Debt | Debt Convertible Notes Baker Bros. Notes (temporarily owned by Aditxt from December 11, 2023 through February 26, 2024) On April 23, 2020, the Company entered into a Securities Purchase and Security Agreement (the Baker Bros. Purchase Agreement) with certain affiliates of Baker Bros. Advisors LP, as purchasers (the Baker Purchasers), and Baker Bros. Advisors LP, as designated agent, pursuant to which the Company agreed to issue and sell to the Baker Purchasers (i) convertible senior secured promissory notes (the Baker Notes) in an aggregate principal amount of up to $ 25.0 25.0 2,731 4,575 five-year The Baker Notes had a five-year 10.0 10.0 2.5 1.4 The Baker Notes were callable by the Company on 10 100 9,356.25 110 4,575 On November 20, 2021, the Company entered into the first amendment to the Baker Bros. Purchase Agreement (the First Baker Amendment), in which each Baker Purchaser had the right to convert all or any portion of the Baker Notes into common stock at a conversion price equal to the lesser of (a) $ 4,575 115 115 50 The First Baker Amendment also extended, effective upon the Company’s achievement of the Financing Threshold, the affirmative covenant to achieve $ 100.0 582,886 93.75 Note 8 – Stockholders’ Deficit 0.0158 0.0154 Note 10 – Subsequent Events On March 21, 2022, the Company entered into the second amendment to the Baker Bros. Purchase Agreement (the Second Baker Amendment), which granted each Baker Purchaser the right to convert all or any portion of the Baker Notes into common stock at a conversion price equal to the lesser of (a) $ 725.81 100 100 20 EVOGUARD 93.75 100.0 On September 15, 2022, the Company entered into the third amendment to the Baker Bros. Purchase Agreement (the Third Baker Amendment), pursuant to which the conversion price was amended to $ 26.25 two-year On December 19, 2022, the Company entered into the First Amendment to the Forbearance Agreement (the Amendment) effective as of December 15, 2022 to amend certain provisions of the Forbearance Agreement dated September 15, 2022. The Amendment revised the Forbearance Agreement to (i) amend the Fifth Recital Clause to clarify that the Purchasers consent to any additional indebtedness pari passu 5.0 On March 7, 2023, Baker Bros. Advisors, LP (the Designated Agent) provided a Notice of Event of Default and Reservation of Rights (the Notice of Default) relating to the Baker Bros. Purchase Agreement. The Notice of Default claimed that the Company failed to maintain the “Required Reserve Amount” as required by the Third Baker Amendment. The Designated Agent, at the direction of the Baker Purchasers, accelerated repayment of the outstanding balance payable. As a result, approximately $ 92.7 100.0 On September 8, 2023, the Company entered into the Fourth Amendment to the Baker Bros. Purchase Agreement (the Fourth Baker Amendment) with the Baker Purchasers. The Fourth Amendment amends certain provisions within the Baker Bros. Purchase Agreement including: (i) the rescission of the Notice of Default delivered to the Company on March 7, 2023 and waiving the Events of Default named therein; (ii) the waiver of any and all other Events of Default existing as of the Fourth Amendment date; (iii) the removal of the conversion feature into shares of Company common stock, including the removal of any requirement to reserve shares of common stock for conversion of the Baker Notes as well as any registration rights related thereto; (iv) the clarification that for the sole purpose of enabling an ex-U.S. license agreement for such assets, any Patents, Trademarks or Copyrights acquired after the Effective Date shall be excluded from the definition of Collateral; and, (v) the removal of the requirement for the Company to obtain $ 100 The outstanding balance of the Baker Notes will continue to accrue interest at 10 The Company was required to make a $ 1.0 The cash payments will be determined based upon the quarterly global net revenue of Phexxi such that if the global net revenue is less than or equal to $5.0 million, the Company will pay 3% of such global net revenues; if the global net revenue is over $5.0 million and less than or equal to $7.0 million, the Company will continue to pay 3% on net revenue up to $5.0 million and 4% on the net revenue over $5.0 million; and if the global net revenue is over $7.0 million, the Company will pay 3% on the net revenue up to $5.0 million, 4% on the net revenue over $5.0 million up to $7.0 million, and 5% on net revenue over $7.0 million. The cash payments were payable beginning in the fourth quarter of 2023. Regardless of the percentage paid, the quarterly cash payment amounts, along with the $1.0 million upfront payment, will be deducted from the Repurchase Price as Applicable Reductions. The Fourth Amendment also granted the Company the ability to repurchase the principal amount and accrued and unpaid interest of the Baker Notes for up to a five-year period for the one-time Repurchase Price designated below: Schedule of Repurchase Price Reduction Date of Notes’ Repurchase Repurchase Price On or prior to September 8, 2024 $ 14,000,000 September 9, 2024-September 8, 2025 $ 16,750,000 September 9, 2025-September 8, 2026 $ 19,500,000 September 9, 2026-September 8, 2027 $ 22,250,000 September 9, 2027-September 8, 2028 $ 25,000,000 The Company evaluated whether any of the Embedded Features required bifurcation as a separate component. The Company elected the fair value option (FVO) under ASC 825, Financial Instruments Due to the execution of the Fourth Baker Amendment, the Company reviewed the Baker Notes in accordance with ASC 470, Debt . 15.6 73.2 12.5 75.3 73.2 Note 6 – Fair Value of Financial Instruments As part of the consideration for the Merger, on December 11, 2023, the Baker Purchasers signed an agreement to assign the Baker Notes to Aditxt (the December Assignment Agreement). Upon this December Assignment Agreement, Aditxt assumed all terms under the Baker Notes, with Aditxt becoming the new senior secured debtholder of the Company, governed by the requirements under the Fourth Baker Amendment. The Baker Notes were re-assigned back to the Baker Purchasers on February 26, 2024 (the February Assignment Agreement). Due to the execution of the February Assignment Agreement, the Company reviewed the Baker Notes in accordance with ASC 470. The Baker Notes, having been effectively terminated, were extinguished on February 26, 2024, resulting in removing the fair value of the old Baker Notes of $ 13.5 Note 6 – Fair Value of Financial Instruments As of March 31, 2024, the Baker Notes are recorded at fair value in the condensed consolidated balance sheet as short-term convertible notes payable with a total fair value of $ 12.3 102.0 Adjuvant Notes On October 14, 2020, the Company entered into a Securities Purchase Agreement (the Adjuvant Purchase Agreement) with Adjuvant Global Health Technology Fund, L.P., and Adjuvant Global Health Technology Fund DE, L.P. (together, the Adjuvant Purchasers), pursuant to which the Company sold unsecured convertible promissory notes (the Adjuvant Notes) in aggregate principal amount of $ 25.0 The Adjuvant Notes have a five-year 7.5 8.8 Interest expense for the Adjuvant Notes consist of the following, and is included in other expense, net on the condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 (in thousands): Schedule of Interest Expense 2024 2023 Three Months Ended March 31, 2024 2023 Coupon interest $ 536 $ 497 Amortization of issuance costs 28 68 Total $ 564 $ 565 The Adjuvant Notes are convertible, subject to customary 4.99 19.99 0.0001 6,843.75 6,843.75 18,750 100.0 On April 4, 2022, the Company entered into the first amendment to the Adjuvant Purchase Agreement (the Adjuvant Amendment). The Adjuvant Amendment extended the affirmative covenant to achieve $ 100.0 678.49 100 100 30 18,750 100.0 The Adjuvant Notes contain various customary affirmative and negative covenants agreed to by the Company. On September 12, 2022, the Company was in default of the Adjuvant Notes due to the default with the Baker Notes under the cross-default provision. On September 15, 2022, the Company entered into a Forbearance Agreement (the Adjuvant Forbearance Agreement) with the Adjuvant Purchasers, pursuant to which the Adjuvant Purchasers agreed to forbear from exercising any of their rights and remedies during the Forbearance Period as defined in therein, but solely with respect to the specified events of default provided under the Adjuvant Forbearance Agreement. On September 15, 2022, the Company also entered into the second amendment to the Adjuvant Purchase Agreement (the Second Adjuvant Amendment), pursuant to which the conversion price per share was reduced to $ 26.25 10 2.9 109,842 Note 8 - Stockholders’ Deficit 0.0158 0.0154 Note 10 – Subsequent Events The Adjuvant Notes are accounted for in accordance with authoritative guidance for convertible debt instruments and are classified as current liabilities in the condensed consolidated balance sheets. The aggregate proceeds of $ 25.0 million were initially classified as restricted cash for financial reporting purposes due to contractual stipulations that specify the types of expenses the money can be spent on and how it must be allocated. The conversion feature was required to be bifurcated as an embedded derivative because the Company did not have a sufficient number of shares reserved upon conversion as of March 31, 2023; however, the fair value of such feature was immaterial as of such date. As of June 30, 2023, the Company had a sufficient number of shares reserved and the conversion feature was reclassified to stockholders’ deficit in accordance with ASC 815, Derivatives and Hedging Note 6 - Fair Value of Financial Instruments The Company was in default of the Adjuvant Notes at September 30, 2023, due to the failure to meet the cumulative net sales requirement. However, Adjuvant forbore such default in October 2023 and therefore the Company is no longer in default. As of March 31, 2024, the Adjuvant Notes are recorded in the condensed consolidated balance sheet as short-term convertible notes payable with a total balance of $ 29.1 22.5 6.6 28.5 22.5 6.1 As of March 31, 2024, and assuming the current conversion price of $ 0.0158 1,842,275,987 Term Notes December 2022 and February, March, April, July, August, and September 2023 Notes (SSNs) The Company entered into eight similar Securities Purchase Agreements (SPAs) between December 2022 and September 2023 with certain investors. Each of the agreements were materially similar. The variable details of each SPA, such as the principal amount of each note offering, net proceeds, and maturity date, are outlined in the table below. Pursuant to each SPA, the Company agreed to sell in a registered direct offering (i) unsecured 8.0 0.0001 The SSNs interest rates are subject to increase to 12 % upon an event of default and the Notes have no Company right to prepayment prior to maturity; however, the Company has the option to redeem the respective SSNs at a redemption premium of 32.5 %. The Purchasers can also require the Company to redeem their notes at the respective premium rate tied to the occurrence of certain subsequent transactions, as well as require the Company to redeem the SSNs in the event of subsequent placements (as defined). Also, pursuant to the terms of the SPAs, Purchasers have certain rights to participate in subsequent issuances of the Company’s securities, subject to certain exceptions. Additionally, the conversion rate and warrant strike price are subject to adjustment upon the issuance of other securities (as defined) less than the stated conversion rate and strike price at issuance. The strike prices adjusted as discussed in the table below. Additionally, subsequent to March 31, 2024, the conversion price of the SSNs was adjusted to $ 0.0154 per share due to the price reset requirements in the SPA. The Company evaluated the SSNs in accordance with ASC 480 and determined that the Notes were all liability instruments at issuance. The applicable Notes were then evaluated in accordance with the requirements of ASC 825 and the Company concluded that they were not precluded from electing the fair value option for the applicable Notes. The Company also evaluated the Warrants in accordance with ASC 480 and determined that the Warrants issued before the Reverse Stock Split in May 2023 were required to be recorded as liabilities at fair value in the Company’s condensed consolidated balance sheets. The applicable SSNs were marked-to-market at each reporting date with changes in fair value recognized in the condensed consolidated statement of operations, unless the change is concluded to be related to changes in the Company’s credit rating, in which case the change was recognized as a component of accumulated other comprehensive income in the condensed consolidated balance sheets. As a result of the Reverse Stock Split, the Company had sufficient shares available for issuance to cover the potential exercises; therefore, the Warrants that were previously classified as liabilities were marked-to-market and reclassified to equity in May 2023. For the Warrants issued after the Reverse Stock Split, the Company determined they were required to be recorded in equity. On December 21, 2023, warrants to purchase up to 9,972,074 613 22,280 Note 10 – Subsequent Events Summary of SSNs and Warrants at Issuance (December 2022 to September 2023): Schedule of SSNs and Warrants Conversion Price Notes Principal At Issuance Net Proceeds Before Issuance costs Common Preferred Shares Maturity Date At Issuance At 3/31/2023 At 6/30/2023 At 9/30/2023 At 12/31/2023 At 3/31/2024 December 2022 Notes $ 2,308 $ 1,500 369,230 70 12/21/2025 $ 6.25 $ 1.625 $ 0.8125 $ 0.0845 $ 0.0615 $ 0.0158 February 2023 Notes (1) 1,385 900 653,538 - 2/17/2026 $ 2.50 $ 1.625 $ 0.8125 $ 0.0845 $ 0.0615 $ 0.0158 March 2023 Notes 600 390 240,000 - 3/17/2026 $ 2.50 $ 1.625 $ 0.8125 $ 0.0845 $ 0.0615 $ 0.0158 March 2023 Notes (2) 538 350 258,584 - 3/20/2026 $ 2.50 $ 1.625 $ 0.8125 $ 0.0845 $ 0.0615 $ 0.0158 April 2023 Notes 769 500 615,384 - 3/6/2026 $ 1.25 N/A $ 0.8125 $ 0.0845 $ 0.0615 $ 0.0158 July 2023 Notes 1,500 975 1,200,000 - 3/6/2026 $ 1.25 N/A N/A $ 0.0845 $ 0.0615 $ 0.0158 August 2023 Notes 1,000 650 799,999 - 8/4/2026 $ 1.25 N/A N/A $ 0.0845 $ 0.0615 $ 0.0158 September 2023 Notes (3) 2,885 1,875 26,997,041 - 9/26/2026 $ 0.13 N/A N/A $ 0.13 $ 0.0615 $ 0.0158 Total Offerings $ 10,985 $ 7,140 31,133,776 (1) Warrants include 99,692 (2) Warrants include 43,200 (3) Warrants include 22,189,349 0.13 4,807,692 0.001 |