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STOCKHOLDERS DEFICIENCY
 3 Months Ended
Sep. 30, 2024
STOCKHOLDERS DEFICIENCY  
STOCKHOLDERS DEFICIENCY

(13) STOCKHOLDERS’ DEFICIENCY

 

Series A Convertible Preferred Stock – As of September 30, 2024, 4,030 shares of Series A Convertible Preferred Stock were outstanding. Each share of Series A Convertible Preferred Stock is convertible at any time, at the option of the holder, into the number of shares of common stock equal to $100 divided by the Series A Conversion Price. As of September 30, 2024, the Series A Conversion Price was $75.45, and each share of Series A Convertible Preferred Stock is convertible into approximately 1.33 shares of common stock. The Series A Conversion Price is subject to adjustment, under certain circumstances, upon the sale or issuance of common stock for consideration per share less than either (i) the Series A Conversion Price in effect on the date of such sale or issuance, or (ii) the market price of the common stock as of the date of such sale or issuance. The Series A Conversion Price is also subject to adjustment upon the occurrence of a merger, reorganization, consolidation, reclassification, stock dividend or stock split which will result in an increase or decrease in the number of shares of common stock outstanding. Shares of Series A Convertible Preferred Stock have a preference in liquidation, including certain merger transactions, of $100 per share, or $403,000 in the aggregate as of September 30, 2024. Additionally, the Company may not pay a dividend or make any distribution to holders of any class of stock unless the Company first pays a special dividend or distribution of $100 per share to holders of the Series A Convertible Preferred Stock.

 

Financing Transactions – On January 29, 2024, the Company entered into a securities purchase agreement (the “January 2024 Purchase Agreement”) to sell in a registered direct offering (the “January 2024 RD Offering”), an aggregate of 1,831,503 shares of common stock of the Company. Pursuant to the January 2024 Purchase Agreement, the Company issued to the investors in the January 2024 RD Offering unregistered warrants (the “January 2024 Private Warrants”) to purchase up to 1,831,503 shares of the Company’s common stock (the “January 2024 Private Warrant Shares”) in a concurrent private placement (the “Private Offering” and together with the January 2024 RD Offering, the “January 2024 Offering”). The shares of common stock and accompanying January 2024 Private Warrants were offered at a combined offering price of $5.46.

 

The January 2024 Private Warrants are exercisable on the six-month anniversary of the issuance date for a period of four years from the issuance date, at an exercise price equal to $5.46 per January 2024 Private Warrant Share. The January 2024 Private Warrants are exercisable for cash, or, solely during any period when a registration statement for the issuance or resale of the January 2024 Private Warrant Shares issuable upon exercise of the January 2024 Private Warrants to or by the holder of such January 2024 Private Warrants is not in effect, on a cashless basis.

The Company paid the placement agent a cash fee equal to 7.0% of the aggregate gross proceeds of the January 2024 Offering and for certain expenses and legal fees in connection with the January 2024 Offering. In addition, the Company also issued to the placement agent or its designees warrants (the “2024 Placement Agent Warrants”) to purchase up to 91,575 shares of the Company’s common stock (the “January 2024 Placement Agent Warrant Shares”) as part of the compensation payable to the placement agent. The January 2024 Placement Agent Warrants have substantially the same terms as the January 2024 Private Warrants, except that the January 2024 Placement Agent Warrants have an exercise price of $6.825 per share.

 

On March 14, 2024, the Company filed a registration statement on Form S-1 to register the January 2024 Private Warrants and the January 2024 Placement Agent Warrants, which registration statement was declared effective on March 28, 2024 and a prospectus was filed on the same date.

 

The gross proceeds from the January 2024 Offering totaled $10,000,006, with net proceeds from the January 2024 Offering, after deducting the placement agent fees and offering expenses, amounting to $9,224,056. The Company intends to use the net proceeds received from the January 2024 Offering for general working capital purposes.

 

On October 20, 2023, the Company entered into a securities purchase agreement (the “October 2023 Purchase Agreement”) with a certain institutional investor, to sell in a registered direct offering (the “October 2023 RD Offering”), an aggregate of (i) 1,325,000 shares of common stock (the “October 2023 Shares”), of the Company and (ii) pre-funded warrants (the “October 2023 Pre-Funded Warrants”) to purchase up to 1,033,491 shares of the Company’s common stock (the “October 2023 Pre-Funded Warrant Shares”). Pursuant to the October 2023 Purchase Agreement the Company also issued unregistered warrants (the “October 2023 Private Warrants”) to purchase up to 2,358,491 shares of the Company’s common stock (the “October 2023 Private Warrant Shares”) in a concurrent private placement (the “October 2023 Private Offering” and together with the October 2023 RD Offering, the “October 2023 Offering”). The October 2023 Shares and accompanying October 2023 Private Warrants were offered at a combined offering price of $2.12. The October 2023 Pre-Funded Warrants and accompanying October 2023 Private Warrants were offered at a combined offering price of $2.1199. The October 2023 Offering closed on October 24, 2023.

 

The October 2023 Private Warrants are exercisable on the six-month anniversary of issuance for a period of five and one-half years from the issuance date, at an exercise price equal to $2.12 per October 2023 Private Warrant Share. The October 2023 Private Warrants will be exercisable for cash, or, solely during any period when a registration statement for the issuance or resale of the October 2023 Private Warrant Shares issuable upon exercise of the October 2023 Private Warrants to or by the holder of such October 2023 Private Warrants is not in effect, on a cashless basis.

 

The October 2023 Pre-Funded Warrants had an exercise price of $0.0001 per October 2023 Pre-Funded Warrant Share, were exercisable upon issuance, and during the three months ended December 31, 2023, the institutional investor exercised the outstanding October 2023 Pre-Funded Warrants to purchase 1,033,491 shares of the Company’s common stock.

 

The net proceeds from the October 2023 Offering, after deducting the placement agent fees and offering expenses, were $4,573,948.

 

The placement agent warrants were issued to non-employees in exchange for services related to the offering are accounting for in accordance ASC 718 which requires the fair value of the warrants to be recognized as an offering expense. The placement agent warrants contain certain contingent cash settlement features that are not probable of occurring and not within the control of Company, therefore the placement agent warrants are classified out of permanent equity.

 

On January 24, 2024, the Company and warrant holders amended the terms of warrants related to the October 2023 financings. As a result, all liability classified warrants were reclassified to additional paid-in capital.

 

On April 12, 2023, the Company entered into a new equity distribution agreement (the “2023 Equity Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which the Company may, from time to time, sell shares of the Company’s common stock at market prices by methods deemed to be an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The 2023 Equity Distribution Agreement and related prospectus is limited to sales of up to an aggregate maximum $50.0 million of shares of the Company’s common stock. The Company pays Canaccord 3.0% of the gross proceeds as a commission.

Proceeds raised under the 2023 Equity Distribution Agreement are as follows:

 

 

 

Three Months Ended

September 30, 2023

 

 

Cumulative from inception

 

 

 

Shares

 

 

Proceeds

 

 

Shares

 

 

Proceeds

 

Gross proceeds

 

 

217,027

 

 

$547,803

 

 

 

721,061

 

 

$1,744,542

 

Fees

 

 

-

 

 

 

(16,434)

 

 

-

 

 

 

(52,336)
Expenses

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(126,800)
Net proceeds

 

 

217,027

 

 

$531,369

 

 

 

721,061

 

 

$1,565,406

 

 

No proceeds were raised under the 2023 Equity Distribution Agreement during the three months ended September 30, 2024.

 

Stock Warrants - On June 20, 2024, the Company entered into a letter agreement (the “Inducement Letter”) with a holder (the “Exercising Holder”) of outstanding common stock purchase warrants that the Company issued on November 2, 2022, and October 24, 2023 (the “Existing Warrants”). Pursuant to the Inducement Letter, the Exercising Holder agreed to exercise, for cash, Existing Warrants to purchase, in the aggregate, 3,233,277 shares of common stock in exchange for the Company’s agreement to (i) lower the exercise price to $1.88 per share for the 3,233,277 Existing Warrants being exercised pursuant to the Inducement Letter and (ii) issue to the Exercising Holder an aggregate of 4,849,915 warrants to purchase shares of common stock, comprised of Series A common stock purchase warrants to purchase 2,727,273 shares of common stock (the “June 2024 Series A Warrants”) and Series B common stock purchase warrants to purchase 2,122,642 (of which 1,624,201 shares of common stock are subject to stockholder approval) shares of common stock (the “June 2024 Series B Warrants” and together with the June 2024 Series A Warrants, the “June 2024 Inducement Warrants”). The Company received aggregate gross proceeds of $6,078,561 from the exercise of the Existing Warrants by the Exercising Holder (the “Warrant Inducement”). As part of the agreement, 1,443,277 shares of common stock were held in abeyance on behalf of the Exercising Holder. During the three months ended September 30, 2024, at the request of the Exercising Holder, 1,443,277 shares were released from abeyance. The incremental value of the Warrant Inducement was recorded as an offering expense against the proceeds received in additional paid-in capital.

 

As of September 30, 2024, the Company had outstanding warrants for shares of common stock as follows:

 

Shares of Common

Exercise Price per

Latest Expiration

Description

Stock

Share

Date

May 2022 Warrants

66,666

$ 12.50

May 11, 2026

October 2022 Placement Agent Warrants

90,909

$ 6.88

October 31, 2027

October 2023 Private Warrants

943,396

$ 2.12

April 24, 2029

October 2023 Placement Agent Warrants

117,925

$ 2.65

October 20, 2028

January 2024 Private Warrants

1,831,503

$ 5.46

February 1, 2028

January 2024 Placement Agent Warrants

91,575

$ 6.83

February 1, 2028

June 2024 Series A Warrants

2,727,273

$ 1.88

June 24, 2029

June 2024 Series B Warrants

2,122,642

$ 1.88

June 24, 2029

*

 

* 1,624,201 shares expire on the five year anniversary following stockholder approval of the warrant issuance

 

Stock Options – For the three months ended September 30, 2024, and 2023, the Company recorded stock-based compensation related to stock options of $177,734 and $205,317.

A summary of stock option activity is as follows:

 

 

 

Number of Shares

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Term in Years

 

 

Aggregate Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding - June 30, 2024

 

 

2,263,440

 

 

$6.11

 

 

 

8.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

Forfeited

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

Expired

 

 

(14,338)

 

 

7.92

 

 

 

 

 

 

 

 

Outstanding - September 30, 2024

 

 

2,249,102

 

 

$6.12

 

 

 

8.0

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at September 30, 2024

 

 

927,524

 

 

$10.81

 

 

 

6.4

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expected to vest at September 30, 2024

 

 

1,321,578

 

 

$2.83

 

 

 

9.1

 

 

$-

 

 

Stock options granted to the Company’s executive officers and employees generally vest over a 48-month period, while stock options granted to its non-employee directors vest over a 12-month period.

 

Included in the outstanding options in the table above are 418,945 and 88,911 unvested performance-based stock options granted to executive officers and other employees, respectively, which were granted in June 2020, 2021, 2022 and 2023. Grants in June 2021, 2022, 2023 and 2024 were 95,167, 60,566, 238,838 and 264,945, respectively. The performance-based stock options vest on annual performance criteria through the fiscal years ending June 30, 2028 relating to advancement of MC1r programs, including initiation of clinical trials and licensing of Vyleesi in additional countries or regions.

 

Restricted Stock Units – For the three months ended September 30, 2024 and 2023, the Company recorded stock-based compensation related to restricted stock units of $171,289 and $185,019, respectively.

 

A summary of restricted stock unit activity is as follows:

 

Outstanding at June 30, 2024

 

 

1,374,980

 

Granted

 

 

-

 

Forfeited

 

 

-

 

Vested

 

 

(232,941)

Expirations

 

 

(2,726)

Outstanding at September 30, 2024

 

 

1,139,313

 

 

Included in outstanding restricted stock units in the table above are 279,700 vested shares that have not been issued as of September 30, 2024, due to a provision in the restricted stock unit agreements to delay delivery.

 

Time-based restricted stock units granted to the Company’s executive officers, employees, and non-employee directors generally vest over 48 months, 48 months, and 12 months, respectively.

 

Included in the outstanding restricted stock units in the table above are 274,549 and 59,842 unvested performance-based restricted stock units granted to executive officers and other employees, respectively, which were granted in June 2021, 2022, 2023, and 2024. Grants in June 2021, 2022, 2023 and 2024 were 22,343, 40,707, 152,432 and 184,443 restricted stock units, respectively. The performance-based restricted stock units vest on annual performance criteria through the fiscal years ending June 30, 2026 relating to advancement of MC1r programs, including initiation of clinical trials, and licensing of Vyleesi in additional countries or regions

 

In connection with the vesting of restricted share units during the three months ended September 30, 2024, the Company withheld 54,691 shares, with an aggregate value of $99,482, in satisfaction of minimum tax withholding obligations.