as published from time to time by S&P Dow Jones Indices LLC that includes an investment or upfront payments resulting in gross proceeds to the Company of at least $2,000,000 upon the execution of such transaction or definitive agreement, and provides for terms of collaboration, manufacturing, distribution, licensing or supply of the Company's products (a "Strategic Transaction") before the maturity date, without any action on the part of the subscribers, the Outstanding Balance shall be converted into that number of shares of common stock equal to: (i) the Outstanding Balance divided by (ii) the lower of 0.6 multiplied by (A) the VWAP of the common stock for the ten (10) trading days immediately preceding the first announcement of the Strategic Transaction or (B) closing price of the common stock on the day preceding the first announcement by the Company of a Strategic Transaction.

 

At any time, at the sole election of the holder of such 2020 Paulson Note, all or a portion of the Outstanding Balance may be converted into that number of shares of common stock equal to: (i) the Outstanding Balance elected by the holder to be converted divided by (ii) an amount equal to 0.6 multiplied by the volume weighted average price of the common stock for the ten (10) trading days immediately preceding the date of conversion.

 

If a change of control transaction occurs prior to the conversion of the 2020 Paulson Notes or the maturity date, the 2020 Paulson Notes would become payable on demand as of the closing date of such transaction. Change of control means a merger or consolidation with another entity in which the Company's stockholders do not own more than 50% of the outstanding voting power of the surviving entity or the disposition of all or substantially all of the Company's assets.

 

Each 2020 Paulson Warrant grants the holder the option to purchase the number of shares of common stock equal to (i) 0.5 multiplied by (ii) the principal amount of such subscriber's 2020 Paulson Notes divided by 1.87, with an exercise price per share equal to $1.87. The 2020 Paulson Warrants are immediately exercisable and expire on April 30, 2023. The exercise price is subject to adjustment in the event of any stock dividends or splits, reverse stock split, recapitalization, reorganization or similar transaction.

 

In connection with the 2020 Paulson Private Placement, Paulson will receive a cash commission equal to 12% of the gross proceeds from the sale of the 2020 Paulson Notes, and at the final closing of the 2020 Paulson Private Placement, Paulson will receive 7-year warrants to purchase an amount of common stock equal to 15% of the total gross proceeds received by the Company in the 2020 Paulson Private Placement, divided by 1.87 (the "Broker Warrants"). The Broker Warrants will have an exercise price equal to $1.87.

 

2020 Paulson Note Conversions

 

Between May 4, 2020 and May 12, 2020, certain Subscribers elected to convert $50,153 of the outstanding principal and interest of such Subscribers' 2020 Paulson Notes into 38,335 shares of common stock.

 

Payroll Protection Program

 

The CARES Act, signed into law in March 2020, established the Paycheck Protection Program ("PPP"). The PPP authorizes up to $349 billion in forgivable loans to small businesses. Loan amounts are forgiven to the extent proceeds are used to cover documented payroll, mortgage interest, rent, and utility costs over an 8 week measurement period following loan funding. Loans have a maturity of 2 years and an interest rate of 1%. Prepayments may be made without penalty. In April 2020, the Company received loan funding of approximately $83,333 under the PPP.

 

Amendment to Veritas Consulting Agreement

 

On April 22, 2020, the Company entered into an amendment (the "Amendment") to the Consulting Agreement, by and between the Company and Veritas Consulting Group Inc. ("Veritas"). Pursuant to the Amendment, the Company issued Veritas an additional 35,000 shares in exchange for consulting services. 

 

PMT Litigation

 

On April 29, 2020, the district court granted the Company's motion for sanctions. Additionally, the district court granted the Company's motion for summary judgment in part with respect to the counts for Christianson's breach of non-confidentiality agreement, Fredrickson's breach of confidentiality covenants, and the creation of a constructive trust and denied the Company's motion for summary judgment on all other counts.