3. STOCKHOLDERS’ EQUITY

September 2023 Private Placement

On September 8, 2023, in a private placement with certain institutional investors, the Company issued 1,225 shares of Series E-1 preferred stock, along with Tranche A warrants to purchase 2,205 shares of Series E-3 preferred stock and Tranche B warrants to purchase 1,715 shares of Series E-4 preferred stock. Shares of Series E preferred stock were issued at a fixed price of $20,000 per share, resulting in gross proceeds of $24.5 million and net proceeds of approximately $22.1 million after placement agent fees and other customary expenses.

The private placement is subject to approval by the Company’s stockholders. Upon approval (Note 9), the Series E-1 preferred stock will convert into either Series E-2 preferred stock and/or common stock. The conversion prices for the preferred stock are as follows: for the Series E-1 or E-2 preferred stock, $1.82 per share of common stock, or a total of 13,461,538 shares of common stock; for the Series E-3 preferred stock, $3.185 per share of common stock, or a total of 13,846,154 shares of common stock; and for the Series E-4 preferred stock, $4.7775 per share of common stock, or a total of 7,179,487 shares of common stock, in each case subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization. The two tranches of warrants are exercisable as follows:

The Series E-1 preferred stock has a redemption feature; therefore, it has been classified as mezzanine equity in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2023. This feature only applies to the Series E-1 preferred stock; upon stockholder approval of the transaction the redemption feature will no longer exist (Note 9). The Series E-1 preferred stock is considered a freestanding instrument, as are the Tranche A and Tranche B warrants, however the warrants are not freestanding from each other and are considered one unit for accounting purposes.

The Series E-1 preferred stock also has a liquidation preference, which is calculated as an amount per share equal to the greater of (i) two times (2X) the Original Per Share Price, together with any declared, unpaid dividends, or (ii) such amount per share as would have been payable had all shares of Series E-1 preferred stock been converted into Common Stock immediately prior to such Liquidation. While the Series E-1 preferred stock is outstanding, both the Tranche A and Tranche B warrants are considered puttable by virtue of the liquidation preference impacting the disposition of these warrants in the event of a liquidation. In accordance with the guidance in Accounting Standards Codification section 480, a puttable warrant is deemed to be a liability. All such liabilities are required to be presented at fair value, with changes being reflected in financial results for the period. As a result, the net proceeds, as reduced by the direct costs of the financing, are allocated first to the warrant liability at fair value, with the residual amount presented in mezzanine equity in the accompanying Condensed Consolidated Balance Sheets, and the change in the value of the warrants from the date of issuance to the end of the fiscal period is reflected in the accompanying Condensed Consolidated Statements of Operations.

October 2022 Public Offering and Private Placement

On October 25, 2022, the Company completed a registered direct offering of 3,275,153 shares of the Company’s common stock at $2.085 per share and common warrants to purchase up to an aggregate of 3,275,153 shares of common stock in a concurrent private placement priced at-the-market under Nasdaq rules. In a separate concurrent private placement transaction, the Company offered and sold pre-funded warrants to purchase an aggregate of 1,875,945 shares of common stock and common warrants to purchase an aggregate of 1,875,945 shares of common stock. The common warrants are immediately exercisable at an exercise price of $1.96 per share and will expire on the fifth anniversary of the closing date. Each pre-funded warrant has a purchase price of $2.08499, is immediately exercisable at an exercise price of $0.00001 per share and will not expire until exercised. The registered direct offering and private placements resulted in total gross proceeds of approximately $10.7 million with net proceeds to the Company of approximately $9.6 million after deducting estimated offering expenses. During the nine months ended September 30, 2023, 355,235 pre-funded warrants were converted into 355,235 shares of common stock. There were no pre-funded warrants exercised during the three months ended September 30, 2023. During the three months and nine months ended September 30, 2023, 177,877 common warrants were exercised for proceeds of $348,638.

In accordance with the concept of ASC 820 regarding the October 2022 public offering, the Company allocated the value of the proceeds to the common stock, common warrants, and pre-funded warrants utilizing a relative fair value basis. Using the Nasdaq closing trading price for our stock on October 20, 2022, the Company computed the fair value of the shares sold. This valuation did not impact the total gross increase to Stockholders’ Equity of $10.7 million, but is an internal, proportionate calculation allocating gross proceeds of approximately $4.0 million to common stock, $4.4 million to common warrants and $2.3 million to pre-funded warrants.

2022 Reverse Stock Split

At the annual stockholders’ meeting held on June 24, 2022, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation to effect a reverse split of the Company’s common stock at a ratio between 1-for-5 to 1-for-10 in order to satisfy requirements for the continued listing of the Company’s common stock on Nasdaq. The board of directors authorized the 1-for-10 ratio of the reverse split on June 27, 2022, and effective at the close of business on July 21, 2022, the Company’s certificate of incorporation was amended to effect a 1-for-10 reverse split of the Company’s common stock (the “Reverse Stock Split”). The accompanying consolidated financial statements and notes to consolidated financial statements give retroactive effect to the Reverse Stock Split for all periods presented.

Equity Distribution Agreement

On August 11, 2020, the Company entered into an equity distribution agreement (the Sales Agreement) with Oppenheimer & Co. Inc. (the Sales Agent). Pursuant to the Sales Agreement, the Company may offer and sell from time-to-time through the Sales Agent, up to $14.5 million shares of the Company’s common stock, par value $0.00001 per share (the ATM Shares). The Sales Agent will receive from the Company a commission of 3.0% of the gross proceeds from the sales of the ATM Shares pursuant to the terms of the Sales Agreement. The offering of the ATM Shares pursuant to the Sales Agreement will terminate upon the earliest of (i) the sale of all

ATM Shares subject to the Sales Agreement, and (ii) the termination of the Sales Agreement by the Company or the Sales Agent. Net proceeds from the sale of the ATM Shares will be used for general corporate purposes, including working capital.

In conjunction with the October 2022 offering, the Company filed a prospectus supplement suspending the ATM program. The Company will not make any sales of its common stock pursuant to the Equity Distribution Agreement unless and until a new registration statement of Form S-3 and a new prospectus supplement are filed with the SEC; however, the Equity Distribution Agreement remains in effect.

Common Stock Warrants

The following table summarizes information with regard to outstanding warrants to purchase common stock as of September 30, 2023:

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