Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Sales of Common Stock and Prefunded Warrants

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Note 8 - Sales of Common Stock and Prefunded Warrants
3 Months Ended
Jun. 26, 2021
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]

Note 8.    Sales of Common Stock and Prefunded Warrants

 

On April 27, 2021, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with certain accredited investors (“Investors”) pursuant to which it issued and sold prefunded warrants to purchase an aggregate of 461,538 shares of the Company’s common stock (“Prefunded Warrants”) for gross proceeds of $1,500,000 or $3.25 per Prefunded Warrants in a private placement on the same day. Net proceeds to the Company after fees and expenses of the private placement were approximately $1,343,000. The Purchase Agreement contains customary representations and warranties of the Company and certain indemnification obligations and ongoing covenants of the Company.

 

The Prefunded Warrants are immediately exercisable and may be exercised for a de-minimis exercise price of $0.01 per share subject to the limitation that a holder of the Prefunded Warrants will not have the right to exercise any portion of the Prefunded Warrants if the holder together with its affiliates and attribution parties (as such terms are defined in the Prefunded Warrants) would beneficially own in excess of 9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Prefunded Warrants. The Prefunded Warrants do not expire. The Prefunded Warrants also contain a put option, under which, if the Company enters into a Fundamental Transaction, as defined in the Prefunded Warrants, the Company or any successor entity will, at the option of a holder of a Prefunded Warrant, which is exercisable concurrently with or at any time within 30 days after the consummation of such Fundamental Transaction, purchase such holder’s Prefunded Warrants by paying to such holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such holder’s Prefunded Warrants within five trading days after the notice of exercise by the holder of the put option. Because of this put-option provision, the Prefunded Warrants are classified as a liability at fair value of $1,703,000 on the issuance date and are marked to market at each reporting date. Further because the fair value of the prefunded warrants liability on the issuance date was greater than the proceeds of the Prefunded Private Placement and the warrants were issued to existing common stockholders, the difference was recorded to accumulated deficit as a $203,000 deemed dividend. There were finance costs of $157,000 associated with the issuance of the Prefunded Warrants. There was a gain on remeasurement of $46,000 on the prefunded warrant liability in the first quarter of fiscal 2022. Both of these amounts are recorded in Other expense, net in the condensed consolidated statement of operations.

 

Pursuant to the terms of the Purchase Agreement, and as a condition to closing the private placement, the Company and each Investor simultaneously entered into a registration rights agreement (“Registration Rights Agreement”) requiring the Company to file a registration statement with the SEC within 45 days of the closing of the private placement to register for resale the shares of the Company’s common stock underlying the Prefunded Warrants. The Registration Rights Agreement contains customary terms and conditions, certain liquidated damages provisions for failing to comply with the timing obligations for the filing and effectiveness of the registration statement, and certain customary indemnification obligations.

 

On April 27, 2021, in connection with the private placement, the Company issued warrants to purchase 23,076 shares of the Company’s common stock to the placement agent for such offering (“Placement Agent Warrants”). The Placement Agent Warrants have an exercise price per share equal to $3.575, subject to adjustment in certain circumstances, and will expire on April 27, 2026. The Placement Agent Warrants do not have the same put option provision as the Prefunded Warrants and, therefore, are classified as equity.

 

On June 6, 2021, the Company entered into a Securities Purchase Agreement with a private investor for the sale of a total of 46,154 common shares at the price of $3.25 per share, for aggregate gross proceeds of $150,000. The sale was completed, and the shares of common stock were issued on June 6, 2021. Net proceeds to the Company after fees and expenses of the transaction were approximately $145,000. This transaction was completed in conjunction with the conversion of 3,500 shares of Series E preferred stock. See Note 14.