| Stockholders' Equity | 10. Stockholders' Equity Preferred Stock The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $ 0.0001 per share, of which no shares were issued and outstanding at June 30, 2023. Common Stock Peak Bio, Inc. is authorized to issue 60,000,000 shares of common stock with a par value of $ 0.0001 per share. The Spin-Off (as defined below) was completed on March 1, 2022, prior to the execution of the Business Combination Agreement, with Peak Bio retaining 8,283,613 shares of the Company's common stock. In May 2022, the Company entered into an agreement with a certain investor in which the investor purchased an aggregate of 63,856 shares of the Peak Bio Co., Ltd. common stock for aggregate gross proceeds of approximately $ 1.2 million. PIPE Subscription Agreements In November 2022, concurrently with the closing of the Business Combination, the Company entered into subscription agreements with certain investors in which the investors purchased, in a private placement, an aggregate of 302,500 shares of common stock and 281,325 warrants to purchase shares of Ignyte common stock, at an exercise price of $ 0.01 per share for aggregate gross proceeds of $ 3.025 million. The warrants are on terms substantially the same as the outstanding warrants that were included in the units issued in Ignyte's initial public offering, except that the warrants are non redeemable, and the warrants are exercisable for one year. Forward Purchase Agreement On December 29, 2022, the Company purchased 375,939 shares of our common stock at a price of $ 10.115 per share following the exercise of an investor’s right to sell up to 450,000 shares of common stock under a previously disclosed Forward Purchase Agreement entered into on October 25, 2022. The 375,939 shares of common stock have been retired. As a result of that exercise, funds in the amount of $ 4,551,750 being held in escrow in connection with the Forward Purchase Agreement were distributed as follows: $ 749,127 to us and $ 3,802,623 to the investor. Additional PIPE Subscription Agreement In December 2022, the Company entered into a subscription agreement whereby the Company agreed to issue and sell to the investor party thereto, in a private placement, (i) 50,000 shares of our common stock at $ 10.00 per share and (ii) 46,500 warrants to purchase shares of our common stock, at an exercise price of $ 0.01 per share. The warrants are on terms substantially the same as the outstanding warrants that were included in the units issued in Ignyte’s initial public offering, except that the warrants are not redeemable, and the warrants are exercisable for one year. Key Company Stockholder Agreements In April 2022, the Company entered into a forward purchase agreement (the “Key Company Stockholder Forward Purchase Agreement”) with its founder and director, Hoyoung Huh (the “Key Company Stockholder”). Pursuant to the terms of the Key Company Stockholder Forward Purchase Agreement, the Key Company Stockholder would, subject to the receipt of margin financing within 180 days following the closing of the Business Combination, purchase shares of the Company's common stock at a purchase price of $ 10.00 per share in a private placement (the “Key Company Stockholder Purchase”) for up to an aggregate amount of $ 10,000,000 (the “Subscription Amount”), subject to the conditions set forth in the Key Company Stockholder Forward Purchase Agreement. The Company recorded a derivative liability for this agreement (see Note 6). In December 2022, the Company and the Key Company Stockholder entered into an amendment to the Key Company Stockholder Forward Purchase Agreement (the “Amendment to Key Company Stockholder Forward Purchase Agreement”), pursuant to which (i) the Key Company Stockholder Purchase is no longer subject to the receipt of margin financing as a condition precedent, (ii) the Key Company Stockholder agreed to fund the Subscription Amount on or prior to March 31, 2023 and (iii) the Key Company Stockholder Purchase would be consummated at a purchase price of $ 5.18 per share of the Company's common stock. Accordingly, upon closing of such purchase, the Key Company Stockholder will receive 1,930,501 shares of common stock in exchange for his $ 10.0 million investment in the Company. In April 2023, the Company received notice from its founder and director informing the Company that he would not consummate the purchase of the Key Company Stockholder Forward Purchase Agreement as a result of the Company’s failure to satisfy the condition that the Company's common stock continue to be listed on Nasdaq as required by the agreement. As a result, the Company cancelled and forfeited the 1,930,501 shares of common stock being held in escrow. White Lion Common Stock Purchase and Registration Rights Agreements On November 3, 2022, the Company entered into a Common Stock Purchase Agreement (as amended, the “White Lion Purchase Agreement") and Registration Rights (the “White Lion RRA”) with White Lion Capital, LLC, a Delaware limited liability company (“White Lion”). Pursuant to the White Lion Purchase Agreement, the Company has the right, but not the obligation, to require White Lion to purchase, from time to time, up to $ 100,000,000 in aggregate gross purchase price of newly issued shares of its common stock, subject to certain limitations and conditions set forth in the White Lion Purchase Agreement. Capitalized terms used but not otherwise defined in this section shall have the meanings given to such terms by the White Lion Purchase Agreement and the White Lion RRA. The Company recorded a derivative liability for this agreement (see Note 6). The Company is obligated under the White Lion Purchase Agreement and the White Lion RRA to file a registration statement with the SEC to register the common stock under the Securities Act, for the resale by White Lion of shares of common stock that the Company may issue to White Lion under the White Lion Purchase Agreement. Subject to the satisfaction of certain customary conditions including, without limitation, the effectiveness of a registration statement registering the shares issuable pursuant to the White Lion Purchase Agreement, the Company's right to sell shares to White Lion will commence on the effective date of the registration statement and extend until November 1, 2025. During such term, subject to the terms and conditions of the White Lion Purchase Agreement, the Company may notify White Lion when it exercises its right to sell shares (the effective date of such notice, a “Notice Date”). The number of shares sold pursuant to any such notice may not exceed (i) the lower of (a) the Purchase Notice Fixed Limit (described below) and (b) the product of (1) the Average Daily Trading Volume (as defined in the White Lion Purchase Agreement), and (2) the applicable Percentage Limit (as defined in the White Lion Purchase Agreement). The Purchase Notice Fixed Limit is $ 500,000 upon payment of the Initial Commitment Shares (as defined in the White Lion Purchase Agreement) and can be increased in two tranches: (A) to $ 1,000,000 following an aggregate purchase of $ 5,000,000 shares and issuance by the Company to White Lion of an additional $ 250,000 in Commitment Shares, and (B) to $ 2,000,000 following an aggregate purchase of $ 10,000,000 shares and issuance by the Company for payment of an additional $ 250,000 in Commitment Shares (as defined in the White Lion Purchase Agreement). The applicable Percentage Limit is 40 % or 150 % depending on the price the Company agrees to sell shares to White Lion. At an applicable Percentage Limit of 40 %, the Purchase Price to be paid by White Lion for any such shares will equal 97 % of lowest daily volume-weighted average price of common stock during a period of two consecutive Trading Days following the applicable Purchase Notice Date (as defined in the White Lion Purchase Agreement) until an aggregate of $ 50,000,000 in Purchase Notice Shares (as defined in the White Lion Purchase Agreement) have been purchased under White Lion Purchase Agreement, at which point the Purchase Price (as defined in the White Lion Purchase Agreement) to be paid by White Lion will equal 98 % of the lowest daily volume-weighted average price of common stock during a period of two consecutive Trading Days following the applicable Purchase Notice Date. At an applicable Percentage Limit of 150 %, the Purchase Price to be paid by White Lion for any such shares will equal 94.5 % of the lowest daily volume-weighted average price of common stock during a period of three consecutive Trading Days following the applicable Purchase Notice Date. The Company will have the right to terminate the White Lion Purchase Agreement at any time after commencement, at no cost or penalty, upon three (3) Trading Days’ prior written notice. Additionally, White Lion will have the right to terminate the White Lion Purchase Agreement upon three (3) days’ prior written notice to the Company if (i) there is a Fundamental Transaction (as defined in the White Lion Purchase Agreement), (ii) the Company is in breach or default in any material respect of the White Lion RRA, (iii) there is a lapse of the effectiveness, or unavailability of, the registration statement for a period of 45 consecutive Trading Days or for more than an aggregate of 90 Trading Days in any 365-day period, (iv) the suspension of trading of the common stock for a period of five (5) consecutive Trading Days, (v) the material breach of the White Lion Purchase Agreement by the Company, which breach is not cured within the applicable cure period or (vi) a Material Adverse Effect (as defined in the White Lion Purchase Agreement) has occurred and is continuing. No termination of the White Lion Purchase Agreement will affect the registration rights provisions contained in the White Lion RRA. In consideration for the commitments of White Lion, as described above, the Company has agreed that it will issue to White Lion shares of common stock having a value of $ 250,000 based upon the Closing Sale Price (as defined in the White Lion Purchase Agreement) of common stock two Trading Days prior to the filing of the Initial Registration Statement as Initial Commitment Shares. The Company may increase the number of shares it may sell to White Lion by issuing additional Commitment Shares in two additional tranches of $ 250,000 each. The Company issued Initial Commitment Shares of 50,200 shares of common stock to White Lion, based upon the Closing Sale Price of our common stock of $ 4.98 per share on November 30, 2022. Concurrently with the execution of the White Lion Purchase Agreement, the Company entered into the White Lion RRA with White Lion in which the Company agreed to register the shares of common stock purchased by White Lion with the SEC for resale within 30 days of the consummation of a business combination. The White Lion RRA also contains usual and customary damages provisions for failure to file and failure to have the registration statement declared effective by the SEC within the time periods specified. The White Lion Purchase Agreement and the White Lion RRA contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties. In March 2023, the Company entered into an amendment to the White Lion Purchase Agreement to give the Company the right, but not the obligation to require White Lion to purchase shares of the Company's common stock while trading on the OTC Market. Under the terms of the amendment, at an applicable Percentage Limit of 200 %, the Purchase Price to be paid by White Lion for any such shares will equal 90 % of the lowest daily volume-weighted average price of common stock during a period of six consecutive Trading Days following the applicable Purchase Notice Date if the Company is listed on the OTC Market with the exception of the OTC Pink or OTC Bulletin Board, in which case the Purchase Price will equal 85 % of the lowest daily volume-weighted average price of common stock during a period of six consecutive Trading Days following the applicable Purchase Notice Date. Further, the Company will issue to White Lion within five (5) Trading Days following the effective date of the amendment fully paid, non-assessable shares of the Company's common stock equal to the quotient obtained by dividing (i) $ 250,000 and (ii) the lowest traded sale price of the common stock of the 10 (ten) Trading Days prior to the effective date of the amendment, minus 50,200 . In March 2023, the Company issued 412,763 shares of its common stock to White Lion. In August 2023, the Company and White Lion entered into a second amendment to the common stock Purchase Agreement (the “Second Amendment”). The Second Amendment includes, among other things, the right of the Company to issue a Purchase Notice (defined in the Second Amendment as an “Accelerated Purchase Notice”) requesting White Lion to purchase newly issued shares of common stock from the Company, subject to acceptance by White Lion, with pricing of the shares to be sold by the Company to White Lion under such Accelerated Purchase Notice determined on the date of issuance by the Company of the Accelerate Purchase Notice and acceptance by White Lion (the date of such notice defined as the “Accelerated Valuation Period”). Such accelerated purchases pursuant to an Accelerated Purchase Notice will be sold to White Lion at a price, defined as an “Accelerated Purchase Price,” equal to the lower of (i) the opening price of common stock during the Accelerated Valuation Period, (ii) the closing price of the common stock during Accelerated Valuation Period, or (iii) the volume weighted average price of the common stock during Accelerated Valuation Period; provided, however, that if at the time the Company delivers an Accelerated Purchase Notice to Investor the price of the common stock is lower than the opening price of the common stock during the Accelerated Valuation Period, the Accelerated Purchase Price will be discounted by 20 %. In addition, the Second Amendment provides for an “Accelerated Purchase Notice Limit” equal to 200 %. In addition, in the event the Company does not issue Purchase Notices (as defined in the White Lion Purchase Agreement) to White Lion providing for the purchase of at least $ 1,250,000 of Purchase Shares (as defined in the White Lion Purchase Agreement and Second Amendment) in the aggregate within 180 days following the effective date of the amendment, the Company will issue to White Lion an additional number of fully paid, non-assessable shares of common stock equal to the quotient obtained by dividing (i) $ 150,000 and (ii) the lowest Closing Sale Price (as defined in the White Lion Purchase Agreement and Second Amendment) of common stock of the 10 (ten) Trading Days prior to the 180th day following the effective date of the amendment. Public Warrants In November 2022, upon consummation of the Business Combination, the Company assumed 2,875,000 public warrants (the “Public Warrants”). Each Public Warrant entitles the holder to purchase one share of common stock at a price of $ 11.50 per share, subject to adjustment as discussed herein. The Public Warrants became exercisable 30 days after the completion of the Business Combination. However, no Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. In the event of such cashless exercise, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Public Warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the trading day prior to the date of exercise. The Public Warrants will expire on the fifth anniversary of the completion of an initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. The Company may call the Public Warrants for redemption: • in whole and not in part; • at a price of $ 0.01 per warrant; • at any time after the warrants become exercisable, • upon not less than 30 days’ prior written notice of redemption to each warrant holder; and • if, and only if, the reported last sale price of the common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations) for any 20 trading days within a 30-trading day period commencing at any time after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and • if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants. If the Company calls the Public Warrants for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Public Warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Public Warrants. Private Placement Warrants In November 2022, upon consummation of the Business Combination, the Company assumed 2,500,000 private placement warrants (the “Private Placement Warrants”). Each Private Placement Warrant will entitle the holder to purchase one share of common stock at a price of $ 11.50 per share, subject to adjustment. The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees. Further, the Sponsor had agreed not to transfer, assign, or sell the Private Placement Warrants (including the shares of common stock issuable upon the exercise of the Private Placement Warrants), except to certain permitted transferees, until after the consummation of the Business Combination. A summary of the Company's outstanding warrants at June 30, 2023 is as follows:
Description Number of Warrants Exercise price per share Expiration Date
Private Placement Warrants 2,500,000 $ 11.50 11/1/2027
Public Warrants 2,875,000 $ 11.50 11/1/2027
Convertible note warrants 3,868,060 $ 0.60 4/28/2028
Founder and director warrants 1,217,958 $ 0.60 4/28/2028
Other Warrants 492,045 $ 0.01 11/1/2023
Outstanding Warrants 10,953,063 The following table summarizes the warrant activity:
Number of Warrants Weighted-average exercise price per share Weighted average remaining contractual term (in years)
Outstanding at December 31, 2022 5,867,045 $ 10.54 4.01
Issued 5,752,685 $ 0.60 4.83
Expired — $ —
Exercised ( 666,667 ) $ 0.60
Outstanding at June 30, 2023 10,953,063 $ 5.92 4.39 As previously disclosed, in April 2023 the Company issued to its founder and director warrants to purchase 1,884,625 shares of the Company’s common stock with an exercise price of $ 0.60 per share. On June 23, 2023, the Company's founder and director exercised warrants to purchase 666,667 shares of the Company’s common stock at $ 0.60 per share for a total purchase price of $ 400,000 . |
