Item 1.01. Entry Into a Material Definitive Agreement.
Convertible Note Subscription Agreement
On May 28, 2024 (the “Initial Closing Date”), Peak Bio, Inc., a Delaware corporation (the “Company”), and certain investors (the “Convertible Note Investors”) entered into a convertible note agreement (the “Convertible Notes”) pursuant to which the Convertible Note Investors purchased and the Company issued to the Convertible Note Investors Convertible Notes in the aggregate principal amount of $1,324,500.
The Convertible Notes provides that the Company may, in one or more closings, raise in excess of $3,250,000 at the Company’s sole discretion.
The Convertible Notes carry an interest rate of 10% per annum, have a maturity date of December 18, 2024, and provide for security interest in the Company’s intellectual property, automatic conversion and registration rights as follows:
Automatic Conversion:
If a Business Combination (defined below) occurs while the Convertible Notes are outstanding, then the outstanding principal amount of the Convertible Notes and all accrued and unpaid interest shall automatically convert into common stock, par value $0.0001 per share (the “Common Stock”) of the Company immediately prior to the closing of the Business Combination at the Conversion Price (defined below) where:
“Business Combination” means any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock of the Company is converted into or exchanged for securities of another entity (the “Surviving Company”) that are traded on a Public Exchange (the “Surviving Company Securities”).
“Conversion Price” means the price per share for the Company’s Common Stock determined by reference to the purchase price payable in connection with such Business Combination, multiplied by the Discount Rate, where the price per share of the Common Stock is determined by reference to the 30-day volume weighted average price of the Surviving Company Securities on the Public Exchange immediately prior to conversion and the exchange ratio (the “Exchange Ratio”) used in the Business Combination.
“Discount Rate” means 50%.
“Public Exchange” means the Nasdaq Stock Market, the New York Stock Exchange or another public exchange or marketplace approved by the Company’s Board of Directors.
Registration Rights:
Upon the Company’s next equity financing after the Initial Closing Date (the “Next Financing”) in which the Company provides future investors with registration rights, the Company will provide substantially equivalent registration rights to the Convertible Note Investors with respect to the shares of Common Stock into which the Convertible Notes are convertible, subject to the Convertible Notes Investors’ execution of any documents executed by the investors purchasing securities in the Next Financing.
Security Interest:
The Convertible Note provides for a senior security interest in all right, title and interest in and to all of the assets of the Company subject to the terms and conditions of the Security Agreement, by and between the Company and the Convertible Note Investors.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
