UNITED STATES
Delaware | 2834 | 98-0443284 | ||||||||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
(781) 788-9043
(781) 788-9043
Robert A. Petitt, Esq. Burns & Levinson LLP 125 High Street Boston, MA 02110 (617) 345-3000 | Michael Nertney, Esq. Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas New York, New York 10105 (212) 370-1300 |
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Large Accelerated filer | ☐ | Accelerated filer | ||||||||||||
Non-accelerated filer | ☒ | Smaller reporting company | ||||||||||||
Emerging growth company |
Up to 1,052,798
This prospectus relates to the offer and sale
The
We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of our Common Stock by the selling stockholder. However, (i) we have received $200,000 aggregate gross proceeds under the Securities Purchase Agreement from our sale to Lincoln Park of 52,798
The selling stockholder may sell or otherwise dispose of the Common Stock described in this prospectus in a number of different ways and at varying prices. See the section titled “Plan of Distribution” in this prospectus for more information about how Lincoln Park may sell or otherwise dispose of the Common Stock being registered for resale by Lincoln Park pursuant to this prospectus. Lincoln Park is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended, or the Securities Act, with respect to the offer and resale by Lincoln Park of up to 1,000,000 including shares of Commoncommon stock underlying shares of Series F Convertible Preferred Stock that we may issue and sellas described below, together with Class C Warrants to Lincoln Park at our sole discretionpurchase 2,582,160 shares of common stock (and the shares issuable from time to time upon exercise of the Class C Warrants) and Class D Warrants to purchase 2,582,160 shares of common stock (and the shares issuable from time to time upon exercise of the Class D Warrants) at an assumed combined purchase price of $2.13 per share of common stock, Class C Warrants and Class D Warrant pursuant to this prospectus. The shares and warrants will be separately issued but will be purchased together in this offering. Each warrant will have an exercise price of $ per share and will be exercisable upon issuance. The Class C Warrants and the Class D Warrants will include a one-time reset of the exercise price to a price equal to the lesser of (i) the then exercise price and (ii) 90% of the five-day volume weighted average prices for the five (5) trading days immediately preceding the date that is sixty calendar days after issuance of the Class C Warrants and Class D Warrants. The Class C Warrants will expire five years from the date of issuance and the Class D Warrants will expire one year from the date of issuance.
warrant numbers included in this prospectus are based upon an assumed combined public offering price per share of common stock, Class C Warrant and Class D Warrant of $2.13, the closing price of our common stock on The Nasdaq Capital Market on May 30, 2023.
The Class C Warrants, Class D Warrants and any shares of Series F Preferred Stock that we issue are not and will not be listed for trading on The Nasdaq Capital Market.
Per Share and Warrants(1) | Total | |||||||||||||
Public offering price | $ | $ | ||||||||||||
Underwriter discounts and commissions (2) | $ | $ | ||||||||||||
Proceeds, before expenses, to us | $ | $ |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | ||||||||
USE OF PROCEEDS | ||||||||
DESCRIPTION OF THE | ||||||||
WHERE YOU CAN FIND MORE INFORMATION | ||||||||
This
Neither we nor the selling stockholder have authorized any dealer, salesman or other person to give any information or to make any representation other than those contained or incorporated by reference in this prospectus. You must not rely upon any information or representation not contained or incorporated by reference in thissuch free writing prospectus. This prospectus doesis not constitute an offer to sell or the solicitation of an offer to buy any of our securities other than the securities covered hereby, nor does this prospectus constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make suchcircumstances under which the offer or solicitation is unlawful.
outside the United States.
i
Our lead product is KIO-301, with an initial focus on patients with mid to later stages of disease progressionvision loss due to Retinitis Pigmentosa (anyretinitis pigmentosa (RP, any and all sub-forms). KIO-301 is a potential vision-restoring small molecule that acts as a “photoswitch” specifically designed to restore vision in patients with inherited and age-related degenerative retinal diseases.diseases, including RP. The molecule is specifically designed to restore the eyes’ ability to perceive and interpret light in visually impaired patients. Itpatients through selectively entersentering viable downstream retinal ganglion cells (no longer receiving electrical input due to degenerated rods and cones) and is intended to turnturning them into light sensing cells, capable of signaling the brain as to the presence or absence of light. We initiated a Phase 1b clinical trial in the third quarter of 2022 and enrolleddosed the first patient in November 2022. On March 17, 2022, we were granted orphan drug designation (ODD) by the fourth quarter of 2022.United States Food and Drug Administration (FDA) for the active pharmaceutical ingredient (API) in KIO-301. KIO-301 (formerly known as B-203) was acquired through the Bayon Therapeutics, Inc. (“Bayon”)(Bayon) transaction which closed October 21, 2021.
In addition, we
Recent Developments
Public Offering
Market Opportunity
Each Class A Warrant and Class B Warrant became exercisable following approval by our stockholdersdate of the exerciselast-to-expire patent included in the licensed patent portfolio which is January 2030.
product.
directors.
In connection with the reverse stock split, proportionalproportionate adjustments were made to (i)the per share exercise price and/or the number of shares issuable upon the
split as if it had occurred at the beginning of the earliest period presented. Our common stock began trading on The Nasdaq Capital Market on a split-adjusted basis when the market opened on September 27, 2022.
Related-Party Transactions
We incurred expenses of approximately $0.125 million for services to a related party vendor Ora, Inc. who is providing us with clinical study services for KIO-301. Aron Shapiro, one of our directors, is an executive at Ora, Inc. This amount was included in accounts payable at September 30, 2022 and was subsequently paid.
The Lincoln Park Transactions
The Private Placement
and Committed Equity Financing
The 52,798 shares of Common Stock and the warrants to purchase up to 105,596 shares of Common Stock that we issued and sold to Lincoln Park in the Private Placement pursuant to the Securities Purchase Agreement on February 3, 2023, and the 105,596 shares of Common Stock in the aggregate issuable upon full exercise of the warrants in accordance with the terms of the warrants, have been and will be issued and sold by us to Lincoln Park in the Private Placement in reliance upon the exemptions from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.
Lincoln Park has represented to us that at no time prior to our execution of the Securities Purchase Agreement and the Private Placement Registration Rights Agreement has Lincoln Parkprivate placement, or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our Common Stock or any hedging transaction, which establishes a net short position with respect to our Common Stock.
There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Securities Purchase Agreement or the Private Placement Registration Rights Agreement, except that we (i) are prohibited (with certain specified exceptions) from, among other things, until the earlier of (1) the first business day following the date a registration statement registering theunderlying shares of Common Stock sold in the Private Placement for resale is declared effective and (2) the six-month anniversary of the closing of the Private Placement, effecting or entering into an agreement to effect a “variable rate transaction” whereby we issue and sell Common Stock or securities exercisable or convertible into Common Stock at a conversion price, exercise price, exchange rate or other price that is based on and/or varies with the trading price of Common Stock at any time after the initial issuance of such securities, that includes any reset to such prices after the initial date of issuance, or that includes any put, call, redemption, back-back, price reset or other similar provision, subject to certain exceptions, and (ii) will be required to pay certain liquidated damages to Lincoln Park if (A) for so long as Lincoln Park owns any shares of Common Stock, warrants or shares of Common Stock issued or issuable upon exercise of the warrants acquired by Lincoln Park in the Private Placement (or until such earlier date as none of the warrants remain outstanding), we fail for any reason to satisfy the current public information requirement under Rule 144(c) under the Securities Act, until such time as such requirement is no longer required in order for Lincoln Park to resell such securities pursuant to Rule 144 under the Securities Act, or (B) we fail to deliver to Lincoln Park the shares of Common Stock, including shares of Common Stock issuable upon exercise of the warrants, purchased by Lincoln Park in the Private Placement free of restrictive legends or any other restrictions on transfer thereof within a specified period set forth in the Securities Purchase Agreement.
The Securities Purchase Agreement and the Private Placement Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. Copies of the Securities Purchase Agreement and the Private Placement Registration Rights Agreement have been filed as exhibits to the registration statement that includes this prospectus and are available electronically on the SEC’s website at www.sec.gov.
The Committed Equity Financing
common stock.
This prospectus relates to the offer and resale by Lincoln Park of up to 1,052,798 shares of our Common Stock, consisting of: (i) 52,798 shares of Common Stockcommon stock that we have issuedbeen and sold to Lincoln in the Private Placement pursuant to the Securities Purchase Agreement on February 3, 2023, in which wemay be issued and sold to Lincoln Park 52,798 shares of Common Stock and warrants to purchase up to an aggregate of 105,596 shares of Common Stock, at a purchase price per unit consisting of one share of Common Stock and two warrants of $3.788, and for a total purchase price of $200,000 (none of the warrants or the 105,596 shares of Common Stock underlying such warrants are being registered for resale in the registration statement that includes this prospectus), and (ii) up to 1,000,000 shares of Common Stock that we have reserved for issuance and sale to Lincoln Park in the Committed Equity Financing under the Purchase Agreement from time to time after the date of this prospectus, if and when we determine to sell shares of our Common Stock to Lincoln Park in the Committed Equity Financing under the Purchase Agreement.
We do not have the right to commence any sales of our Common Stock to Lincoln Park under the Purchase Agreement, until all ofis declared effective by the conditions to Lincoln Park’s purchase obligations under the Committed Equity Financing set forth in the Purchase Agreement have been satisfied (which we refer to in this prospectus as the Commencement), including that the SEC declare effective the registration statement that includes this prospectus and a final prospectus relating thereto is filed with the SEC. Under the Purchase Agreement, fromSEC, which occurred on February 13, 2023 (the “Commencement Date”).
Underpurchase agreement. There are no upper limits on the applicable Nasdaq rules, in no event may we issue to Lincoln Park in connection with the Committed Equity Financing under the Purchase Agreement more than 359,114 shares of our Common Stock, which number of shares is equal to 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the Purchase Agreement, which we refer to as the Exchange Cap, unless (i) we obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average price per share paid bythat Lincoln Park must pay for all of the shares of Common Stock that we direct Lincoln Park to purchase from us pursuant to the Purchase Agreement, ifcommon stock in any equals or exceeds $3.538 per share (representing the lower of the official closing price of our Common Stock on Nasdaq on the trading day immediately preceding the date of the Purchase Agreement and the average official closing price of our Common Stock on Nasdaq for the five consecutive trading days ending on the trading day immediately preceding the date of the Purchase Agreement) so that the Exchange Cap limitation would not apply to issuances and sales of Common Stock in the Committed Equity Financing under applicable Nasdaq rules. In any event, the Purchase Agreement specifically provides that we may not issue or sell any shares of our Common Stock under the Purchase Agreement if such issuance or sale would breach any applicable Nasdaq rules or regulations.
The Purchase Agreement also provides that we may not under any circumstances issue or sell any shares of Common Stock to Lincoln Park under the Purchase Agreement which, when aggregated with all other shares of Common Stock then beneficially owned by Lincoln Park and its affiliates (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 13d-3 thereunder), would result in Lincoln Park beneficially owning more than 9.99% of our outstanding Common Stock, which we refer to in this prospectus as the Beneficial Ownership Cap.
We will control the timing and amount of any sales of our Common Stock to Lincoln Park pursuant to the Purchase Agreement. Lincoln Park has no right to require us to sell any shares of Common Stock to them under the Purchase Agreement, however Lincoln Park is obligated to make purchases of our Common Stock as we may properly direct Lincoln Park to purchase under the Purchase Agreement, upon the terms and subject to the satisfaction of the conditions set forth therein. Neither we nor Lincoln Park may assign or transfer our respective rights and obligations under the Purchase Agreement, and no provision of the Purchase Agreement or the CEF Registration Rights Agreement may be modified or waived by us or Lincoln Park.
Actual sales of shares of Common Stock to Lincoln Park will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by us as to the appropriate sources of funding for our company and its operations. The net proceeds that we may realize from sales of Common Stock to Lincoln Park under the Purchase Agreement, if any, will depend on the frequency and prices at which we may, from time to time at its discretion, sell shares of Common Stock to Lincoln Park from and after the date of this prospectus. We expect that any net proceeds that may be received by us from such sales of Common Stock to Lincoln Park in the Committed Equity Financing pursuant to the Purchase Agreement, together with the net proceeds received by us from the sale of 52,798 shares of Common Stock and warrants to purchase up to 105,596 shares of Common Stock to Lincoln Park in the Private Placement on February 3, 2023, will be used for working capital and general corporate purposes.
Lincoln Park has represented to us that at no time prior to our execution of the Purchase Agreement and the CEF Registration Rights Agreement has Lincoln Park or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our Common Stock or any hedging transaction, which establishes a net short position with respect to our Common Stock.
There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or the CEF Registration Rights Agreement, except that we are prohibited (with certain specified exceptions) from, among other things, until the earlier of (1) the later of (A) the 36-month anniversary of the date of the Purchase Agreement and (B) the 36-month anniversary of the Commencement Date (if the Commencement shall have occurred), and (2) the six-month anniversary of the effective date of termination of the Purchase Agreement in accordance with its terms, effecting or entering into an agreement to effect a “variable rate transaction” whereby we issue and sell Common Stock or securities exercisable or convertible into Common Stock at a conversion price, exercise price, exchange rate or other price that is based on and/or varies with the trading price of Common Stock at any time after the initial issuance of such securities, that includes any reset to such prices after the initial date of issuance, or that includes any put, call, redemption, back-back, price reset or other similar provision, subject to certain exceptions.
We have the unconditional right, at any time, for any reason and without any payment or liability to us, to terminate the Purchase Agreement upon one business day’s prior written notice to Lincoln Park. In the event of bankruptcy proceedings by or against us that are not discharged within 90 days, the Purchase Agreement will automatically terminate without action of any party. No termination of the Purchase Agreement will be effective during the pendency of any Regular Purchase, accelerated purchase or additional accelerated purchase that has not then fully settled in accordance with the Purchase Agreement.
The Purchase Agreement and the CEF Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. Copies of the agreements have been filed as exhibits to the registration statement that includes this prospectus and are available electronically on the SEC’s website at www.sec.gov.
As of February 3, 2023, there were 1,849,270 shares of our Common Stock outstanding, of which 1,848,795 shares of our Common Stock were held by non-affiliates. Although the Purchase Agreement provides that we may sell up to an aggregate of $10.0 million of our Common Stock to Lincoln Park, only 1,052,798 shares of our Common Stock are being registered for resale under this prospectus, which represents the 52,798 shares that we issued to Lincoln Park in the Private Placement and an additional 1,000,000 shares of our Common Stock that we may issue and sell to Lincoln Park in the future in the Committed Equity Financing under the Purchase Agreement, if and when we sell shares of our Common Stock to Lincoln Park under the Purchase Agreement. Depending on the market prices of our Common Stock at the time we elect to issue and sell shares of our Common Stock to Lincoln Park in the Committed Equity Financing under the Purchase Agreement, we may need to register for resale under the Securities Act additional shares of our Common Stock in order to receive aggregate gross proceeds equal to the $10.0 million total commitment available to us under the Purchase Agreement. If all of the 1,000,000 shares of our Common Stock that may be sold to Lincoln Park in the future in the Committed Equity Financing under the Purchase Agreement that are being registered for resale by Lincoln Park hereunder were issued and outstanding as of the date of this prospectus (without taking into account the 19.99% Exchange Cap limitation applicable to the Committed Equity Financing under the Purchase Agreement), such shares of our Common Stock, taken together with the 52,798 shares of Common Stock that we issued and sold to Lincoln Park on February 3, 2023 in the Private Placement, would represent approximately 57% of the total number of shares of our Common Stock outstanding and approximately 57% of the total number of outstanding shares of our Common Stock held by non-affiliates of the Company, in each case as of February 3, 2023.
If it becomes necessary for us to issue and sell to Lincoln Park shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in order to receive aggregate gross proceeds equal to $10,000,000 in the Committed Equity Financing under the Purchase Agreement, then for so long as the Exchange Cap continues to apply to the Committed Equity Financing, we must first obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in accordance with applicable Nasdaq rules. Furthermore, if we elect to issue and sell to Lincoln Park more than the 1,000,000 shares of our Common Stock that we may elect to issue and sell to Lincoln Park in the Committed Equity Financing under the Purchase Agreement that are being registered for resale by Lincoln Park hereunder, which we have the right, but not the obligation, to do, we must first file with the SEC one or more additional registration statements to register under the Securities Act for resale by Lincoln Park such additional shares of our Common Stock we wish to sell from time to time under the Purchase Agreement, which the SEC must declare effective, in each case before we may elect to sell any additional shares of our Common Stock to Lincoln Park in the Committed Equity Financing under the Purchase Agreement. Any issuance and sale by us under the Purchase Agreement of a substantial amount of shares of Common Stock in addition to the 1,000,000 shares of Common Stock being registered for resale by Lincoln Park under this prospectus could cause additional substantial dilution to our stockholders.
The number of shares of Common Stock relating to the Committed Equity Financing ultimately resold by Lincoln Park through this prospectus is dependent upon the total number of shares of Common Stock, if any, we elect to issue and sell to Lincoln Park in the Committed Equity Financing pursuant to the Purchase Agreement from and after Commencement and during the term of the Purchase Agreement. The issuance by us of our Common Stock to Lincoln Park in the Committed Equity Financing pursuant to the Purchase Agreement will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests of each of our existing stockholders will be diluted. Although the number of shares of Common Stock that our existing stockholders own will not decrease, the shares of Common Stock owned by our existing stockholders will represent a smaller percentage of our total outstanding Common Stock after any such issuance.
Our Corporate Information
We are registering for resale by the selling stockholder named herein an aggregate of 1,052,798 shares of our Common Stock as described below.
Securities offered by us | 2,582,160 shares of our common stock. 5,500 shares of Series F Preferred Stock that are convertible into an aggregate of up to 2,582,160 shares of common stock, subject to certain adjustments. For each share of common stock underlying a share of Series F Preferred Stock that we sell, the number of shares of common stock that we are selling will be decreased on a one-for-one basis. Class C Warrants to purchase up to 2,582,160 shares of our common stock. Class D Warrants to purchase up to 2,582,160 shares of our Common Stock. | ||||||
Warrants | The warrants will be exercisable at an initial exercise price of $ per share. The warrants will include a one-time reset of the exercise price to a price equal to the lesser of (i) the then exercise price and (ii) 90% of the five-day volume weighted average prices for the five (5) trading days immediately preceding the date that is sixty calendar days after issuance of the warrants. The warrants will be exercisable beginning on the date of issuance. The Class C Warrants will expire on the five year anniversary of the date of issuance and the Class D Warrants will expire on the one year anniversary of the date of issuance. This prospectus also relates to the offering of the shares of common stock issuable upon exercise of the warrants. | ||||||
Series F Preferred Stock | Each share of Series F Preferred Stock is convertible at any time at the holder’s option into a number of shares of common stock equal to $1,000 divided by the Conversion Price. Notwithstanding the foregoing, we shall not effect any conversion of Series F Preferred Stock, to the extent that, after giving effect to an attempted conversion, the holder of shares of Series F Preferred Stock (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of our common stock |
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Common |
| 4,606,430 shares, assuming that we sell all securities offered pursuant to this prospectus and assuming conversion of all shares of | |||||
Price per share of common stock | $2.13 combined public offering price per share of common stock, Class C Warrant and Class D Warrant based upon an assumed combined public offering price of $2.13, the closing price of our common stock on May 30, 2023. | ||||||
Price per share of Series F Preferred Stock and warrants | $1,000 | ||||||
Underwriters’ option to | We have granted the | |||||
Use of proceeds | We | |||||
Risk factors | Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page | |||||
Nasdaq Capital Market symbol |
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The number of shares of our Common Stockcommon stock to be outstanding after giving effect to the issuance of the additional 1,000,000this offering is based on 2,024,270 shares of our Common Stock reserved for issuance and sale under the Purchase Agreement is based on 1,849,270 shares of our Common Stockcommon stock outstanding as of February 3,May 30, 2023, assumes no exercise of the underwriters’ over-allotment option, and assumes that the shares of Series F Preferred Stock sold in the offering have been converted, but does not include, as of such date:
10
Before making an investment decision with respect to our securities, we urge you toYou should carefully consider the risks describedand uncertainties and all other information contained in the “Risk Factors” sections of our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as well as our Current Reports on Form 8-K, filed with the SEC andor incorporated by reference intoin this prospectus. In addition, the followingAll of these risk factors present materialare incorporated by reference herein in their entirety. Our business, financial condition or results of operations could be materially adversely affected by the materialization of any of these risks. The trading price of our securities could decline due to the materialization of any of these risks, and you may lose all or part of your investment. This prospectus and the documents incorporated herein by reference also contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described herein and in the documents incorporated herein by reference.this offering. The riskspharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Our expenses will increase if: uncertainties incorporated by reference into this prospectusdescribed belowcompleting our clinical trials or the development of KIO-101, KIO-201, KIO-301, or any other product candidates that we may develop.notunable to raise capital when needed, we could be forced to delay, reduce, or eliminate our product development programs or commercialization efforts.only onesclinical development of our KIO-101, KIO-201, and KIO-301 products. In the future, we face. Additional risksexpect to raise additional financial resources for the continued clinical development of KIO-101, KIO-201, KIO-301, and uncertainties not presently knownother product candidates we may develop. In addition, if we obtain regulatory approval for any of our product candidates, we would need to devote substantial financial resources to commercialization efforts, including product manufacturing, marketing, sales, and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce, or eliminate our research and development programs or any future commercialization efforts.consider immaterialin-license or acquire rights to other products, product candidates, or technologies for the treatment of ophthalmic diseases.hereofand to assess our future viability.alsoencounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.matters discussedphysicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, it may be subject to criminal, civil, or administrative sanctions, including exclusions from participation in government funded healthcare programs.risk factorsmaterial weaknesses because we did not maintain effective controls regarding:business, financial condition, operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed.operations, cash flowsclinical trials of KIO-101, KIO-201, KIO-301, or prospectsany other product candidate that we may develop;materiallylimited.adversely affected,aggregate federal and state research and development tax credit carryforwards of approximately $2.5 million and $0.5 million, respectively, available to reduce future taxable income. Certain of these federal and state net operating loss carryforwards and federal and state tax credit carryforwards will expire at various dates through 2041, if not utilized. Federal net operating losses generated as of December 31, 2017, will carry-forward until 2037 and net operating losses generated during the year ended December 31, 2018, and later will be carried forward indefinitely until utilized, but their utilization will be limited to 80% of taxable income. Utilization of these net operating loss and tax credit carryforwards may be subject to a substantial limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, and comparable provisions of state, local, and foreign tax laws due to changes in ownership of our company that have occurred previously or that could occur in the future. Under Section 382 of the Code and comparable provisions of state, local, and foreign tax laws, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research and development tax credits, to reduce its post-change income may be limited. We have not completed a study to determine whether our initial public offering, subsequent public and private offerings, and other transactions that have occurred may have triggered an ownership change limitation. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we generate taxable income, our ability to use our pre-change net operating loss and tax credits carryforwards to reduce U.S. federal and state taxable income may be subject to limitations, which could result in increased future tax liability to us. In addition, the Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017, limits the amount of net operating losses that we are permitted to deduct in any taxable year to 80% of our taxable income in such year. The TCJA also eliminates the ability to carry back net operating losses to prior years, but allows net operating losses generated after 2017 to be carried forward indefinitely. As such, there is a risk that due to such items, our existing net operating losses couldcould decline and you could lose allimpair our ability to raise adequate capital through the sale of additional equity securities.partnon-accelerated filers, including not being required to comply with the auditor attestation requirements of your investmentSection 404 of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations, including disclosures regarding executive compensation, in our securities.Risks Related toAnnual Report and our periodic reports and proxy statements and providing only two years of audited consolidated financial statements in our Annual Report and our periodic reports. We will remain an SRC until (a) the OfferingIt is not possible to predict the actual number of shares we may sell to Lincoln Park in the Committed Equity Financing under the Purchase Agreement, or the actual gross proceeds resulting from those sales.On February 3, 2023, we entered into the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park has committed to purchase up to $10.0 millionaggregate market value of our Common Stock in the Committed Equity Financing, subject to certain limitations and conditions set forth in the Purchase Agreement. The shares of our Common Stock that may be issued under the Purchase Agreement may be soldoutstanding common stock held by us to Lincoln Park at our discretion from time to time over an approximately 36-month period commencing on the Commencement Date.We generally have the right to control the timing and amount of any sales of our shares of Common Stock to Lincoln Park under the Purchase Agreement. Sales of our Common Stock, if any, to Lincoln Park under the Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Lincoln Park all, some or none of the shares of our Common Stock that may be available for us to sell to Lincoln Park pursuant to the Purchase Agreement.Because the purchase price per share to be paid by Lincoln Park for the shares of Common Stock that we may elect to sell to Lincoln Park under the Purchase Agreement, if any, will fluctuate based on the market prices of our Common Stock at the time we elect to sell shares to Lincoln Park pursuant to the Purchase Agreement, if any, it is not possible for us to predict,non-affiliates as of the datelast business day our most recently completed second fiscal quarter exceeds $250 million or (b) in the event we have over $100 million in annual revenues, the aggregate market value of this prospectusour outstanding common stock held by non-affiliates as of the last business day our most recently completed second fiscal quarter exceeds $700 million. We cannot predict whether investors will find our common stock less attractive if we rely on certain or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and priorour stock price may be more volatile and may decline.any such sales, the number of shares of Common Stockdevote substantial time to new compliance initiatives and corporate governance practices.will selldid not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, Financial Industry Regulatory Authority (FINRA) rules, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel need to Lincoln Park under the Purchase Agreement, the purchase price per share that Lincoln Park will pay for shares purchased from us under the Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by Lincoln Park under the Purchase Agreement.Moreover, although the Purchase Agreement provides that we may sell up to an aggregate of $10.0 million of our Common Stock to Lincoln Park in the Committed Equity Financing, only 1,052,798 shares of Common Stock are being registered for resale under the registration statement that includes this prospectus, consisting of (i) the 52,798 shares of Common Stock that we previously issued to Lincoln Park in the Private Placement and (ii) up to 1,000,000 shares of our Common Stock that we may elect to sell to Lincoln Park, in our sole discretion, from time to time from and after the Commencement Date in the Committed Equity Financing under the Purchase Agreement.If after the Commencement Date we elect to sell to the selling stockholder all of the 1,000,000 shares of Common Stock being registered for resale under this prospectus that are available for sale by us to the selling stockholder in purchases in the Committed Equity Financing under the Purchase Agreement, depending on the market prices of our Common Stock at the time of such sales, the actual gross proceeds from the sale of all such shares in the Committed Equity Financing may be substantially less than the $10.0 million total purchase commitment available to us under the Purchase Agreement, which could materially adversely affect our liquidity.If it becomes necessary for us to issue and sell to Lincoln Park shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in order to receive aggregate gross proceeds equal to $10,000,000 in the Committed Equity Financing under the Purchase Agreement, then for so long as the Exchange Cap continues to apply to the Committed Equity Financing, we must first obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in accordance with applicable Nasdaq rules. Furthermore, if we elect to issue and sell to Lincoln Park more than the 1,000,000 shares of our Common Stock that we may elect to issue and sell to Lincoln Park in the Committed Equity Financing under the Purchase Agreement that are being registered for resale by Lincoln Park hereunder, which we have the right, but not the obligation, to do, we must first file with the SEC one or more additional registration statements to register under the Securities Act for resale by Lincoln Park such additional shares of our Common Stock we wish to sell from time to time under the Purchase Agreement, which the SEC must declare effective, in each case before we may elect to sell any additional shares of our Common Stock to Lincoln Park in the Committed Equity Financing under the Purchase Agreement. Any issuance and sale by us under the Purchase Agreement ofdevote a substantial amount of sharestime to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly.Common Stock in addition toadditional costs we may incur or the 1,000,000 sharestiming of Common Stock being registered for resale by Lincoln Park under this prospectus could cause additional substantial dilution to our stockholders.The number of shares of our Common Stock ultimately offered for sale by Lincoln Park is dependent upon the number of shares of Common Stock we ultimately sell to Lincoln Park in the Committed Equity Financing under the Purchase Agreement.Investors who buy shares at different times will likely pay different prices.Pursuant to the Purchase Agreement, we will have discretion,such costs. These rules and regulations are often subject to market demand,varying interpretations, in many cases due to vary the timing, prices,their lack of specificity, and, numbers of shares sold to Lincoln Park in the Committed Equity Financing. If and when we do elect to sell shares of our Common Stock to Lincoln Park in the Committed Equity Financing pursuant to the Purchase Agreement, after Lincoln Park has acquired such shares, Lincoln Park may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from Lincoln Park in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from Lincoln Park in this offering as a result, of future sales madetheir application in practice may evolve over time as new guidance is provided by usregulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to Lincoln Park at prices lower than the prices such investors paid for their shares in this offering.We may not have accessdisclosure and governance practices.the full amount available in the Committed Equity Financing under the Purchase Agreement with Lincoln Park. We may require additional financing to sustain our operations, without which we may not be able to continue operations, and the terms of subsequent financings may adversely impact our stockholders.We may direct Lincoln Park to purchase up to $10.0 million worth of shares of our Common Stock from time to time in the Committed Equity Financing under the Purchase Agreement over a 36-month period generally in amounts up to 35,000 shares of our Common Stock, which may be increased to up to 50,000 shares of our Common Stock depending on the market price of our Common Stock at the time of sale, provided that Lincoln Park’s committed obligation under such single Regular Purchase shall not exceed $1,000,000.Depending on the prevailing market price of our Common Stock, we may not be able to sell shares to Lincoln Park for the maximum $10.0 million over the termSection 404 of the Purchase Agreement. We will needSarbanes-Oxley Act, or Section 404, we are required to seek stockholder approval before issuing more than 359,114 shares in the Committed Equity Financing under the Purchase Agreement, unless the average price of all applicable sales offurnish a report by our Common Stock to Lincoln Park under the Purchase Agreement equals or exceeds $3.538 per share (which represents the lower of (A) the official closing price ofmanagement on our Common Stock on Nasdaq on the trading day immediately preceding the date of the Purchase Agreement and (B) the average official closing price of our Common Stock on Nasdaq for the five consecutive trading days ending on the trading day immediately preceding the date of the Purchase Agreement), so that the Exchange Cap limitation will not apply to issuances and sales of Common Stock in the Committed Equity Financing under applicable Nasdaq rules. We are not required or permitted to issue any shares of Common Stock in the Committed Equity Financing under the Purchase Agreement if such issuance would breach our obligations under the rules or regulations of The Nasdaq Stock Market. In addition, Lincoln Parkinternal control over financial reporting. However, while we remain a non-accelerated filer, we will not be required to purchase any shares ofinclude an attestation report on internal control over financial reporting issued by our Common Stock if such sale would resultindependent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we have engaged in Lincoln Park’s beneficial ownership ofa process to document and evaluate our Common Stock exceeding 9.99% of the outstanding shares of our Common Stock. Our inability to access a portion or the full amount available under the Purchase Agreement, in the absence of any other financing sources, could have a material adverse effect on our business.The extent we rely on Lincoln Park as a source of funding will depend on a number of factors including the prevailing market price of our Common Stock and the extent to which we are able to secure working capital from other sources. If obtaining sufficient funding from Lincoln Park were to prove unavailable or prohibitively dilutive,internal control over financial reporting. In this regard, we will need to secure another sourcecontinue to dedicate internal resources, engage outside consultants, and adopt a detailed work plan to continue to assess and document the adequacy of fundinginternal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. If we identify one or more material weaknesses in orderour internal control over financial reporting, it couldsatisfy our working capital needs. Even if we sell all $10.0 milliona loss of sharesconfidence in the reliability of our Common Stockconsolidated financial statements.Committed Equity Financing undercost of an acquisition exceeds the Purchase Agreementfair value of the net tangible and identifiable intangible assets we acquire. Goodwill and indefinite-lived intangible assets are subject to Lincoln Park,an impairment analysis at least annually based on fair value. Intangible assets relate primarily to in-process research and development (IPR&D) and patents acquired by us as part of our acquisitions of other companies, and are subject to an impairment analysis whenever events or changes in circumstances exist that indicate that the carrying value of the intangible asset might not be recoverable. If market and economic conditions or business performance deteriorate, the likelihood that we may still need additional capitalwould record an impairment charge would increase, which impairment charge could materially and adversely affect our financial condition and operating results.finance our future production plans and working capital needs,This Offeringhave to raise funds throughnot use the issuance of equity or debt securities. Assuming a purchase price of $3.56 (which represents the closing price of our Common Stock on February 2, 2023), the purchase by Lincoln Park of the 52,798 shares issued in the Private Placement and the entire 1,000,000 additional shares issuable under the Purchase Agreement being registered hereunder would result in gross proceeds to us of only $3,747,961.effectively.
Depending on the type and the terms of any financing we pursue, stockholders’ rights and the value of their investment in our Common Stock could be reduced. A financing could involve one or more types of securities including Common Stock, convertible debt or warrants to acquire Common Stock. These securities could be issued at or below the then prevailing market price for our Common Stock. In addition, if we issue secured debt securities, the holders of the debt would have a claim to our assets that would be prior to the rights of stockholders until the debt is paid. Interest on these debt securities would increase costs and negatively impact operating results. If the issuance of new securities results in diminished rights to holders of our Common Stock, the market price of our Common Stock could be negatively impacted.
Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could be a material adverse effect on our business, operating results, financial condition and prospects.
Our management will have broad discretion over the use of proceeds from this offering, and we could spend the proceeds from this offering in ways with which you may not agree or that do not yield a favorable return. We intend to use the net proceeds from this offering to support our operations, including for clinical trials, for working capital and for other general corporate purposes. If we do not invest or apply the proceeds of this offering in ways that improve our operating results, we may fail to achieve expected financial results, which could cause our stock price to decline.
Our management will have broad discretion as to the useany future sales of the net proceeds from our salea substantial number of shares of Common Stock to Lincoln Parkour common stock in the Private Placementpublic market, or the perception that such sales may occur, could adversely affect the price of our common stock. We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares of common stock for sale will have on the market price of our common stock.
13
This prospectus relates to shares of our Common Stock that may be offered and sold from time to time by Lincoln Park.
Anywould decrease the net proceeds to us by $2.0 million, assuming the assumed combined public offering price of $2.13 per share of common stock, Class C Warrant and Class D Warrant remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Assumed combined public offering price per share of common stock and warrants | $ | 2.13 | |||
Net tangible book value per share as of March 31, 2023 | $ | (0.30) | |||
Increase in net tangible book value per share after giving effect to this offering | $ | 1.25 | |||
As adjusted net tangible book value per share after giving effect to this offering | $ | 0.95 | |||
Dilution per share to new investors | $ | 1.18 |
On February 2, 2023 and simultaneously with the execution of the Securities Purchase Agreement, we entered into the Private Placement Registration Rights Agreement. The Private Placement Registration Rights Agreement provides that if, at any time during the period from and after the closing date of the Private Placement through and including the six-month anniversary of the closing date, we propose to file a registration statement with the SEC for our own account or for the account of one or more third parties other than us or any of our subsidiaries (including any offeringClass D Warrants to be made on a delayed or continuous basis under Rule 415 under the Securities Act), such as the registration statement that includes this prospectus, which was filed by us with the SEC pursuantissued to our obligations under the registration rights agreement that we entered into with Lincoln Park relating to the Committed Equity Facility for the purpose of registering under the Securities Act for resale by Lincoln Park shares of Common Stock that may be issued and sold by us to Lincoln Park in the Committed Equity Financing pursuant to the Purchase Agreement, then Lincoln Park may elect to have the 52,798 shares of Common Stock that were issued and sold by us to Lincoln Park in the Private Placement pursuant to the Securities Purchase Agreement on February 3, 2023 also included in such registration statement in order to register under the Securities Act the resale by Lincoln Park of such 52,798 shares of Common Stock that were issued and sold by us to Lincoln Park in the Private Placement. However, the Private Placement Registration Rights Agreement does not afford any registration rights with respect to the warrants that were issued and sold by us to Lincoln Park in the Private Placement, or with respect to the 105,596 shares of Common Stock underlying such warrants. Therefore, none of the warrants or the 105,596 shares of Common Stock underlying such warrants that were issued and sold by us to Lincoln Park in the Private Placement on February 3, 2023 are being registered for resale in the registration statement that includes this prospectus, or any other registration statement of ours that has been filed with the SEC as of the date of this prospectus.
The 52,798 shares of Common Stock and the warrants to purchase up to 105,596 shares of Common Stock that were issued and sold by us to Lincoln Park in the Private Placement pursuant to the Securities Purchase Agreement on February 3, 2023, and the 105,596 shares of Common Stock in the aggregate issuable upon full exercise of the warrants in accordance with the terms of the warrants, have been and will be issued and sold by us to Lincoln Park in the Private Placement in reliance upon the exemptions from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.
Lincoln Park has represented to us that at no time prior to our execution of the Securities Purchase Agreement and the Private Placement Registration Rights Agreement has Lincoln Park or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our Common Stock or any hedging transaction, which establishes a net short position with respect to our Common Stock.
There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Securities Purchase Agreement or the Private Placement Registration Rights Agreement, except that we (i) are prohibited (with certain specified exceptions) from, among other things, until the earlier of (1) the first business day following the date a registration statement registering the shares of Common Stock sold in the Private Placement for resale is declared effective and (2) the six-month anniversary of the closing of the Private Placement, effecting or entering into an agreement to effect a “variable rate transaction” whereby we issue and sell Common Stock or securities exercisable or convertible into Common Stock at a conversion price, exercise price, exchange rate or other price that is based on and/or varies with the trading price of Common Stock at any time after the initial issuance of such securities, that includes any reset to such prices after the initial date of issuance, or that includes any put, call, redemption, back-back, price reset or other similar provision, subject to certain exceptions, and (ii) will be required to pay certain liquidated damages to Lincoln Park if (A) for so long as Lincoln Park owns any shares of Common Stock, warrants or shares of Common Stock issued or issuable upon exercise of the warrants acquired by Lincoln Park in the Private Placement (or until such earlier date as none of the warrants remain outstanding), we fail for any reason to satisfy the current public information requirement under Rule 144(c) under the Securities Act, until such time as such requirement is no longer required in order for Lincoln Park to resell such securities pursuant to Rule 144 under the Securities Act, or (B) we fail to deliver to Lincoln Park the shares of Common Stock, including shares of Common Stock issuable upon exercise of the warrants, purchased by Lincoln Park in the Private Placement free of restrictive legends or any other restrictions on transfer thereof within a specified period set forth in the Securities Purchase Agreement.
The Securities Purchase Agreement and the Private Placement Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. Copies of the Securities Purchase Agreement and the Private Placement Registration Rights Agreement have been filed as exhibits to the registration statement that includes this prospectus and are available electronically on the SEC’s website at www.sec.gov.
The Committed Equity Financing
General
On February 3, 2023, we entered into the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park has agreed to purchase from us up to an aggregate of $10.0 million of our Common Stock (subject to certain limitations), from time to time and at our sole discretion over the term of the Purchase Agreement. Also on February 3, 2023, we entered into the CEF Registration Rights Agreement, pursuant to which we filed with the SEC the registration statement that includes this prospectus to register under the Securities Act for resale by Lincoln Park the shares of our Common Stock that we may elect to issue and sell to Lincoln Park from time to time from and after the date of this prospectus in connection with the Committed Equity Financing under the Purchase Agreement.
This prospectus relates to the offer and resale by Lincoln Park of up to 1,052,798 shares of our Common Stock, consisting of: (i) 52,798 shares of Common Stock that we have issued and sold to Lincoln in the Private Placement pursuant to the Securities Purchase Agreement on February 3, 2023, in which we issued and sold to Lincoln Park 52,798 shares of Common Stock and warrants to purchase up to an aggregate of 105,596 shares of Common Stock, at a purchase price per unit consisting of one share of Common Stock and two warrants of $3.788, and for a total purchase price of $200,000 (none of the warrants or the 105,596 shares of Common Stock underlying such warrants are being registered for resale in the registration statement that includes this prospectus), and (ii) up to 1,000,000 shares of Common Stock that we have reserved for issuance and sale to Lincoln Park in the Committed Equity Financing under the Purchase Agreement from time to time from and after the Commencement Date, if and when we determine to sell shares of our Common Stock to Lincoln Park in the Committed Equity Financing under the Purchase Agreement.
We do not have the right to commence any sales of Purchase Shares to Lincoln Park under the Purchase Agreement until all of the conditions set forth in the Purchase Agreement have been satisfied on the Commencement Date, including that the registration statement that includes this prospectus is declared effective by the SEC and a final prospectus relating thereto is filed with the SEC. From and after the Commencement Date, on any business day selected by us as the purchase date therefor, we may, from time to time and at our sole discretion for a period of up to 36-months after the Commencement Date, by written notice delivered by us to Lincoln Park, direct Lincoln Park to purchase up to 35,000 shares of Common Stock (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement) in a Regular Purchase, at a purchase price per share that will be determined and fixed in accordance with the Purchase Agreement at the time we deliver such written notice to Lincoln Park on the purchase date for such Regular Purchase. The maximum share limit for a Regular Purchase shall be increased to higher share threshold amounts in the Purchase Agreement, up to a maximum share limit of 50,000 shares of Common Stock (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement), with the applicable maximum share limit determined by whether the closing price for our Common Stock on the applicable purchase date exceeds certain price thresholds set forth in the Purchase Agreement. In any case, however, Lincoln Park’s maximum purchase commitment in any single Regular Purchase may not exceed $1,000,000. The per share purchase price for the shares of Common Stock sold in each such Regular Purchase, if any, will be based on prevailing market prices of our Common Stock immediately preceding the time of sale as computed under the Purchase Agreement. We may direct Lincoln Park to purchase shares of our Common Stock in a Regular Purchase on any business day we select as the purchase date for such Regular Purchase and as often as every business day, provided that all shares of Common Stock subject to all prior Regular Purchases that we have effected under the Purchase Agreement, if any, have been received by Lincoln Park before we deliver notice to Lincoln Park for such Regular Purchase in accordance with the Purchase Agreement.
In addition to Regular Purchases described above, provided that (i) we have directed Lincoln Park to purchase the maximum amount of Common Stock that we are then able to sell to Lincoln Park in a Regular Purchase on the applicable purchase date therefor and (ii) the closing sale price of our Common Stock on such applicable purchase date for such Regular Purchase is not below $1.00 per share (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement), we may, in our sole discretion, also direct Lincoln Park to purchase additional shares of Common Stock in “accelerated purchases” and “additional accelerated purchases” as set forth in the Purchase Agreement, provided further that all shares of Common Stock purchased by Lincoln Park pursuant to all prior Regular Purchases, accelerated purchases and additional accelerated purchases (as applicable) that we have effected under the Purchase Agreement have been received by Lincoln Park before we deliver notice to Lincoln Park for the applicable accelerated purchase (and with respect to an additional accelerated purchase, before we deliver notice to Lincoln Park for such applicable additional accelerated purchase) in accordance with the Purchase Agreement. The purchase price per share of Common Stock to be paid by Lincoln Park for shares of Common Stock that we elect to sell to Lincoln Park in any accelerated purchase (or in any additional accelerated purchase, as applicable) will be based on prevailing market prices of our Common Stock at the time of sale as computed under the Purchase Agreement.
Under the applicable Nasdaq rules, in no event may we issue to Lincoln Park in connection with the Committed Equity Financing under the Purchase Agreement more than the Exchange Cap of 359,114 shares of our Common Stock, which number of shares is equal to 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the Purchase Agreement, unless (i) we obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average price per share paid by Lincoln Park for all of the shares of Common Stock that we direct Lincoln Park to purchase from us pursuant to the Purchase Agreement, if any, equals or exceeds $3.538 per share (representing the lower of the official closing price of our Common Stock on Nasdaq on the trading day immediately preceding the date of the Purchase Agreement and the average official closing price of our Common Stock on Nasdaq for the five consecutive trading days ending on the trading day immediately preceding the date of the Purchase Agreement) so that the Exchange Cap limitation would not apply to issuances and sales of Common Stock in the Committed Equity Financing under applicable Nasdaq rules. In any event, the Purchase Agreement specifically provides that we may not issue or sell any shares of our Common Stock under the Purchase Agreement if such issuance or sale would breach any applicable Nasdaq rules or regulations.
The Purchase Agreement also provides that we may not under any circumstances issue or sell any shares of Common Stock to Lincoln Park under the Purchase Agreement which, when aggregated with all other shares of Common Stock then beneficially owned by Lincoln Park and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 thereunder), would result in Lincoln Park beneficially owning more than the Beneficial Ownership Cap of 9.99% of our outstanding Common Stock.
We will control the timing and amount of any sales of our Common Stock to Lincoln Park pursuant to the Purchase Agreement. Lincoln Park has no right to require us to sell any shares of Common Stock to them under the Purchase Agreement, however Lincoln Park is obligated to make purchases of our Common Stock as we may properly direct Lincoln Park to purchase under the Purchase Agreement, upon the terms and subject to the satisfaction of the conditions set forth therein. Neither we nor Lincoln Park may assign or transfer our respective rights and obligations under the Purchase Agreement, and no provision of the Purchase Agreement or the CEF Registration Rights Agreement may be modified or waived by us or Lincoln Park. Actual sales of shares of Common Stock to Lincoln Park will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by us as to the appropriate sources of funding for us and our operations.
The Purchase Agreement and the CEF Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. Copies of the agreements have been filed as exhibits to the registration statement that includes this prospectus and are available electronically on the SEC’s website at www.sec.gov.
Purchase of Shares of our Common Stock under the Purchase Agreement
Regular Purchases
From and after the Commencement Date, on any business day selected by us (and provided all shares of Common Stock subject to all prior Regular Purchases have been properly delivered to Lincoln Park in accordance with the Purchase Agreement), we may, by written notice delivered by us to Lincoln Park, direct Lincoln Park to purchase up to 35,000 shares of our Common Stock on such business day in a Regular Purchase, provided, however, that the maximum number of shares we may sell to Lincoln Park in a Regular Purchase may be increased to up to (i) 40,000 shares of our Common Stock, provided that the closing sale price of our Common Stock is not below $6.00 on the purchase date, (ii) 45,000 shares of our Common Stock, provided that the closing sale price of our Common Stock is not below $8.00 on the purchase date, and (iii) 50,000 shares of our Common Stock, provided that the closing sale price of our Common Stock is not below $10.00 on the purchase date (such share amount limitation, the “Regular Purchase Share Limit”). In each case, Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $1,000,000.
The purchase price per share for each such Regular Purchase will be equal to 98.5% of the lower of:
Accelerated Purchases
In addition to Regular Purchases described above, on any purchase date for a Regular Purchase on which we have properly submitted a Regular Purchase notice directing Lincoln Park to purchase the maximum number of shares of our Common Stock that we are then permitted to include in a single Regular Purchase notice, and provided that (i) the closing price of our Common Stock on such purchase date is not below $1.00 per share (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement) and (ii) all shares of Common Stock subject to all prior purchases effected prior to such purchase date have been properly delivered to Lincoln Park in accordance with the Purchase Agreement, we may also direct Lincoln Park to purchase an additional amount of our Common Stock, which we refer to as an Accelerated Purchase, on the next business day following such purchase date for such corresponding Regular Purchase, which we refer to as the Accelerated Purchase Date, not to exceed the lesser of:
The purchase price per share for the shares subject to an Accelerated Purchase will be equal to 97% of the lower of:
Additional Accelerated Purchases
We may also direct Lincoln Park, not later than 1:00 p.m., Eastern time, on the same Accelerated Purchase Date on which an Accelerated Purchase Measurement Period for an Accelerated Purchase has ended prior to such time, and provided that (i) the closing price of our Common Stock on the business day immediately preceding such Accelerated Purchase Date is not below $1.00 per share (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement) and (ii) all shares of Common Stock subject to all prior Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases, including those prior Accelerated Purchases and Additional Accelerated Purchases effected on the same Accelerated Purchase Date as the applicable Additional Accelerated Purchase, have been properly delivered to Lincoln Park in accordance with the Purchase Agreement prior to such time), to purchase an additional amount of our Common Stock on such same Accelerated Purchase Date, which we refer to as an Additional Accelerated Purchase, of up to the lesser of:
The purchase price per share for the shares subject to an Additional Accelerated Purchase will be equal to 97% of the lower of:
We may, in our sole discretion, submit multiple Additional Accelerated Purchase notices to Lincoln Park prior to 1:00 p.m., Eastern time, on a single Accelerated Purchase Date, again provided all shares of Common Stock subject to all prior Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases, including those prior Accelerated Purchases and Additional Accelerated Purchases effected on the same Accelerated Purchase Date as the applicable Additional Accelerated Purchase, have been properly delivered to Lincoln Park in accordance with the Purchase Agreement prior to such time.
In the case of Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases, the purchase price per share will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the business days used to compute the purchase price.
Other than as described above, there are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales of our Common Stock to Lincoln Park.
Events of Default
Events of default under the Purchase Agreement include the following:
Lincoln Park does not have the right to terminate the Purchase Agreement upon any of the events of default set forth above, although the Purchase Agreement would automatically terminate in the event of any voluntary or involuntary participation or threatened participation in insolvency or bankruptcy proceedings by or against us that are not discharged within 90 days. During an event of default, all of which are outside of Lincoln Park’s control, we may not direct Lincoln Park to purchase any shares of our Common Stock under the Purchase Agreement.
Our Termination Rights
We have the unconditional right, at any time, for any reason and without any payment or liability to us, to terminate the Purchase Agreement upon one business day’s prior written notice to Lincoln Park. In the event of bankruptcy proceedings by or against us that are not discharged within 90 days, the Purchase Agreement will automatically terminate without action of any party. No termination of the Purchase Agreement will be effective during the pendency of any Regular Purchase, Accelerated Purchase or Additional Accelerated Purchase that has not then fully settled in accordance with the Purchase Agreement.
No Short-Selling or Hedging by Lincoln Park
Lincoln Park has represented to us that at no time prior to the Purchase Agreement has Lincoln Park or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our Common Stock or any hedging transaction, which establishes a net short position with respect to our Common Stock. Lincoln Park agreed that during the term of the Purchase Agreement, it, its agents, representatives or affiliates will not enter into or effect, directly or indirectly, any of the foregoing transactions.
Prohibitions on Certain Transactions
There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or the CEF Registration Rights Agreement, except that we are prohibited (with certain specified exceptions) from, among other things, until the earlier of (1) the later of (A) the 36-month anniversary of the date of the Purchase Agreement and (B) the 36-month anniversary of the Commencement Date (if the Commencement shall have occurred), and (2) the six-month anniversary of the effective date of termination of the Purchase Agreement in accordance with its terms, effecting or entering into an agreement to effect a “variable rate transaction” whereby we issue and sell Common Stock or securities exercisable or convertible into Common Stock at a conversion price, exercise price, exchange rate or other price that is based on and/or varies with the trading price of Common Stock at any time after the initial issuance of such securities, that includes any reset to such prices after the initial date of issuance, or that includes any put, call, redemption, back-back, price reset or other similar provision, subject to certain exceptions.
Effect of Performance of the Purchase Agreement on Our Stockholders
All 1,000,000 shares of our Common Stock being registered for resale hereunder which have been or may be issued or sold by us to Lincoln Park under the Purchase Agreement are expected to be freely tradable. It is anticipated that shares registered in this offering will be sold from time to time over a period of up to 36 months commencing on the date that the registration statement including this prospectus becomes effective. The sale by Lincoln Park of a significant amount of shares of our Common Stock registeredinvestors in this offering at any given time could cause the marketan initial exercise price of our Common Stock to decline and to be highly volatile. Sales of our Common Stock to Lincoln Park, if any, will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Lincoln Park all, some or none of the additional shares of our Common Stock that may be available for us to sell pursuant to the Purchase Agreement. If and when we do sell additional shares of our Common Stock to Lincoln Park, after Lincoln Park has acquired the shares of our Common Stock, Lincoln Park may resell all, some or none of those shares of our Common Stock at any time or from time to time in its discretion. Therefore, sales to Lincoln Park by us under the Purchase Agreement may result in substantial dilution to the interests of other holders of our Common Stock. In addition, if we sell a substantial number of shares of our Common Stock to Lincoln Park under the Purchase Agreement, or if investors expect that we will do so, the actual sales of shares of our Common Stock or the mere existence of our arrangement with Lincoln Park may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales. However, we have the right to control the timing and amount of any additional sales of our Common Stock to Lincoln Park and the Purchase Agreement may be terminated by us at any time at our discretion without any cost to us.
Although the Purchase Agreement provides that we may sell up to an aggregate of $10.0 million of our Common Stock to Lincoln Park, only 1,052,798 shares of our Common Stock are being registered for resale under this prospectus, which represents the 52,798 shares that we issued to Lincoln Park in the Private Placement and an additional 1,000,000 shares of our Common Stock that we may issue and sell to Lincoln Park in the future in the Committed Equity Financing under the Purchase Agreement, if and when we sell shares of our Common Stock to Lincoln Park under the Purchase Agreement. If it becomes necessary for us to issue and sell to Lincoln Park shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in order to receive aggregate gross proceeds equal to $10,000,000 in the Committed Equity Financing under the Purchase Agreement, then for so long as the Exchange Cap continues to apply to the Committed Equity Financing, we must first obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in accordance with applicable Nasdaq rules. Furthermore, if we elect to issue and sell to Lincoln Park more than the 1,000,000 shares of our Common Stock that we may elect to issue and sell to Lincoln Park in the Committed Equity Financing under the Purchase Agreement that are being registered for resale by Lincoln Park hereunder, which we have the right, but not the obligation, to do, we must first file with the SEC one or more additional registration statements to register under the Securities Act for resale by Lincoln Park such additional shares of our Common Stock we wish to sell from time to time under the Purchase Agreement, which the SEC must declare effective, in each case before we may elect to sell any additional shares of our Common Stock to Lincoln Park in the Committed Equity Financing under the Purchase Agreement. Any issuance and sale by us under the Purchase Agreement of a substantial amount of shares of Common Stock in addition to the 1,000,000 shares of Common Stock being registered for resale by Lincoln Park under this prospectus could cause additional substantial dilution to our stockholders. The number of shares of our Common Stock ultimately offered for resale by Lincoln Park is dependent upon the number of shares of our Common Stock we ultimately decide to sell to Lincoln Park under the Purchase Agreement.
The number of shares of Common Stock relating to the Committed Equity Financing ultimately resold by Lincoln Park through this prospectus is dependent upon the total number of shares of Common Stock, if any, we elect to issue and sell to Lincoln Park in the Committed Equity Financing pursuant to the Purchase Agreement from and after Commencement and during the term of the Purchase Agreement. The issuance by us of our Common Stock to Lincoln Park in the Committed Equity Financing pursuant to the Purchase Agreement will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests of each of our existing stockholders will be diluted. Although the number of shares of Common Stock that our existing stockholders own will not decrease, the shares of Common Stock owned by our existing stockholders will represent a smaller percentage of our total outstanding Common Stock after any such issuance.
The following table sets forth the amount of gross proceeds we would receive from Lincoln Park from our sale of up to 1,000,000 shares of our Common Stock that we are registering hereby that we may issue and sell to Lincoln Park in the future under the Purchase Agreement at varying purchase prices from and after commencement:
Assumed Average Purchase Price Per Share | Number of Registered Shares of our Common Stock to be Issued if Full Purchase(1) | Percentage of Outstanding Shares of our Common Stock After Giving Effect to the Issuance to Lincoln Park(2) | Gross Proceeds from the Sale of Shares of our Common Stock to Lincoln Park Under the Purchase Agreement(1) | |||||||||||
$ | 2.00 | 1,000,000 | 35.1 | % | 2,000,000 | |||||||||
$ | 3.00 | 1,000,000 | 35.1 | % | $ | 3,000,000 | ||||||||
$ | 3.56 | (3) | 1,000,000 | 35.1 | % | $ | 3,560,000 | |||||||
$ | 4.00 | 1,000,000 | 35.1 | % | $ | 4,000,000 | ||||||||
$ | 5.00 | 1,000,000 | 35.1 | % | $ | 5,000,000 |
This prospectus relates to the possible resale by the selling stockholder, Lincoln Park, of up to 1,052,798 shares of our Common Stock, consisting of: (i) 52,798 shares of Common Stock that we have issued and sold to Lincoln in the Private Placement pursuant to the Securities Purchase Agreement on February 3, 2023, and (ii) up to 1,000,000 shares of Common Stock that we have reserved for issuance and sale to Lincoln Park in the Committed Equity Financing under the Purchase Agreement from time to time from and after the Commencement Date, if and when we determine to sell shares of our Common Stock to Lincoln Park in the Committed Equity Financing under the Purchase Agreement.
We are filing the registration statement of which this prospectus is a part pursuant to the provisions of the CEF Registration Rights Agreement, which we entered into with Lincoln Park on February 3, 2023 concurrently with our execution of the Purchase Agreement, in which we agreed to provide certain registration rights with respect to sales by Lincoln Park of the shares of our Common Stock that may be issued to Lincoln Park in the Committed Equity Financing under the Purchase Agreement. Pursuant to the Private Placement Registration Rights Agreement, we are also registering the shares of Common Stock that we have issued and sold to Lincoln in the Private Placement pursuant to the Securities Purchase Agreement on February 3, 2023; however, the Private Placement Registration Rights Agreement does not afford any registration rights with respect to the warrants that were issued and sold by us to Lincoln Park in the Private Placement, or with respect to the 105,596 shares of Common Stock underlying such warrants. Therefore, none of the warrants or the 105,596 shares of Common Stock underlying such warrants that were issued and sold by us to Lincoln Park in the Private Placement on February 3, 2023 are being registered for resale in the registration statement that includes this prospectus, or any other registration statement of ours that has been filed with the SEC as of the date of this prospectus.
The selling stockholder may sell some, all or none of the shares of Common Stock. We do not know how long the selling stockholder will hold the shares of our Common Stock before selling them, and we currently have no agreements, arrangements or understandings with the selling stockholder regarding the sale of any of the shares of Common Stock. See “Plan of Distribution.”
The table below sets forth, to our knowledge, information concerning the beneficial ownership of shares of our Common Stock by the selling stockholder as of February 3, 2023. The percentages of shares owned before and after the offering are based on 1,849,270 shares of Common Stock outstanding as of February 3, 2023, which includes the 52,798 shares that we issued to Lincoln Park in the Private Placement. The information in the table below with respect to the selling stockholder has been obtained from the selling stockholder.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to shares. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of Common Stock. The inclusion of any shares in this table does not constitute an admission of beneficial ownership for the person named below.
Name of Selling Stockholder | Number of Shares of Common Stock Owned Prior to Offering(2) | Maximum Number of Shares of Common Stock to be Offered Pursuant to this Prospectus(3) | Number of Shares of Common Stock Owned After Offering | |||||||||||||||||
Number | Percent | Number (4) | Percent | |||||||||||||||||
Lincoln Park Capital Fund, LLC(1) | 186,000 | 9.99 | % | 1,052,798 | 284,642 | 9.99 | % |
(1) Josh Scheinfeld and Jonathan Cope, the Managing Members of Lincoln Park Capital, LLC, the manager of Lincoln Park Capital Fund, LLC, are deemed to be beneficial owners of all of the shares of Common Stock owned directly by Lincoln Park Capital Fund, LLC. Messrs. Cope and Scheinfeld have shared voting and investment power over the shares of Common Stock being offered under the registration statement filed with the SEC in connection with the transactions contemplated under the Purchase Agreement and the Registration Rights Agreement. Neither Lincoln Park Capital, LLC nor Lincoln Park Capital Fund, LLC is a licensed broker dealer or an affiliate of a licensed broker dealer.
(2) Includes (i) the 52,798 shares of Common Stock issued to Lincoln Park in the Private Placement on February 3, 2023, (ii) 120,375 shares of Common Stock acquired by Lincoln Park from the Company in connection with the Company’s public offering of its Common Stock, Series E Preferred Stock and Class A and Class B warrants to purchase common stock (each of which Class A and Class B warrants contain a 9.99% beneficial ownership limitation provision) on July 26, 2022 (the “July 2022 Public Offering”), and (iii) up to 12,827 shares of Common Stock issuable upon exercise of currently exercisable Class A and Class B warrants to purchase Common Stock acquired by Lincoln Park in the July 2022 Public Offering, subject to a 9.99% beneficial ownership limitation provision contained in each of such warrants. Excludes (i) up to 230,923 shares of Common Stock underlying Class A and Class B warrants to purchase Common Stock acquired by Lincoln Park in the July 2022 Public Offering pursuant to a 9.99% beneficial ownership limitation provision contained in each of such warrants, and (ii) up to 105,596 shares of Common Stock underlying the warrants purchased by Lincoln Park in the Private Placement on February 3, 2023, which warrants and 105,596 shares of Common Stock issuable upon exercise thereof are not being registered in the registration statement that includes this prospectus, because such warrants are not exercisable until August 3, 2023 and therefore, are not deemed to be “beneficially owned” by Lincoln Park as of the date of this prospectus under Rule 13d-3 of the Exchange Act. Furthermore, in accordance with Rule 13d-3(d) under the Exchange Act, we have excluded from the number of shares of our Common Stock beneficially owned prior to the offering all of the 1,000,000 shares of our Common Stock that we may issue and sell to Lincoln Park in the Committed Equity Financing pursuant to the Purchase Agreement, from time to time at our discretion, from and after the Commencement Date that are being registered for resale under the registration statement that includes this prospectus, because the issuance and sale of such shares to Lincoln Park under the Purchase Agreement is solely at our discretion and is subject to certain conditions, the satisfaction of all of which are outside of Lincoln Park’s control, including the registration statement that includes this prospectus becoming and remaining effective under the Securities Act. Furthermore, under the terms of the Purchase Agreement, issuances and sales of shares of our Common Stock to Lincoln Park under the Purchase Agreement are subject to certain limitations on the amounts we may sell to Lincoln Park at any time, including the Exchange Cap and the Beneficial Ownership Cap.
(3) Although the Purchase Agreement provides that we may sell up to $10.0 million of our Common Stock to Lincoln Park, we are only registering 1,052,798 shares of our common stock for resale under this prospectus, including the 52,798 shares issued to Lincoln Park in the Private Placement. Therefore, only 1,000,000 of such shares represent shares that we may issue and sell to Lincoln Park in the future in the Committed Equity Financing under the Purchase Agreement from time to time, at our sole discretion, during the 36-month period commencing on the Commencement Date. Depending on the price$ per share at which we sell our Common Stock to Lincoln Park in the Committed Equity Financing pursuant to the Purchase Agreement, we may need to sell to Lincoln Park under the Purchase Agreement more than the 1,000,000 shares of our Common Stock relating to the Committed Equity Financing that are being registered for resale by Lincoln Park hereunder in order to receive aggregate gross proceeds equal to the full $10.0 million available to us under the Purchase Agreement. If we elect to issue and sell to Lincoln Park more than the 1,000,000 shares of our Common Stock relating to the Committed Equity Financing that are being registered for resale by Lincoln Park hereunder, we must first register for resale under the Securities Act any such additional shares of our Common Stock. The number of shares relating to the Committed Equity Financing ultimately offered for resale by Lincoln Park through this prospectus is dependent upon the number of shares of Common Stock we sell to Lincoln Park in the Committed Equity Financing under the Purchase Agreement.
(4) Includes (i) 120,375 shares of Common Stock acquired by Lincoln Park from the Company in connection with the July 2022 Public Offering, and (ii) up to 164,267 shares of Common Stock issuable upon exercise of currently exercisable Class A and Class B warrants to purchase Common Stock acquired by Lincoln Park in the July 2022 Public Offering, subject to a 9.99% beneficial ownership limitation provision contained in each of such warrants. Excludes (i) up to 79,483 shares of Common Stock underlying Class A and Class B warrants to purchase Common Stock acquired by Lincoln Park in the July 2022 Public Offering pursuant to a 9.99% beneficial ownership limitation provision contained in each of such warrants, and (ii) up to 105,596 shares of Common Stock underlying the warrants purchased by Lincoln Park in the Private Placement on February 3, 2023, which warrants and 105,596 shares of Common Stock issuable upon exercise thereof are not being registered in the registration statement that includes this prospectus, because such warrants are not exercisable until August 3, 2023 and therefore, are not deemed to be “beneficially owned” by Lincoln Park as of the date of this prospectus under Rule 13d-3 of the Exchange Act.
General
The shares of our Common Stock offered for resale by this prospectus are being offered for resale by the selling stockholder, Lincoln Park Capital Fund, LLC. The shares may be sold or distributed from time to time by the selling stockholder directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of our Common Stock offered by this prospectus could be effected in one or more of the following methods:
In order to comply with the securities laws of certain states, if applicable, the shares of our Common Stock offered for resale by this prospectus may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the shares of our Common Stock offered by this prospectus may not be sold unless they have been registered or qualified for sale in the state or an exemption from the state’s registration or qualification requirement is available and complied with.
Brokers, dealers, underwriters or agents participating in the distribution of the shares of our Common Stock being offered for resale by Lincoln Park by this prospectus may receive compensation in the form of commissions, discounts, or concessions from the purchasers, for whom the broker-dealers may act as agent, of shares of our Common Stock sold by Lincoln Park through this prospectus. The compensation paid to any such particular broker-dealer by any such purchasers of shares of our Common Stock sold by Lincoln Park may be less than or in excess of customary commissions. Neither we nor Lincoln Park can presently estimate the amount of compensation that any agent will receive from any purchasers of shares of our common stock sold by Lincoln Park.
We know of no existing arrangements between Lincoln Park or any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares of our Common Stock offered for resale by this prospectus.
We may from time to time file with the SEC one or more supplements to this prospectus or amendments to the registration statement that includes this prospectus to amend, supplement or update information contained in this prospectus, including, if and when required under the Securities Act, to disclose certain information relating to a particular sale of shares of our Common Stock offered for resale by this prospectus by the selling stockholder, including the names of any brokers, dealers, underwriters or agents participating in the distribution of such shares of our Common Stock by the selling stockholder, any compensation paid by the selling stockholder to any such brokers, dealers, underwriters or agents, and any other required information.
We will pay the expenses incident to the registration under the Securities Act of the offer and resale of the shares of our Common Stock included in this prospectus by Lincoln Park. We have agreed to indemnify Lincoln Park and certain other persons against certain liabilities in connection with the offering of shares of our Common Stock offered for resale by this prospectus, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Lincoln Park has agreed to indemnify us against liabilities under the Securities Act that may arise from certain written information furnished to us by Lincoln Park specifically for use in this prospectus or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities.
Lincoln Park has represented to us that at no time prior to the date of the Securities Purchase Agreement or prior to the date of the Purchase Agreement has Lincoln Park or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our Common Stock or any hedging transaction, which establishes a net short position with respect to our Common Stock. Lincoln Park agreed that during the term of the Purchase Agreement, it, its agents, representatives or affiliates will not enter into or effect, directly or indirectly, any of the foregoing transactions.
We have advised Lincoln Park that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes the selling stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the securities offered by this prospectus.
This offering will terminate on the date that all shares of our Common Stock offered for resale by this prospectus have been resold by Lincoln Park.
Our Common Stock is currently listed on The Nasdaq Capital Market under the symbol “KPRX”.
The Private Placement
The selling stockholder may offer and sell, from time to time, the 52,798 shares of Common Stock that we have issued and sold to Lincoln in the Private Placement pursuant to the Securities Purchase Agreement on February 3, 2023 that are covered by this prospectus (the “Private Placement Shares”). The following disclosure relates to the offer and sale of the Private Placement Shares by the selling stockholder.
With respect to the offer and resale of the Private Placement Shares through this prospectus, the selling stockholder and any underwriters, dealers or agents participating in a distribution of the Private Placement Shares may be deemed to be “underwriters” within the meaning of the Securities Act, and any profit on the sale of the Private Placement Shares by the selling stockholder and any commissions received by broker-dealers may be deemed to be underwriting commissions under the Securities Act.
The selling stockholder may agree to indemnify an underwriter, broker-dealer or agent against certain liabilities related to the sale of the securities, including liabilities under the Securities Act.
Instead of selling the Private Placement Shares under this prospectus, the selling stockholder may sell the Private Placement Shares in compliance with the provisions of Rule 144 under the Securities Act, if available, or pursuant to other available exemptions from the registration requirements of the Securities Act.
The Committed Equity Financing
Lincoln Park may offer and sell up to 1,000,000 shares of Common Stock that are covered by this prospectus (the “CEF Shares”), which we have reserved for issuance and sale to Lincoln Park in the Committed Equity Financing under the Purchase Agreement, from time to time from and after the Commencement Date, if and when we determine to sell shares of our Common Stock to Lincoln Park in the Committed Equity Financing under the Purchase Agreement.
Lincoln Park is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act with respect to the offer and resale by Lincoln Park of up to 1,000,000 CEF Shares through this prospectus.
Lincoln Park has informed us that it intends to use an unaffiliated broker-dealer to effectuate all resales, if any, of the CEF Shares that it may in the future acquire from us in the Committed Equity Financing pursuant to the Purchase Agreement. Each such unaffiliated broker-dealer will be an underwriter within the meaning of Section 2(a)(11) of the Securities Act with respect to the offer and resale by Lincoln Park of up to 1,000,000 CEF Shares through this prospectus. Lincoln Park has informed us that, with respect to the offer and resale by Lincoln Park of up to 1,000,000 CEF Shares through this prospectus, each such broker-dealer will receive commissions from Lincoln Park that will not exceed customary brokerage commissions.
DESCRIPTION OF OUR CAPITAL STOCK
THE SECURITIES WE ARE OFFERING
Provisions in our restated certificate of incorporation provide that our board of directors is authorized to issue preferred stock in one or more series, to establish the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of such shares and any qualifications, limitations or restrictions thereof. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock. The issuance of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of common stock, including the loss of voting control to others. At present, we have no plans to issue any additional preferred stock.
Delaware Anti-Takeover Statute. We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors.
Underwriters | Number of Shares of Common Stock (or Common Stock underlying Series F Preferred Stock) | Number of Warrants | ||||||||||||
Ladenburg Thalmann & Co. Inc. | ||||||||||||||
Total |
Per Share and Warrant (1) | Total Without Over-Allotment | Total With Full Over-Allotment | |||||||||||||||
Public offering price | $ | ||||||||||||||||
Underwriting discounts and commissions to be paid to underwriters by us(2)(3) | $ | ||||||||||||||||
Proceeds, before expenses, to us | $ |
Ellenoff Grossman & Schole LLP, New York, New York, is acting as counsel to the underwriters in connection with this offering.
Kiora Pharmaceuticals, Inc. | ||
332 Encinitas Boulevard, Suite 102 | ||
Encinitas, California 92024 | ||
Telephone: (858) 224-9600 |
This prospectus is part of a registration statement we filed with the SEC. We have incorporated exhibits into this registration statement. You should read the exhibits carefully for provisions that may be important to you.
You should rely only on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus or in the documents incorporated by reference is accurate as of any date other than the date on the front of this prospectus or those documents.
1,052,7982,582,160 Shares of Common Stock
We are paying
Securities and Exchange Commission registration fee | $ | 413 | ||
Legal Fees and Expenses | 50,000 | |||
Accounting Fees and Expenses | 25,000 | |||
Miscellaneous Fees and Expenses | 30,000 | |||
Total | $ | 105,413 |
Securities and Exchange Commission registration fee | $ | 2,851.44 | |||
FINRA filing fee | $ | 3,200.00 | |||
Legal fees and expenses | $ | 75,000.00 | |||
Accounting fees and expenses | $ | 98,250.00 | |||
Transfer agent fees and expenses | $ | 3,000.00 | |||
Printing expenses | $ | 8,000.00 | |||
Miscellaneous | $ | 15,000.00 | |||
Total | $ | 205,301.44 |
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Item 16. Exhibits and Financial Statement Schedules. |
(a)Exhibits.
Item 17. Undertakings. (a)Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b) |
The undersigned registrant hereby undertakes:
(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i)To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii)To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered II-3 (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; (iii)To include any material information with respect to the plan of distribution not previously disclosed |
Provided, however, that paragraphs (1)(a), (1)(b) and (1)(c) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement or any material change to such information in the registration statement;
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EXHIBIT INDEX
Exhibit Number | Description of Exhibit | ||||||||
1.1* | |||||||||
2.1** | |||||||||
2.2** | |||||||||
2.3** | |||||||||
3.1 | |||||||||
3.2 | |||||||||
3.3 | |||||||||
3.4 | |||||||||
3.5 | |||||||||
3.6 | |||||||||
3.7 | |||||||||
3.8 | |||||||||
3.9 | |||||||||
3.10 | |||||||||
3.11 | |||||||||
3.12 | |||||||||
3.13*** | |||||||||
4.1 |
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4.2 | |||||||||
4.3 | |||||||||
4.4 | |||||||||
4.5 | |||||||||
4.6 | |||||||||
4.7 | |||||||||
4.8 | |||||||||
4.9 | |||||||||
4.10 | |||||||||
4.11 | |||||||||
4.12* | |||||||||
4.13* | |||||||||
4.14* | |||||||||
5.1* | |||||||||
10.1# | |||||||||
10.2# | |||||||||
10.3# | |||||||||
10.4 | |||||||||
10.5# |
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10.6# | |||||||||
10.7† | |||||||||
10.8 | |||||||||
10.9†† |
10.10†† | |||||||||
10.11†† | |||||||||
10.12 | |||||||||
10.13 | |||||||||
10.14# | |||||||||
10.15†† | |||||||||
10.16†† | |||||||||
10.17# | |||||||||
10.18# | |||||||||
10.19# | |||||||||
10.20# | |||||||||
10.21 |
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10.22** | |||||||||
10.23 | |||||||||
10.24 | |||||||||
10.25** | |||||||||
16.1 | |||||||||
21.1 | |||||||||
23.1* | |||||||||
23.2* | |||||||||
24.1*** | |||||||||
107* |
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3rd31st day of February,May, 2023.KIORA PHARMACEUTICALS, INC. By: /s/ Brian M. Strem, Ph.D. Brian M. Strem, Ph.D. President and Chief Executive Officer KNOW ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Brian M. Strem, Ph.D. and Melissa Tosca, and each of them singly (with full power to each of them to act alone), as such person’s true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any or all amendments (including, without limitation, post-effective amendments) to this registration statement (or any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or any substitute or substitutes of them, may lawfully do or cause to be done by virtue hereof.SignatureTitleSignature Title Date /s/ Brian M. Strem, Ph.D. February 3,May 31, 2023Brian M. Strem, Ph.D. (principal executive officer) /s/ Melissa Tosca February 3,May 31, 2023Melissa Tosca (principal financial and accounting officer) /s/ Paul Chaney*Chairman February 3,May 31, 2023Paul Chaney /s/ Kenneth Gayron*Director February 3,May 31, 2023Kenneth Gayron /s/ Praveen Tyle*Director February 3,May 31, 2023Praveen Tyle /s/ David Hollander*Director February 3,May 31, 2023David Hollander /s/ Aron Shapiro* Director February 3,May 31, 2023Aron Shapiro /s/ Erin Parsons* Director February 3,May 31, 2023Erin Parsons II-10