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Jun. 30, 2024 | |||||||||||||||||||||||||||||||
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| Capitalization |
May 2024 Private Placement
On May 24, 2024, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”), dated May 22, 2024 with the purchasers named therein (the “Purchasers”), which included certain affiliated entities of Chicago Pacific Founders GP, L.P., a Delaware limited partnership (“CPF GP”), and institutional investors, the Company issued approximately 67.4 million units at a price of approximately $0.6270 per unit. Each unit consists of one share of Class A common stock and a warrant (the “Common Warrants”) to purchase one share of Class A common stock at an exercise price of $0.5020. Certain institutional investors elected to receive pre-funded warrants (the “Pre-Funded Warrants,” and together with the Common Warrants, the “Warrants”) to purchase Class A common stock in lieu of a portion of their Class A common stock. In total, the Company sold (i) an aggregate of 41.6 million shares of its Class A common stock (the “Shares”), (ii) Common Warrants to purchase an aggregate of 67.4 million shares of Class A common stock, and (iii) Pre-Funded Warrants to purchase an aggregate of 25.8 million shares of Class A common stock for aggregate proceeds of $39.8 million, net of $2.4 million in offering costs (collectively, the “May 2024 Private Placement”). The Common Warrants were recorded as liability-classified financial instruments and the Pre-Funded Warrants were recorded as equity-classified financial instruments.
The key Level 3 inputs into the option pricing model related to the Common Warrants were as follows:
Registration Rights Agreement
On May 24, 2024, in connection with the May 2024 Private Placement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers. Pursuant to the Registration Rights Agreement, the Company agreed to prepare and file a registration statement with the SEC for purposes of registering the resale of the Shares and shares of common stock issuable upon exercise of the Warrants, which was filed with the SEC on June 18, 2024 and declared effective by the SEC on June 27, 2024. The Registration Rights Agreement also contains certain shelf takedown and piggyback rights.
The Company has also agreed, among other things, to indemnify the Purchasers, their officers, directors, members, employees and agents, successors and assigns under the registration statement from certain liabilities and to pay all fees and expenses incident to the Company’s obligations under the Registration Rights Agreement.
Amended and Restated Letter Agreement with CPF
On May 24, 2024, in connection with entry into the Purchase Agreement, the Company entered into an amended and restated letter agreement (the “Amended and Restated Letter Agreement”) with CPF GP, and Chicago Pacific Founders GP III, L.P., a Delaware limited partnership (“CPF GP III,” and together with CPF GP, “CPF”) (on behalf of the funds of which CPF GP is the general partner, certain funds of which CPF GP III is the general partner and/or certain of their affiliated entities and funds (collectively, the “CPF Parties”)). The Amended and Restated Letter Agreement provides that for as long as the CPF Parties own 40% of the Company’s outstanding common stock, (i) CPF will be entitled to designate one additional independent member of the Company’s board of directors, and (ii) CPF will be entitled to certain information rights and protective provisions. As of the date of the issuance of these financial statements, CPF has not exercised its right to designate a director under the terms of the Amended and Restated Letter Agreement. The CPF Parties also agreed to extend a standstill restriction that limits the ownership of the CPF Parties to 49.99% of the Company’s Class A common stock and Class V common stock from the date of the closing of the May 2024 Private Placement to July 31, 2025.
Restricted Stock Unit Settlement
On December 31, 2023, 1.5 million restricted stock units (“RSU”), each RSU representing the right to receive one share of Class A common stock of the Company, previously granted to Sherif Abdou, M.D., the Company’s former Chief Executive Officer, vested pursuant to the terms of a Restricted Stock Unit Agreement between the Company and Dr. Abdou. The Company timely paid $0.7 million in withholding taxes attributable to the vesting of the RSUs to the Internal Revenue Service on behalf of Dr. Abdou on January 10, 2024. Dr. Abdou repaid such sum to the Company on May 2, 2024
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