UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Qualigen Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-37428 | 26-3474527 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
2042 Corte Del Nogal, Carlsbad, California 92011
(Address of principal executive offices) (Zip Code)
(760) 918-9165
(Registrant’s telephone number, including area code)
n/a
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Common Stock, par value $.001 per share | QLGN | The Nasdaq Capital Market of The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of May 10, 2022, there were shares of the registrant’s common stock, par value $0.001 per share, outstanding.
TABLE OF CONTENTS
| 2 |
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUALIGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 13,610,894 | 17,538,272 | |||||
| Accounts receivable, net | 594,338 | 822,351 | ||||||
| Inventory, net | 1,400,712 | 1,055,878 | ||||||
| Prepaid expenses and other current assets | 1,097,822 | 1,379,896 | ||||||
| Total current assets | 16,703,766 | 20,796,397 | ||||||
| Right-of-use assets | 1,591,072 | 1,645,568 | ||||||
| Property and equipment, net | 230,242 | 203,920 | ||||||
| Equipment held for lease, net | 221 | 296 | ||||||
| Intangible assets, net | 164,818 | 171,190 | ||||||
| Other assets | 18,334 | 18,334 | ||||||
| Total Assets | $ | 18,708,453 | $ | 22,835,705 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 997,406 | $ | 886,224 | ||||
| Accrued expenses and other current liabilities | 1,343,375 | 1,793,901 | ||||||
| Deferred revenue, current portion | 127,304 | 135,063 | ||||||
| Operating lease liability, current portion | 155,525 | 134,091 | ||||||
| Warrant liabilities | 1,002,100 | 1,686,200 | ||||||
| Total current liabilities | 3,625,710 | 4,635,479 | ||||||
| Operating lease liability, net of current portion | 1,484,833 | 1,542,564 | ||||||
| Deferred revenue, net of current portion | 81,081 | 92,928 | ||||||
| Total liabilities | 5,191,624 | 6,270,971 | ||||||
| Stockholders’ equity | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | 35,295 | 35,290 | ||||||
| Additional paid-in capital | 102,545,950 | 101,274,073 | ||||||
| Accumulated deficit | (89,064,416 | ) | (84,744,629 | ) | ||||
| Total stockholders’ equity | 13,516,829 | 16,564,734 | ||||||
| Total Liabilities & Stockholders’ Equity | $ | 18,708,453 | $ | 22,835,705 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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QUALIGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| REVENUES | ||||||||
| Net product sales | $ | 722,029 | $ | 1,420,842 | ||||
| License revenue | — | 478,654 | ||||||
| Total revenues | 722,029 | 1,899,496 | ||||||
| EXPENSES | ||||||||
| Cost of product sales | 828,848 | 1,202,479 | ||||||
| General and administrative | 2,898,751 | 2,873,939 | ||||||
| Research and development | 1,864,745 | 3,499,373 | ||||||
| Sales and marketing | 138,323 | 136,587 | ||||||
| Total expenses | 5,730,667 | 7,712,378 | ||||||
| LOSS FROM OPERATIONS | (5,008,638 | ) | (5,812,882 | ) | ||||
| OTHER (INCOME), NET | ||||||||
| Gain on change in fair value of warrant liabilities | (683,242 | ) | (552,808 | ) | ||||
| Interest income, net | (6,309 | ) | (17,343 | ) | ||||
| Other income, net | (36 | ) | (542 | ) | ||||
| Total other income, net | (689,587 | ) | (570,693 | ) | ||||
| LOSS BEFORE PROVISION FOR INCOME TAXES | (4,319,051 | ) | (5,242,189 | ) | ||||
| PROVISION FOR INCOME TAXES | 736 | 530 | ||||||
| NET LOSS | $ | (4,319,787 | ) | $ | (5,242,719 | ) | ||
| Net loss per common share, basic and diluted | $ | (0.12 | ) | $ | (0.19 | ) | ||
| Weighted—average number of shares outstanding, basic and diluted | 35,294,051 | 28,165,796 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
QUALIGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Common Stock | Additional Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount $ | Capital | Deficit | Total | ||||||||||||||||
| Balance at December 31, 2021 | 35,290,178 | $ | 35,290 | $ | 101,274,073 | $ | (84,744,629 | ) | $ | 16,564,734 | ||||||||||
| Stock issued upon exercise of warrants | 5,363 | 5 | 4,711 | 4,716 | ||||||||||||||||
| Stock-based compensation | — | 1,267,166 | 1,267,166 | |||||||||||||||||
| Net Loss | — | (4,319,787 | ) | (4,319,787 | ) | |||||||||||||||
| Balance at March 31, 2022 | 35,295,541 | $ | 35,295 | $ | 102,545,950 | $ | (89,064,416 | ) | $ | 13,516,829 | ||||||||||
| Series Alpha Convertible | Additional | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount $ | Shares | Amount $ | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance at December 31, 2020 | $ | 180 | $ | 1 | 27,296,061 | $ | 27,296 | $ | 85,114,755 | $ | (66,847,492 | ) | $ | 18,294,560 | ||||||||||||||
| Stock issued upon exercise of warrants | — | 1,319,625 | 1,320 | 1,813,353 | 1,814,673 | |||||||||||||||||||||||
| Stock issued upon net-exercise of warrants | — | 192,373 | 192 | (192 | ) | |||||||||||||||||||||||
| Stock issued for professional services | — | 25,000 | 25 | 101,725 | 101,750 | |||||||||||||||||||||||
| Stock-based compensation | — | — | 1,262,123 | 1,262,123 | ||||||||||||||||||||||||
| Net Loss | — | — | (5,242,719 | ) | (5,242,719 | ) | ||||||||||||||||||||||
| Balance at March 31, 2021 | 180 | $ | 1 | 28,833,059 | $ | 28,833 | $ | 88,291,764 | $ | (72,090,211 | ) | $ | 16,230,387 | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
QUALIGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (4,319,787 | ) | $ | (5,242,719 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 29,749 | 27,453 | ||||||
| Amortization of right-of-use assets | 54,495 | 54,179 | ||||||
| Accounts receivable reserves and allowances | (88,129 | ) | 8,490 | |||||
| Inventory reserves | 4,074 | 29,615 | ||||||
| Common stock issued for professional services | 101,750 | |||||||
| Stock-based compensation | 1,267,166 | 1,262,123 | ||||||
| Change in fair value of warrant liabilities | (683,242 | ) | (552,808 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 316,142 | (254,968 | ) | |||||
| Inventory and equipment held for lease | (348,908 | ) | 107,588 | |||||
| Prepaid expenses and other assets | 282,074 | 1,459,135 | ||||||
| Accounts payable | 111,184 | (15,217 | ) | |||||
| Accrued expenses and other current liabilities | (450,526 | ) | 1,122,686 | |||||
| Operating lease liability | (36,297 | ) | (60,710 | ) | ||||
| Deferred revenue | (19,606 | ) | (127,701 | ) | ||||
| Net cash used in operating activities | (3,881,611 | ) | (2,081,104 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | (49,625 | ) | (62,265 | ) | ||||
| Payments for patents and licenses | (6,737 | ) | ||||||
| Net cash used in investing activities | (49,625 | ) | (69,002 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Net proceeds from warrant exercises | 3,858 | 244,581 | ||||||
| Principal payments on notes payable | (123,133 | ) | ||||||
| Net cash provided by financing activities | 3,858 | 121,448 | ||||||
| Net change in cash | (3,927,378 | ) | (2,028,658 | ) | ||||
| Cash - beginning of period | 17,538,272 | 23,976,570 | ||||||
| Cash - end of period | $ | 13,610,894 | $ | 21,947,912 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | 831 | |||||
| Taxes | $ | $ | 100 | |||||
| NONCASH FINANCING AND INVESTING ACTIVITIES: | ||||||||
| Fair value of shares issued for cashless warrant exercises | $ | $ | 722,970 | |||||
| Fair value of warrant liabilities on date of exercise | $ | 858 | $ | 1,570,092 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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QUALIGEN THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
Organization
Qualigen, Inc., now a subsidiary of Qualigen Therapeutics, Inc., was incorporated in Minnesota in 1996 to design, develop, manufacture and sell point-of-care quantitative immunoassay diagnostic products for use in physician offices and other point-of-care settings worldwide, and was reincorporated in Delaware in 1999. Qualigen Therapeutics, Inc. (the “Company”) operates in one business segment. In May 2020, Qualigen, Inc. completed a reverse recapitalization transaction with Ritter Pharmaceuticals, Inc. (“Ritter”) and Ritter was renamed Qualigen Therapeutics, Inc. All shares of Qualigen, Inc.’s capital stock were exchanged for Qualigen Therapeutics, Inc.’s capital stock in the merger. Ritter/Qualigen Therapeutics common stock, which was previously traded on the Nasdaq Capital Market under the ticker symbol “RTTR,” commenced trading on the Nasdaq Capital Market, on a post-reverse-stock-split adjusted basis, under the trading symbol “QLGN” on May 26, 2020.
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a smaller reporting company. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities Exchange Commission on March 31, 2022, as amended on April 29, 2022 (the “2021 Annual Report”). In the opinion of management, the accompanying condensed consolidated interim financial statements include all adjustments necessary in order to make the financial statements not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. Certain notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Company’s 2021 Annual Report have been omitted. The accompanying condensed consolidated balance sheet at December 31, 2021 has been derived from the audited balance sheet at December 31, 2021 contained in the 2021 Annual Report.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in one operating segment. All long-lived assets of the Company are located in the United States.
Accounting Estimates
Management uses estimates and assumptions in preparing its unaudited condensed financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The most significant estimates relate to the estimated fair value of warrant liabilities, stock-based compensation, amortization and depreciation, inventory reserves, allowances for doubtful accounts and returns, and warranty costs. Actual results could vary from the estimates that were used.
Cash
The Company considers all highly liquid investments purchased with an initial maturity of 90 days or less and money market funds to be cash equivalents.
The Company maintains its cash in bank deposits which exceed federally insured limits and could potentially be subject to significant concentrations of credit risk on cash. The Company reviews the financial stability of its depository institutions on a regular basis, and has not experienced any losses in such accounts.
Inventory, Net
Inventory is recorded at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The Company reviews the components of its inventory on a periodic basis for excess or obsolete inventory, and records reserves for inventory components identified as excess or obsolete.
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Long-Lived Assets
The Company assesses potential impairments to its long-lived assets when there is evidence that events or changes in circumstances indicate that assets may not be recoverable. An impairment loss would be recognized when the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets. The amount of impairment loss, if any, will generally be measured as the difference between the net book value of the assets and their estimated fair values. During the three months ended March 31, 2022 and 2021, no such impairment losses have been recorded.
Accounts Receivable, Net
The Company grants credit to domestic physicians, clinics, and distributors. The Company performs ongoing credit evaluations of its customers and generally requires no collateral. Customers can purchase certain products through a financing agreement that the Company has with an outside leasing company. Under the agreement, the leasing company evaluates the credit worthiness of the customer. Upon acceptance of the product by the customer, the leasing company remits payment to the Company at a discount. This financing arrangement is without recourse to the Company.
The Company records an allowance for doubtful accounts and returns equal to the estimated uncollectible amounts or expected returns. The Company’s estimates are based on historical collections and returns and a review of the current status of trade accounts receivable.
Accounts receivable, net is comprised of the following at:
| March 31, 2022 | December 31, 2021 | |||||||
| Accounts Receivable | $ | 642,306 | $ | 958,448 | ||||
| Less Allowances | (47,968 | ) | (136,097 | ) | ||||
| $ | 594,338 | $ | 822,351 | |||||
Research and Development
The Company expenses research and development costs as incurred including therapeutics license costs.
Shipping and Handling Costs
The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound and outbound freight are generally recorded in cost of sales which totaled approximately $39,000 and $30,000, respectively, for the three months ended March 31, 2022 and 2021. Other shipping and handling costs included in general and administrative, research and development, and sales and marketing expenses totaled approximately $4,000 and $1,000 for the three months ended March 31, 2022 and 2021, respectively.
Revenue from Contracts with Customers
We apply the following five-step model in accordance with ASC 606, Revenue from Contracts with Customers, in order to determine the revenue: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
Product Sales
The Company generates revenue from selling FastPack System analyzers, accessories and disposable products used with the FastPack System. Disposable products include reagent packs which are diagnostic tests for prostate-specific antigen (“PSA”), testosterone, thyroid disorders, pregnancy, and Vitamin D.
The Company provides disposable products and equipment in exchange for consideration, which occurs when a customer submits a purchase order and the Company provides disposable products and equipment at the agreed upon prices in the invoice. Generally, customers purchase disposable products using separate purchase orders after the equipment (“analyzer”) has been provided to the customer. The initial delivery of the equipment and reagent packs represents a single performance obligation and is completed upon receipt by the customer. The delivery of each subsequent individual reagent pack represents a separate performance obligation because the reagent packs are standardized, are not interrelated in any way, and the customer can benefit from each reagent pack without any other product. There are no significant discounts, rebates, returns or other forms of variable consideration. Customers are generally required to pay within 30 days.
| 8 |
The performance obligation arising from the delivery of the equipment is satisfied upon the delivery of the equipment to the customer. The disposable products are shipped Free on Board (“FOB”) shipping point. For disposable products that are shipped FOB shipping point, the customer has the significant risks and rewards of ownership and legal title to the assets when the disposable products leave the Company’s shipping facilities, thus the customer obtains control and revenue is recognized at that point in time.
The Company has elected the practical expedient and accounting policy election to account for the shipping and handling as activities to fulfill the promise to transfer the disposable products and not as a separate performance obligation.
The Company’s contracts with customers generally have an expected duration of one year or less, and therefore the Company has elected the practical expedient in ASC 606 to not disclose information about its remaining performance obligations. Any incremental costs to obtain contracts are recorded as selling, general and administrative expense as incurred due to the short duration of the Company’s contracts.
License Revenue
The Company enters into out-license agreements with counterparties to develop and/or commercialize its products in exchange for nonrefundable upfront license fees and/or sales-based royalties.
If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from nonrefundable upfront fees allocated to the license when the license is transferred to the customer and the customer can benefit from the license. For licenses that are bundled with other performance obligations, management uses judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition. During the three months ended March 31, 2022 and 2021, the Company recognized license revenue of $0 and approximately $479,000, respectively.
Contract Asset and Liability Balances
The timing of the Company’s revenue recognition may differ from the timing of payment by the Company’s customers. The Company records a receivable when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, when payment precedes the performance of the related services, the Company records deferred revenue until the performance obligations are satisfied.
Multiple performance obligations included contracts that combined both the Company’s analyzer and a customer’s future reagent purchases under a single contract. In some sales contracts, the Company provided analyzers at no charge to customers. Title to the analyzer was maintained by the Company and the analyzer was returned by the customer to the Company at the end of the purchase agreement.
During the three months ended March 31, 2022 and 2021, product sales are stated net of an allowance for estimated returns of approximately $43,000 and $0, respectively.
Deferred Revenue
Payments received in advance from customers pursuant to certain collaborative research license agreements, deposits against future product sales, multiple element arrangements and extended warranties are recorded as a current or non-current deferred revenue liability based on the time from the condensed consolidated balance sheets date to the future date of revenue recognition.
Operating Leases
Effective April 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2018-11, Leases (Topic 842) Targeted Improvements (“Topic 842”). In accordance with the guidance in Topic 842, the Company recognizes lease liabilities and corresponding right-of-use-assets for all leases with terms of greater than 12 months. Leases with a term of 12 months or less will be accounted for in a manner similar to the guidance for operating leases prior to the adoption of Topic 842. Refer to Note 9 for more information.
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Property and Equipment, Net
Property and equipment are stated at cost and are presented net of accumulated depreciation. Depreciation is provided for on a straight-line basis over the estimated useful lives of the related assets as follows:
| Machinery and equipment | 5 years | |||
| Computer equipment | 3 years | |||
| Molds and tooling | 5 years | |||
| Furniture and fixtures | 5 years |
Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or their estimated useful lives. The Company occasionally designs and builds its own machinery. The costs of these projects, which includes the cost of construction and other direct costs attributable to the construction, are capitalized as construction in progress. No provision for depreciation is made on construction in progress until the relevant assets are completed and placed in service.
The Company’s policy is to evaluate the remaining lives and recoverability of long-term assets on at least an annual basis or when conditions are present that indicate impairment.
Intangible Assets, Net
Intangibles consist of patent-related costs and costs for license agreements. Management reviews the carrying value of intangible assets that are being amortized on an annual basis or sooner when there is evidence that events or changes in circumstances may indicate that impairment exists. The Company considers relevant cash flow and profitability information, including estimated future operating results, trends and other available information, in assessing whether the carrying value of intangible assets being amortized can be recovered.
If the Company determines that the carrying value of intangible assets will not be recovered from the undiscounted future cash flows expected to result from the use and eventual disposition of the underlying assets, the Company considers the carrying value of such intangible assets as impaired and reduces them by a charge to operations in the amount of the impairment.
Costs related to acquiring patents and licenses are capitalized and amortized over their estimated useful lives, which is generally 5 to 17 years, using the straight-line method. Amortization of patents and licenses commences once final approval of the patent or license has been obtained. Patent and license costs are charged to operations if it is determined that the patent or license will not be obtained.
The carrying value of the patents of approximately $154,000 and $159,000 at March 31, 2022 and December 31, 2021, respectively, are stated net of accumulated amortization of approximately $325,000 and $320,000, respectively. Amortization of patents charged to operations for the three months ended March 31, 2022 and 2021 was approximately $5,000 and $3,000, respectively. Total future estimated amortization of patent costs for the five succeeding years is approximately $14,000 for the remaining nine months in the year ending December 31, 2022, approximately $18,000 for the year ending December 31, 2023, approximately $15,000 for year 2024, approximately $14,000 for years 2025 and 2026, and approximately $79,000 thereafter.
The carrying value of the in-licenses of approximately $11,000 and $12,000 at March 31, 2022 and December 31, 2021, respectively, are stated net of accumulated amortization of approximately $408,000 and $407,000, respectively. Amortization of licenses charged to operations for the three months ended March 31, 2022 and 2021 was approximately $2,000 for each period. Total future estimated amortization of license costs is approximately $6,000 for the remaining nine months in the year ending December 31, 2022, approximately $5,000 for the year ending December 31, 2023.
Derivative Financial Instruments and Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. Depending on the features of the derivative financial instrument, the Company uses either the Black-Scholes option-pricing model or a Monte-Carlo simulation to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period (See Note 7).
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Fair Value Measurements
The Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the inputs used in measuring fair value. The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:
| ● | Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date; | |
| ● | Level 2 - Inputs other than quoted prices that are observable for the assets or liability either directly or indirectly, including inputs in markets that are not considered to be active; and | |
| ● | Level 3 - Inputs that are unobservable. |
Fair Value of Financial Instruments
Cash, accounts receivable, prepaids, accounts payable, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.
Stock-Based Compensation
Stock-based compensation cost for equity awards granted to employees and non-employees is measured at the grant date based on the calculated fair value of the award using the Black-Scholes option-pricing model, and is recognized as an expense, under the straight-line method, over the requisite service period (generally the vesting period of the equity grant). If the Company determines that other methods are more reasonable, or other methods for calculating these assumptions are prescribed by regulators, the fair value calculated for the Company’s stock options could change significantly. Higher volatility, lower risk-free interest rates, and longer expected lives would result in an increase to stock-based compensation expense to employees and non-employees determined at the date of grant.
Income Taxes
Deferred income taxes are recognized for temporary differences in the basis of assets and liabilities for financial statement and income tax reporting that arise due to net operating loss carry forwards, research and development credit carry forwards and from using different methods and periods to calculate depreciation and amortization, allowance for doubtful accounts, accrued vacation, research and development expenses, and state taxes. A provision has been made for income taxes due on taxable income and for the deferred taxes on the temporary differences.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Realization of the deferred income tax asset is dependent on generating sufficient taxable income in future years.
Sales and Excise Taxes
Sales and other taxes collected from customers and subsequently remitted to government authorities are recorded as accounts receivable with corresponding tax payable. These balances are removed from the condensed consolidated balance sheet as cash is collected from customers and remitted to the tax authority.
Warranty Costs
The Company’s warranty policy generally provides for one year of coverage against defects and nonperformance within published specifications for sold analyzers and for the term of the contract for equipment held for lease. The Company accrues for estimated warranty costs in the period in which the revenue is recognized based on historical data and the Company’s best estimates of analyzer failure rates and costs to repair.
Accrued warranty liabilities were approximately $72,000 and $60,000, respectively, as of March 31, 2022 and December 31, 2021 and are included in accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. Warranty costs were approximately $53,000 and $25,000 for the three months ended March 31, 2022 and 2021, respectively, and are included in cost of product sales in the condensed consolidated statements of operations.
| 11 |
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which supersedes current guidance by requiring recognition of credit losses when it is probable that a loss has been incurred. The new standard requires the establishment of an allowance for estimated credit losses on financial assets including trade and other receivables at each reporting date. The new standard will result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842), which extends the effective date of Topic 326 for certain companies until fiscal years beginning after December 15, 2022. The new standard will be effective for the Company in the first quarter of fiscal year beginning January 1, 2023, and early adoption is permitted. The Company has not completed its review of the impact of this standard on its condensed consolidated financial statements. However, based on the Company’s history of immaterial credit losses from trade receivables, management does not expect that the adoption of this standard will have a material effect on the Company’s condensed consolidated financial statements.
Impact of the COVID-19 Pandemic
Events surrounding the SARS-CoV-2 virus that emerged in late 2019 and the ensuing global pandemic have had a dramatic impact on businesses globally and our business as well. Our sales of diagnostic products fell significantly during 2020 and our net loss increased significantly, as deferral of patients’ non-emergency visits to physician offices, clinics and small hospitals sharply reduced demand for FastPack tests. Since then we have experienced some recovery in demand. The severity and duration of the pandemic and economic repercussions of the virus and government actions taken in response to the pandemic remain uncertain and will ultimately depend on many factors, including the speed of global dissemination and effectiveness of the vaccination and containment efforts throughout the world, the duration and spread of the virus, as well as seasonality, variants or new outbreaks.
In the United States, federal, state, and local government directives and policies have been put in place throughout the course of the pandemic to manage public health concerns and address the economic impacts of the pandemic, including reduced business activity and overall uncertainty presented by this new healthcare challenge. Similar actions have been taken by governments around the world. Our facilities could be required to temporarily curtail production levels or temporarily cease operations based on government mandates or as a result of the pandemic. To mitigate risks, we continue to evaluate the extent to which COVID-19 may impact our business and operations and adjust risk mitigation planning and business continuity activities as needed.
Other accounting standard updates are either not applicable to the Company or are not expected to have a material impact on the Company’s unaudited condensed financial statements.
NOTE 2 — LIQUIDITY
The Company has incurred recurring losses from operations and has an accumulated deficit at March 31, 2022. The Company expects to continue to incur losses subsequent to the condensed consolidated balance sheet date of March 31, 2022. In December 2021, the Company raised $8.82 million through a Securities Purchase Agreement with several institutional investors. Based on the Company’s current cash position, and assuming currently planned expenditures and level of operations, the Company believes it has sufficient capital to fund operations for the 12-month period subsequent to the issuance of the accompanying unaudited condensed financial statements. However, there is no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. Also, beyond such 12-month period, planned research and development activities, capital expenditures, clinical and pre-clinical testing, and commercialization activities of the Company’s products are expected to require significant additional financing. Additional financing may not be available on acceptable terms or at all.
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NOTE 3 — INVENTORY, NET
Inventory, net consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Raw materials | $ | 819,434 | $ | 823,315 | ||||
| Work in process | 539,085 | 188,135 | ||||||
| Finished goods | 42,193 | 44,428 | ||||||
| $ | 1,400,712 | $ | 1,055,878 | |||||
NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Prepaid insurance | $ | 818,216 | $ | 1,197,726 | ||||
| Prepaid manufacturing expenses | 32,087 | 50,371 | ||||||
| Other prepaid expenses | 247,519 | 131,799 | ||||||
| $ | 1,097,822 | $ | 1,379,896 | |||||
NOTE 5 — PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Machinery and equipment | $ | 2,493,222 | $ | 2,482,841 | ||||
| Computer equipment | 384,361 | 345,117 | ||||||
| Leasehold improvements | 333,271 | 333,271 | ||||||
| Molds and tooling | 260,002 | 260,002 | ||||||
| Furniture and fixtures | 143,013 | 143,013 | ||||||
| 3,613,869 | 3,564,244 | |||||||
| Less Accumulated depreciation | (3,383,627 | ) | (3,360,324 | ) | ||||
| $ | 230,242 | $ | 203,920 | |||||
Depreciation expense relating to property and equipment was approximately $23,000 and $15,000 for the three months ended March 31, 2022 and 2021, respectively.
| 13 |
NOTE 6 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Board compensation | $ | 17,500 | $ | 17,500 | ||||
| Franchise, sales and use taxes | 11,975 | 14,090 | ||||||
| Income taxes | 4,356 | 3,620 | ||||||
| Payroll | 105,877 | 682,036 | ||||||
| Professional fees | 265,421 | 225,308 | ||||||
| Research and development | 293,624 | 232,712 | ||||||
| Royalties | 8,880 | 10,152 | ||||||
| Vacation | 313,633 | 282,910 | ||||||
| Warranty liability | 71,974 | 60,281 | ||||||
| Other | 250,135 | 265,292 | ||||||
| $ | 1,343,375 | $ | 1,793,901 | |||||
NOTE 7 – WARRANT LIABILITIES
In 2004, the Company issued warrants to various investors and brokers for the purchase of Series C preferred stock in connection with a private placement (the “Series C Warrants”). The Series C Warrants were subsequently extended and, upon closing of the reverse recapitalization transaction with Ritter, exchanged for warrants to purchase common stock of the Company, pursuant to the Series C Warrant terms as adjusted.
In exchange for the Series C Warrants, upon closing of the merger with Ritter, the holders received warrants to purchase an aggregate of 4,713,490 shares of the Company’s common stock at $0.72 per share, subject to adjustment. As of March 31, 2022, the warrants received in exchange for the Series C Warrants have remaining terms ranging from 1.7 to 2.2 years. The warrants were determined to be liability-classified pursuant to the guidance in ASC 480 and ASC 815-40, resulting from inclusion of a leveraged ratchet provision for subsequent dilutive issuances.
The following table summarizes the activity in the Common Stock Warrants (received in exchange for the Series C Warrants) for the three months ended March 31, 2022:
Common Stock Warrants (received in exchange for the Series C Warrants) | ||||||||||||||||
| Shares | Weighted– Average Exercise Price | Range of Exercise Price | Weighted– Average Remaining Life (Years) | |||||||||||||
| Total outstanding – December 31, 2021 | 2,481,614 | $ | 0.72 | |||||||||||||
| Exercised | (5,363 | ) | 0.72 | |||||||||||||
| Forfeited | ||||||||||||||||
| Expired | ||||||||||||||||
| Granted | ||||||||||||||||
| Total outstanding – March 31, 2022 | 2,476,251 | $ | 0.72 | |||||||||||||
| Exercisable | 2,476,251 | $ | 0.72 | $ | 0.72 | |||||||||||
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The following table summarizes the activity in the Common Stock Warrants (received in exchange for the Series C Warrants) activity for the three months ended March 31, 2021:
Common Stock Warrants (received in exchange for the Series C Warrants) | ||||||||||||||||
| Shares | Weighted– Average Exercise Price | Range of Exercise Price | Weighted– Average Remaining Life (Years) | |||||||||||||
| Total outstanding –December 31, 2020 | 3,378,596 | $ | 0.72 | |||||||||||||
| Exercised | (473,608 | ) | 0.72 | |||||||||||||
| Forfeited | (36,097 | ) | 0.72 | |||||||||||||
| Expired | ||||||||||||||||
| Granted | ||||||||||||||||
| Total outstanding – March 31, 2021 | 2,868,891 | $ | 0.72 | |||||||||||||
| Exercisable | 2,868,891 | $ | 0.72 | $ | 0.72 | |||||||||||
The following table presents the Company’s fair value hierarchy for its warrant liabilities and exercises (all of which arise under the warrants received in exchange for the Series C Warrants) measured at fair value on a recurring basis using Level 3 inputs as of March 31, 2022:
| Quoted | ||||||||||||||||
| Market | Significant | |||||||||||||||
| Prices for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Common Stock Warrant | Assets | Inputs | Inputs | |||||||||||||
| liabilities | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | 1,686,200 | $ | 1,686,200 | ||||||||||
| Exercises | (858 | ) | (858 | ) | ||||||||||||
| Gain on change in fair value of warrant liabilities | (683,242 | ) | (683,242 | ) | ||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | 1,002,100 | $ | 1,002,100 | ||||||||||
There were no transfers of financial assets or liabilities between category levels for the three months ended March 31, 2022.
The value of the warrant liabilities was based on a valuation received from an independent valuation firm determined using a Monte-Carlo simulation. For volatility, the Company considers comparable public companies as a basis for its expected volatility to calculate the fair value of common stock warrants and transitions to its own volatility as the Company develops sufficient appropriate history as a public company. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected term of the common stock warrant. The Company uses an expected dividend yield of zero based on the fact that the Company has never paid cash dividends and does not expect to pay cash dividends in the foreseeable future. Any significant changes in the inputs may result in significantly higher or lower fair value measurements.
The following table shows the range of assumptions used in estimating the fair value of warrant liabilities as of March 31, 2022 and 2021:
| March 31, 2022 | March 31, 2021 | |||||||||||||||
| Range | Weighted Average | Range | Weighted Average | |||||||||||||
| Risk-free interest rate | 2.03% — 2.29 | % | 2.08 | % | 0.28% — 0.42 | % | 0.30 | % | ||||||||
| Expected volatility (peer group) | 88% — 101 | % | 90.4 | % | 81% — 84 | % | 83.52 | % | ||||||||
| Term of warrants (in years) | 1.65 — 2.24 | 1.76 | 2.65 — 3.24 | 2.75 | ||||||||||||
| Expected dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
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Basic loss per share (“EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted EPS is computed based on the sum of the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from stock options and warrants.
For the Three Months Ended March 31, | For the Three Months Ended March 31, | |||||||
| 2022 | 2021 | |||||||
| Net loss used for basic earnings per share | $ | (4,319,787 | ) | $ | (5,242,719 | ) | ||
| Basic weighted-average common shares outstanding | 35,294,051 | 28,165,796 | ||||||
| Dilutive potential shares issuable from stock options and warrants | ||||||||
| Diluted weighted-average common shares outstanding | 35,294,051 | 28,165,796 | ||||||
| For the Three Months Ended March 31, | For the Three Months Ended March 31, | |||||||
| 2022 | 2021 | |||||||
| Shares of common stock subject to outstanding options | 4,864,023 | 4,033,856 | ||||||
| Shares of common stock subject to outstanding warrants | 9,816,032 | 9,609,316 | ||||||
| Shares of common stock subject to conversion of Series Alpha Convertible Preferred Stock | 243,418 | |||||||
| Total common stock equivalents | 14,680,055 | 13,886,590 | ||||||
NOTE 9 — COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its facilities under a long-term operating lease agreement. On December 15, 2021, our wholly-owned subsidiary Qualigen, Inc. entered into a Second Amendment to Lease with Bond Ranch LP. This Amendment extended the Company’s triple-net leasehold on the Company’s existing 22,624-square-feet headquarters/manufacturing facility at 2042 Corte del Nogal, Carlsbad, California for the 61-month period of November 1, 2022 to November 30, 2027. Over the 61 months, the base rent payable by Qualigen, Inc. will total $1,950,710; however, the base rent for the first 12 months of the 61-month period will be only $335,966. Additionally, under the Second Amendment to Lease Qualigen, Inc. is entitled to a $339,360 tenant improvement allowance.
The tables below show the operating lease right-of-use assets and operating lease liabilities as of March 31, 2022, including the changes during the periods:
| Operating lease right-of-use assets | ||||
| Net right-of-use assets at December 31, 2021 | $ | 1,645,568 | ||
| Less amortization of operating lease right-of-use assets | (54,496 | ) | ||
| Operating lease right-of-use assets at March 31, 2022 | $ | 1,591,072 | ||
| Operating lease liabilities | ||||
| Lease liabilities at December 31, 2021 | $ | 1,676,655 | ||
| Less principal payments on operating lease liabilities | (36,297 | ) | ||
| Lease liabilities at March 31, 2022 | 1,640,358 | |||
| Less non-current portion | (1,484,833 | ) | ||
| Current portion at March 31, 2022 | $ | 155,525 | ||
As of March 31, 2022, the Company’s operating leases have a weighted-average remaining lease term of 5.6 years and a weighted-average discount rate of 8.9%.
| 16 |
As of March 31, 2022, future minimum payments during the next five fiscal years and thereafter are as follows:
| Year Ending December 31, | Amount | |||
| 2022 (nine months) | $ | 203,857 | ||
| 2023 | 368,341 | |||
| 2024 | 379,392 | |||
| 2025 | 390,773 | |||
| 2026 | 402,497 | |||
| 2027 | 379,165 | |||
| Total | 2,124,025 | |||
| Less present value discount | (483,667 | ) | ||
| Operating lease liabilities | $ | 1,640,358 | ||
Total lease expense was approximately $114,000 and $86,000 for the three months ended March 31, 2022 and 2021, respectively. Lease expense was recorded in cost of product sales, general and administrative expenses, research and development and sales and marketing expenses.
Termination of Sekisui Distribution Agreement
In March 2018, the Company extended a strategic partnership entered into in May 2016 with Sekisui Diagnostics, LLC (“Sekisui”). The Company appointed Sekisui as its diagnostics commercial partner and exclusive worldwide distributor with the exception of certain customer accounts retained by Qualigen; Sekisui’s distribution arrangement expired on March 31, 2022. Subsequent to the expiration of the agreement, in the second quarter of 2022 the Company will have a commitment to purchase leased FastPack rental systems back from Sekisui at Sekisui’s net book value, the amount of which has not yet been determined.
Litigation and Other Legal Proceedings
On November 9, 2021, the Company was named as a defendant in an action brought by Mediant Communications Inc. (“Mediant”) in the U.S. District Court for the Southern District of New York. The complaint alleged that Qualigen entered into an implied contract with Mediant, whereby Qualigen retained Mediant to distribute proxy materials and subsequently conduct shareholder vote tabulations. The Company filed a Motion to Dismiss with the District Court and on March 14, 2022 a hearing was held during which the presiding judge ruled in favor of the Motion to Dismiss. The Company and Mediant settled the litigation on April 5, 2022 in the amount of $96,558. This amount is included in accounts payable and accrued expenses on the Company’s March 31, 2022 condensed consolidated balance sheet.
NOTE 10 — RESEARCH AND LICENSE AGREEMENTS
The University of Louisville Research Foundation
Between June 2018 and April 2022, the Company entered into license and sponsored research agreements with the University of Louisville Research Foundation (“ULRF”) for QN-247, a novel aptamer-based compound that has shown promise as an anticancer drug. Under the agreements, the Company will take over development, regulatory approval and commercialization of the compound from ULRF and is responsible for maintenance of the related intellectual property portfolio. In return, ULRF received a $50,000 convertible promissory note in payment of an upfront license fee, which was subsequently converted into the Company’s common stock, and the Company agreed to reimburse ULRF for sponsored research expenses of up to approximately $805,000 and prior patent costs of up to $200,000. In addition, the Company agreed to pay ULRF (i) royalties, on patent-covered net sales associated with the commercialization of anti-nucleolin agent-conjugated nanoparticles, of 4% (on net sales up to a cumulative $250,000,000) or 5% (on net sales above a cumulative $250,000,000), until expiration of the last to expire of the licensed patents, (ii) 30% to 50% of any non-royalty sublicensee income received (50% for sublicenses granted in the first two years of the ULRF license agreement, 40% for sublicenses granted in the third or fourth years of the ULRF license agreement, and 30% for sublicenses granted in the fifth year of the ULRF license agreement or thereafter), (iii) reimbursements for ongoing costs associated with the preparation, filing, prosecution and maintenance of licensed patents, incurred prior to June 2018, and (iv) payments ranging from $100,000 to $5,000,000 upon the achievement of certain regulatory and commercial milestones. Milestone payments for the first therapeutic indication would be $100,000 for first dosing in a Phase 1 clinical trial, $200,000 for first dosing in a Phase 2 clinical trial, $350,000 for first dosing in a Phase 3 clinical trial, $500,000 for regulatory marketing approval and $5,000,000 upon achieving a cumulative $500,000,000 of Licensed Product sales; the Company would also pay another $500,000 milestone payment for any additional regulatory marketing approval for each additional therapeutic (or diagnostic) indication. The Company also must pay ULRF shortfall payments if the total amounts actually paid with respect to royalties and non-royalty sublicensee income for any year is less than the applicable annual minimum (ranging from $10,000 to $50,000) for such year.
| 17 |
Sponsored research expenses related to these agreements for the three months ended March 31, 2022 and 2021 were approximately $87,000 and $62,000, respectively, and these amounts are recorded in research and development expenses in the condensed consolidated statements of operations. License costs were approximately $55,000 and $36,000 related to these agreements for the three months ended March 31, 2022 and 2021, respectively, and are included in research and development expenses in the condensed consolidated statements of operations.
In March 2019, the Company entered into a sponsored research agreement and an option for a license agreement with ULRF for development of several small-molecule RAS interaction inhibitor drug candidates. Under the terms of this agreement, the Company agreed to reimburse ULRF for sponsored research expenses of up to $693,000 for this program. In February 2021 and March 2022, the Company extended the term of this agreement until January 2023 and increased the amount that the Company will reimburse ULRF for sponsored research expenses to approximately $2.7 million. In July 2020, the Company entered into an exclusive license agreement with ULRF for RAS interaction inhibitor drug candidates. Under the agreement, the Company will take over development, regulatory approval and commercialization of the candidates from ULRF and is responsible for maintenance of the related intellectual property portfolio. In return, ULRF received approximately $112,000 for an upfront license fee and reimbursement of prior patent costs. In addition, the Company has agreed to pay ULRF (i) royalties, on patent-covered net sales associated with the commercialization, of 4% (on net sales up to a cumulative $250,000,000) or 5% (on net sales above a cumulative $250,000,000), until expiration of the licensed patent, and 2.5% (on net sales for any sales not covered by Licensed Patents), (ii) 30% to 50% of any non-royalty sublicensee income received (50% for sublicenses granted in the first two years of the ULRF license agreement, 40% for sublicenses granted in the third or fourth years of the ULRF license agreement, and 30% for sublicenses granted in the fifth year of the ULRF license agreement or thereafter), (iii) reimbursements for ongoing costs associated with the preparation, filing, prosecution and maintenance of licensed patents, incurred prior to July 2020, and (iv) payments ranging from $50,000 to $5,000,000 upon the achievement of certain regulatory and commercial milestones. Milestone payments for the first therapeutic indication would be $50,000 for first dosing in a Phase 1 clinical trial, $100,000 for first dosing in a Phase 2 clinical trial, $150,000 for first dosing in a Phase 3 clinical trial, $300,000 for regulatory marketing approval and $5,000,000 upon achieving a cumulative $500,000,000 of Licensed Product sales. The Company also must pay ULRF shortfall payments if the total amounts actually paid with respect to royalties and non-royalty sublicensee income for any year is less than the applicable annual minimum (ranging from $20,000 to $100,000) for such year.
Sponsored research expenses related to these agreements for the three months ended March 31, 2022 and 2021 were approximately $184,000 and $107,000, respectively, and are recorded in research and development expenses in the condensed consolidated statements of operations. License costs related to these agreements for the three months ended March 31, 2022 and 2021 were approximately $2,000 and $46,000, respectively, and are included in research and development expenses in the condensed consolidated statements of operations.
In June 2020, the Company entered into an exclusive license agreement with ULRF for its intellectual property in the use of QN-165 as a treatment for COVID-19. Under the agreement, the Company will take over development, regulatory approval and commercialization of the compound (for such use) from ULRF and is responsible for maintenance of the related intellectual property portfolio. In return, ULRF received approximately $24,000 for an upfront license fee and reimbursement of prior patent costs. In addition, the Company was required to enter into a separate sponsored research agreement with ULRF (for QN-165 as a treatment for COVID-19) for at least $250,000. In November 2020, the Company executed a sponsored research agreement with ULRF (for QN-165 as a treatment for COVID-19) supporting up to approximately $430,000 in research which satisfied this requirement. This sponsored research agreement expired in November 2021.
In addition, the Company has agreed to pay ULRF (i) royalties, on patent-covered net sales associated with the commercialization of QN-165 as a treatment for COVID-19, of 4% (on net sales up to a cumulative $250,000,000) or 5% (on net sales above a cumulative $250,000,000), until expiration of the licensed patents, and 2.5% (on net sales for any sales not covered by Licensed Patents), (ii) 30% to 50% of any non-royalty sublicensee income received (50% for sublicenses granted in the first two years of the ULRF license agreement, 40% for sublicenses granted in the third or fourth years of the ULRF license agreement, and 30% for sublicenses granted in the fifth year of the ULRF license agreement or thereafter), (iii) reimbursements for ongoing costs associated with the preparation, filing, prosecution and maintenance of licensed patents, incurred prior to June 2020, and (iv) payments ranging from $50,000 to $5,000,000 upon the achievement of certain regulatory and commercial milestones. Milestone payments would be $50,000 for first dosing in a Phase 1 clinical trial, $100,000 for first dosing in a Phase 2 clinical trial, $150,000 for first dosing in a Phase 3 clinical trial, $300,000 for regulatory marketing approval and $5,000,000 upon achieving a cumulative $500,000,000 of Licensed Product sales. The Company also must pay ULRF shortfall payments if the total amounts actually paid with respect to royalties and non-royalty sublicensee income for any year is less than the applicable annual minimum (ranging from $5,000 to $50,000) for such year.
Sponsored research expenses related to these agreements for the three months ended March 31, 2022 and 2021 were $0 and approximately $69,000, respectively, and are recorded in research and development expenses in the condensed consolidated statements of operations. There were no license costs related to these agreements for the three months ended March 31, 2022 and 2021.
| 18 |
Advanced Cancer Therapeutics
In December 2018, the Company entered into a license agreement with Advanced Cancer Therapeutics, LLC (“ACT”), granting the Company exclusive rights to develop and commercialize QN-165, an aptamer-based drug candidate. In return, ACT received a $25,000 convertible promissory note in payment of an upfront license fee, which was subsequently converted into the Company’s common stock. In addition, the Company agreed to pay ACT (i) royalties, on net sales associated with the commercialization of QN-165, of 2% (only if patent-covered and only on net sales above a cumulative $3,000,000) or 1% (if not patent-covered, but only on net sales above a cumulative $3,000,000), until the 15th anniversary of the ACT license agreement and (ii) milestone payments of $100,000 for the Company raising a cumulative total of $2,000,000 in new equity financing after the date of the ACT license agreement, $100,000 upon any first QN-165-based licensed product receiving the CE Mark or similar FDA status, and $500,000 upon cumulative worldwide QN-165-based licensed product net sales reaching $3,000,000. For the three months ended March 31, 2022 and 2021, there were license costs of $0 and approximately $2,000, respectively, related to this agreement which are included in research and development expenses in the condensed consolidated statements of operations.
Prediction Biosciences
In November 2015, the Company entered into a long-term development and supply agreement with Prediction Biosciences SAS to develop and manufacture diagnostic tests for use in the stroke point-of-care market. The Company recognizes development revenue and product sales over the performance period of the contract. For both the three months ended March 31, 2022 and 2021, there was no collaborative research revenue related to this agreement.
Sekisui Diagnostics
In March 2018, the Company extended a strategic partnership entered into in May 2016 with Sekisui Diagnostics, LLC (“Sekisui”). The Company appointed Sekisui as its diagnostics commercial partner and exclusive worldwide distributor with the exception of certain customer accounts retained by Qualigen. Sekisui’s distribution arrangement expired on March 31, 2022. The agreement contains a right of first refusal for Sekisui against any potential acquisition of the Company which expired on March 31, 2022.
There were product sales to Sekisui of approximately $403,000 and $1,017,000, respectively, for the three months ended March 31, 2022 and 2021, related to this agreement.
Yi Xin
In October 2020, the Company entered into a Technology Transfer Agreement with Yi Xin Zhen Duan Jishu (Suzhou) Ltd. (“Yi Xin”), of Suzhou, China, for Yi Xin to develop, manufacture and sell new generations of diagnostic test systems based on the Company’s core FastPack technology. In addition, the Technology Transfer Agreement authorized Yi Xin to manufacture and sell the Company’s current generations of FastPack System diagnostic products (1.0, IP and PRO) in China.
The Company will receive low- to mid-single-digit royalties on any future new-generations and current-generations product sales by Yi Xin. The Company recognized $0 and approximately $38,000 in product sales and $0 and approximately $479,000 in license revenue included in the statement of operations for the three months ended March 31, 2022 and 2021, respectively. The Company provided technology transfer and patent/know-how license rights to facilitate Yi Xin’s development and commercialization.
The Company gave Yi Xin the exclusive rights for China – which is a market the Company has not otherwise entered – both for Yi Xin’s new generations of FastPack-based products and for Yi Xin-manufactured versions of the Company’s existing FastPack product lines. Yi Xin will also have the right to sell its new generations of FastPack-based diagnostic test systems throughout the world (but not to or toward current customers of the Company’s existing generations of FastPack products). After March 31, 2022, Yi Xin has the right to sell Yi Xin-manufactured versions of existing FastPack 1.0, IP and PRO product lines worldwide (other than in the United States and other than to or toward current non-U.S. customers of those products), as well as the right to buy Company-manufactured FastPack 1.0, IP and PRO products from the Company at distributor prices for resale in and for the United States (but not to or toward current U.S. customers of those products); the Company did not license Yi Xin to sell in the United States market any Yi Xin-manufactured versions of those legacy FastPack 1.0, IP and PRO product lines. In the Technology Transfer Agreement, the Company also confirmed that it would not, after March 31, 2022, seek new FastPack customers outside the United States.
STA Pharmaceutical
In November 2020, the Company entered into a contract with STA Pharmaceutical Co., Ltd., a subsidiary of WuXi AppTec, for GMP production of QN-165, which was the Company’s lead drug candidate for the treatment of COVID-19 and other viral diseases, for potential clinical trials in 2021.
Research and development expenses related to this agreement for the three months ended March 31, 2022 and 2021 were approximately $9,000 and $1.1 million, respectively, and are recorded in research and development expenses in the condensed consolidated statements of operations.
| 19 |
UCL Business Limited
In January 2022, the Company entered into a License Agreement with UCL Business Limited to obtain an exclusive worldwide in-license of a genomic quadruplex (G4)-selective transcription inhibitor drug development program which had been developed at University College London, including lead and back-up compounds, preclinical data and a patent estate. (UCL Business Limited is the commercialization company for University College London.) The program’s lead compound is now being developed at Qualigen under the name QN-302 as a candidate for treatment for pancreatic ductal adenocarcinoma (PDAC), which represents the vast majority of pancreatic cancers. The License Agreement requires a $150,000 upfront payment, reimbursement of past patent prosecution expenses (approximately $160,000), and (if and when applicable) tiered royalty payments in the low to mid-single digits, clinical/regulatory/sales milestone payments and a percentage of any non-royalty sublicensing consideration paid to Qualigen.
For the three months ended March 31, 2022 and 2021, there were license costs of approximately $310,000 and $0, respectively, related to this agreement which are included in research and development expenses in the condensed consolidated statements of operations.
NOTE 11 — STOCKHOLDERS’ EQUITY
As of March 31, 2022 and December 31, 2021, the Company had two classes of capital stock: common stock and Series Alpha convertible preferred stock.
Common Stock
Holders of common stock generally vote as a class with the holders of the preferred stock and are entitled to one vote for each share held. Subject to the rights of the holders of the preferred stock to receive preferential dividends, the holders of common stock are entitled to receive dividends when and if declared by the Board of Directors. Following payment of the liquidation preference of the preferred stock, as of March 31, 2022 any remaining assets would be distributed ratably among the holders of the common stock and, on an as-if-converted basis, the holders of Series Alpha convertible preferred stock upon liquidation, dissolution or winding up of the affairs of the Company. The holders of common stock have no preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions.
At March 31, 2022, the Company has reserved shares of authorized but unissued common stock for possible future issuance.
At March 31, 2022, shares were reserved in connection with the following:
| Exercise of issued and future grants of stock options | 4,864,023 | |||
| Exercise of stock warrants | 9,816,032 | |||
| Total | 14,680,055 |
Series Alpha Convertible Preferred Stock
As of March 31, 2022, and December 31, 2021, there were shares of Series Alpha convertible preferred stock outstanding.
Stock Options and Warrants
The Company recognizes all compensatory share-based payments as compensation expense over the service period, which is generally the vesting period.
In April 2020, the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the granting of incentive or non statutory common stock options to qualified employees, officers, directors, consultants and other service providers. At March 31, 2022 and December 31, 2021 there were and outstanding options, respectively, under the 2020 Plan and on those dates there were and unused 2020 Plan shares available, respectively, for future grant. The shares available for future grant reflect a 2020 Plan amendment approved by the Company’s stockholders on August 9, 2021 where the number of shares of common stock available for issuance under the 2020 Plan was increased by .
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| Shares | Weighted– Average Exercise Price | Range of Exercise Price | Weighted– Average Remaining Life (Years) | |||||||||||||
| Total outstanding – December 31, 2021 | 4,841,856 | $ | 6.07 | $ | — $ | |||||||||||
| Granted | 25,000 | 1.05 | ||||||||||||||
| Expired | — | |||||||||||||||
| Forfeited | (2,833 | ) | 3.00 | - | — | |||||||||||
| Total outstanding – March 31, 2022 | 4,864,023 | $ | 6.05 | $ | — $ | |||||||||||
| Exercisable (vested) | 1,417,195 | $ | 10.83 | $ | — $ | |||||||||||
| Non-Exercisable (non-vested) | 3,446,828 | $ | 4.08 | $ | — $ | 8.57 | ||||||||||
There was approximately $ million of compensation cost related to outstanding options for each of the three months ended March 31, 2022 and 2021. As of March 31, 2022, there was approximately $ million of total unrecognized compensation cost related to unvested stock-based compensation arrangements. This cost is expected to be recognized over a weighted average period of years.
| Shares | Weighted– Average Exercise Price | Range of Exercise Price | Weighted– Average Remaining Life (Years) | |||||||||||||
| Total outstanding – December 31, 2020 | 4,011,356 | $ | 7.05 | $ | - $ | |||||||||||
| Granted | 27,000 | 3.29 | ||||||||||||||
| Expired | — | — | ||||||||||||||
| Forfeited | (4,500 | ) | 3.68 | — | ||||||||||||
| Total outstanding – March 31, 2021 | 4,033,856 | $ | 7.03 | $ | - $ | |||||||||||
| Exercisable (vested) | 108,856 | $ | 81.38 | $ | — $ | |||||||||||
| Non-Exercisable (non-vested) | 3,925,000 | $ | 4.96 | $ | — $ | 9.23 | ||||||||||
The options awarded under the 2020 Plan will vest as determined by the Board of Directors but will not exceed a ten-year period. The weighted average grant date fair value per share of options granted during the three months ended March 31, 2022 was $.
Fair Value of Equity Awards
The Company utilizes the Black-Scholes option pricing model to value awards under its Plans. Key valuation assumptions include:
| ● | Expected dividend yield. The expected dividend is assumed to be zero, as the Company has never paid dividends and has no current plans to pay any dividends on the Company’s common stock. |
| ● | Expected stock-price volatility. The Company’s expected volatility is derived from the average historical volatilities of publicly traded companies within the Company’s industry that the Company considers to be comparable to the Company’s business over a period approximately equal to the expected term. |
| ● | Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term. |
| ● | Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore, the Company estimates the expected term by using the simplified method provided by the Securities and Exchange Commission. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options. |
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For the three months ended March 31,
| ||||||||
| 2022 | 2021 | |||||||
| Expected dividend yield | 0.00 | % | 0.00 | % | ||||
| Expected stock-price volatility | 102 | % | 102 | % | ||||
| Risk-free interest rate | % — | % | % — | % | ||||
| Expected average term of options (in years) | ||||||||
| Stock price | $ | $ | ||||||
For the three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| General and administrative | $ | 1,113,384 | $ | 1,092,228 | ||||
| Research and development | 153,782 | 169,895 | ||||||
| Total | $ | 1,267,166 | $ | 1,262,123 | ||||
Equity Classified Compensatory Warrants
In connection with the $4.0 million equity capital raise as part of the May 2020 reverse recapitalization transaction, the Company issued common stock warrants to an advisor and its designees for the purchase of 811,431 shares of the Company’s common stock at an exercise price of $1.11 per share. The issuance cost of these warrants was charged to additional paid-in capital, and did not result in expense on the Company’s statements of operations.
In addition, various service providers hold equity classified compensatory warrants issued in 2017 and earlier (originally exercisable to purchase Series C convertible preferred stock, and now instead exercisable to purchase common stock) for the purchase of 668,024 shares of Company common stock at a weighted average exercise price of $2.34 per share. These are to be differentiated from the Series C Warrants described in Note 7.
During the year ended December 31, 2021, the Company issued equity classified compensatory warrants to a service provider for the purchase of 600,000 shares of Company common stock at an exercise price of $1.32 per share. The fair value issuance cost of approximately $0.3 million using the Black-Scholes options pricing model for these warrants was charged to general and administrative expenses in the Company’s Consolidated Statements of Operations. In April 2022 these warrants were subsequently modified (see Note 13).
No compensatory warrants were issued during the three months ended March 31, 2022.
The following table summarizes the activity in the common stock equity classified compensatory warrants for the three months ended March 31, 2022:
| Common Stock | ||||||||||||||||
| Shares | Weighted– Average Exercise Price | Range of Exercise Price | Weighted– Average Remaining Life (Years) | |||||||||||||
| Total outstanding – December 31, 2021 | 1,790,648 | $ | 1.52 | $ | 1.11 — $2.54 | |||||||||||
| Granted to advisor and its designees | ||||||||||||||||
| Exercised | ||||||||||||||||
| Expired | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Total outstanding – March 31, 2022 | 1,790,648 | $ | 1.52 | $ | 1.11 — 2.54 | |||||||||||
| Exercisable | 1,790,648 | $ | 1.52 | $ | 1.11 — $2.54 | |||||||||||
| Non-Exercisable | $ | $ | — | |||||||||||||
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The following table summarizes the activity in the common stock equity classified compensatory warrants for the three months ended March 31, 2021:
| Common Stock | ||||||||||||||||
| Shares | Weighted– Average Exercise Price | Range of Exercise Price | Weighted– Average Remaining Life (Years) | |||||||||||||
| Total outstanding – December 31, 2020 | 1,294,217 | $ | 1.66 | |||||||||||||
| Granted | ||||||||||||||||
| Exercised | (38,390 | ) | 2.09 | |||||||||||||
| Expired | ||||||||||||||||
| Forfeited | (65,179 | ) | 2.07 | |||||||||||||
| Total outstanding – March 31, 2021 | 1,190,648 | $ | 1.61 | |||||||||||||
| Exercisable | 1,187,052 | $ | 1.60 | $ | 1.11 — $2.54 | |||||||||||
| Non-Exercisable | 3,596 | $ | 2.54 | $ | 2.54 | |||||||||||
There were no compensation costs related to outstanding equity classified compensatory warrants for the three months ended March 31, 2022 or for the three months ended March 31, 2021. As of March 31, 2022 and 2021, there were unrecognized compensation costs related to nonvested equity classified compensatory warrants.
Noncompensatory Equity Classified Warrants
In May 2020, as a commitment fee, the Company issued noncompensatory equity classified warrants to an investor for the purchase of 270,478 shares of Company common stock at an exercise price of $1.11 per share (of which warrants for 200,000 shares were subsequently exercised in December 2020). In July 2020 the Company issued noncompensatory equity classified warrants to such investor for the purchase of 780,198 shares of Company common stock at an exercise price of $0.001 per share (which were subsequently exercised in July 2020), and 1,920,678 shares of Company common stock at an exercise price of $5.25 per share. In August 2020 the Company issued noncompensatory equity classified warrants to such investor for the purchase of 1,287,829 shares of Company common stock at an exercise price of $6.00 per share. Lastly, in December 2020, the Company issued noncompensatory equity classified warrants to such investor for the purchase of 1,000,000 shares of Company common stock at an exercise price of $0.01 per share (which were exercised in February 2021) and 2,191,010 shares of Company common stock at an exercise price of $ per share. No noncompensatory equity classified warrants were issued during the three months ended March 31, 2022.
During the year ended December 31, 2021, with the exception of the warrants to purchase 270,478 shares of the Company’s common stock at an exercise price of $1.11 per share, the exercise prices of all outstanding warrants to purchase a total of 5,399,517 shares of the Company’s common stock were all modified to an exercise price of $2.00 per share on November 29, 2021 and each of their remaining terms extended by six months. The fair value of the modification cost of these warrant modifications of approximately $2.3 million was charged to additional paid-in capital and did not result in expense on the Company’s Consolidated Statements of Operations.
The following table summarizes the noncompensatory equity classified warrant activity for the three months ended March 31, 2022:
| Common Stock | ||||||||||||||||
| Shares | Weighted– Average Exercise Price | Range of Exercise Price | Weighted– Average Remaining Life (Years) | |||||||||||||
| Total outstanding – December 31, 2021 | 5,549,137 | $ | 2.01 | |||||||||||||
| Legacy Ritter warrants | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Expired | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Total outstanding – March 31, 2022 | 5,549,137 | $ | 2.01 | |||||||||||||
| Exercisable | 5,549,137 | $ | 2.01 | $ | 1.11 — $3.77 | |||||||||||
| Non-Exercisable | $ | $ | — | |||||||||||||
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NOTE 12 - QUARTERLY FINANCIAL DATA (UNAUDITED)
As disclosed in 2021 Annual Report, our management identified an error in the previously issued March 31, 2021, June 30, 2021 and September 30, 2021 unaudited interim condensed consolidated financial statements in which the fair value of its exercised liability classified warrants had been inadvertently excluded from reclassification into shareholders’ equity. All financial information contained in the accompanying notes to these condensed consolidated financial statements has been revised to reflect the correction of this error as shown in the table below.
For the Quarter Ended March 31, 2021 | ||||||||
| As reported | Corrected | |||||||
| Gain on change in fair value of warrant liabilities | $ | (2,122,900 | ) | $ | (552,808 | ) | ||
| Net loss | $ | (3,672,627 | ) | $ | (5,242,719 | ) | ||
| Net loss per common share | $ | (0.13 | ) | $ | (0.19 | ) | ||
NOTE 13 — SUBSEQUENT EVENTS
On April 25, 2022, the Company amended the terms of outstanding warrants to purchase 600,000 shares of the Company’s common stock previously issued to GreenBlock, LLC on December 3, 2021 (300,000 of which had been transferred to an individual affiliated with GreenBlock, LLC), to reduce the exercise price of the warrants to $0.60 per share and extend the expiration date to September 14, 2023.
On April 29, 2022, the Company entered into a Series B Preferred Share Purchase Agreement (the “Series B Purchase Agreement”) with NanoSynex Ltd., a company established under the laws of the State of Israel (“NanoSynex”), pursuant to which it will acquire newly authorized Series B preferred shares of NanoSynex, nominal value NIS per share, for a total purchase price of $600,000, subject to certain closing conditions described in the Series B Purchase Agreement. As a condition to the Series B Purchase Agreement, the Company has agreed to, among other things, enter into a Master Agreement for the Operational and Technological Funding of NanoSynex (the “Funding Agreement”), pursuant to which the Company will agree to fund NanoSynex up to an aggregate of approximately $10.4 million over the following three years, subject to NanoSynex’s achievement of certain performance milestones specified in the Funding Agreement and the satisfaction of other terms and conditions described in the Funding Agreement.
Also on April 29, 2022, the Company entered into a Share Purchase Agreement (the “Series A-1 Purchase Agreement”) with Alpha Capital Anstalt (“Alpha”), pursuant to which it will acquire Series A-1 preferred shares, nominal value NIS each, of NanoSynex from Alpha in exchange for 3,500,000 shares of Company common stock and pre-funded warrants to purchase 2,432,203 shares of Company common stock, subject to certain closing conditions described in the Series A-1 Purchase Agreement.
Subject to the satisfaction of the applicable closing conditions set forth in the Series B Purchase Agreement and Series A-1 Purchase Agreement, the Company will acquire an approximate 53% interest in the voting securities of NanoSynex. The Company believes the NanoSynex share purchases result in a business combination which will be accounted for during the three and six months ended June 30, 2022, respectively.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and the audited financial statements and notes thereto as of and for the twelve months ended December 31, 2021, which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022 (as amended, the “2021 Annual Report.) As used in this Quarterly Report, unless the context suggests otherwise, “we,” “us,” “our,” or “Qualigen” refer to Qualigen Therapeutics, Inc. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.
Cautionary Note Regarding Forward Looking Statements
This Quarterly Report contains forward-looking statements by Qualigen Therapeutics, Inc. that involve risks and uncertainties and reflect our judgment as of the date of this Quarterly Report. These statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Such forward-looking statements may relate to, among other things, potential future development, testing and launch of products and product candidates. Actual events or results may differ from our expectations due to a number of factors.
These forward-looking statements include, but are not limited to, statements about:
| ● | our ability to successfully develop any drugs or therapeutic devices; | |
| ● | our ability to progress our drug candidates or therapeutic devices through preclinical and clinical development; | |
| ● | our ability to obtain the requisite regulatory approvals for our clinical trials and to begin and complete such trials according to any projected timeline; | |
| ● | our ability to complete enrollment in our clinical trials as contemplated by any projected timeline; | |
| ● | the likelihood that future clinical trial data will be favorable or that such trials will confirm any improvements over other products or lack negative impacts; | |
| ● | our ability to successfully commercialize any drugs or therapeutic devices; | |
| ● | our ability to procure or earn sufficient working capital to complete the development, testing and launch of our prospective therapeutic products; | |
| ● | the likelihood that patents will issue on our owned and in-licensed patent applications; | |
| ● | our ability to protect our intellectual property; | |
| ● | our ability to compete; | |
| ● | our ability to maintain or expand market demand and/or market share for our diagnostic products generally, particularly in light of COVID-19-related deferral of patients’ physician-office visits and in view of FastPack reimbursement pricing challenges; and | |
| ● | our ability to maintain our diagnostic sales and marketing engine without interruption following the expiration of our distribution agreement with Sekisui. |
By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and healthcare, regulatory and scientific developments and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. These risks and uncertainties include risks related to our financial position and our ability to raise additional capital as needed to fund our operations and product development; risks related to the initiation, cost, timing, progress and results of current and future research and development programs, preclinical studies and clinical trials and our ability to obtain and maintain regulatory approvals; risks related to our reliance on third party suppliers and manufacturers; risks related to market acceptance of our products and competition; risks related to the ongoing COVID-19 pandemic and the war in Ukraine, including instability in the global credit markets and supply chain disruptions. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent in some future periods with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in other future periods. Any forward-looking statement that we make in this Quarterly Report speaks only as of the date of this Quarterly Report, and we disclaim any intent or obligation to update these forward-looking statements beyond the date of this Quarterly Report, except as required by law. This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
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Future filings with the SEC, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may also contain forward-looking statements. Because such statements include risks and uncertainties, many of which are beyond our control, actual results may differ materially from those expressed or implied by such forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.
Overview
We are a diversified life sciences company focused on developing treatments for adult and pediatric cancers with potential for Orphan Drug designation, while also commercializing diagnostics. Our cancer therapeutics pipeline includes QN-302, QN-247 and RAS-F. Our investigational QN-302 compound is a small molecule G4 selective transcription inhibitor with strong binding affinity to G4s prevalent in cancer cells. Such binding could, by stabilizing the G4s against “unwinding,” help inhibit cancer cell proliferation. QN-247 is a DNA coated gold nanoparticle cancer drug candidate that has the potential to target various types of cancer; the nanoparticle conjugate technology is similar to the core nanoparticle coating technology used in our blood-testing diagnostic products. The foundational aptamer of QN-247 is QN-165 (formerly referred to as AS1411), which the Company has deprioritized as a drug candidate for treating COVID-19 and other viral-based infectious diseases. RAS-F is a family of RAS oncogene protein-protein interaction inhibitor small molecules for preventing mutated RAS genes’ proteins from binding to their effector proteins; preventing this binding could stop tumor growth, especially in RAS-driven tumors such as pancreatic, colorectal and lung cancers. We are also identifying strategic partnering opportunities for STARS, a DNA/RNA-based therapeutic device product concept for removing precisely targeted tumor-produced and viral compounds from circulating blood.
Our FastPack System diagnostic instruments and test kits are sold commercially primarily in the United States, as well as certain European countries. The FastPack System menu includes a rapid, highly accurate immunoassay diagnostic testing system for cancer, men’s health, hormone function, and vitamin D status. We provide analyzers to our customers (physician offices, clinics and small hospitals) at low cost in order to increase sales volumes of higher-margin test kits. Prior to March 31, 2022, most of our FastPack product sales were through our partner Sekisui Diagnostics, LLC (“Sekisui”) pursuant to a distribution agreement, but we maintained direct distribution for certain house accounts, including selling our total testosterone test kits to Low T Center, Inc. (“Low T”), the largest men’s health group in the United States, with 40 locations. The distribution agreement with Sekisui expired on March 31, 2022, at which time the services provided by Sekisui reverted to us and as of April 1, 2022 we recognize 100% of the revenue from the sales of our FastPack diagnostic instruments and test kits. We have licensed and technology-transferred our FastPack System technology to Yi Xin Zhen Duan Jishu (Suzhou) Ltd. for the China diagnostics market and other markets outside of the United States in which the Company does not currently sell.
Our condensed consolidated financial statements do not separate out our diagnostics-related activities and our therapeutics-related activities. Although to date all our reported revenue is diagnostics-related, our reported expenses represent the total of our therapeutics-related and diagnostics-related expenses.
Distribution and Development Agreement with Sekisui
In May 2016, through our wholly-owned diagnostics subsidiary Qualigen, Inc., we entered into a Distribution and Development Agreement (the “Distribution Agreement”) with Sekisui. Under the Distribution Agreement, Sekisui served as the exclusive worldwide distributor for FastPack products (although we retained certain specific accounts for direct transactions). Sekisui’s exclusive distribution arrangements expired on March 31, 2022.
Under the Distribution Agreement, we began development of a proposed “FastPack 2.0” product line for a new whole blood vitamin D assay, which if successfully introduced by us would have been distributed by Sekisui. Between May 2016 and January 2018, Sekisui paid us a total of approximately $5.5 million upon the achievement of specified development milestones related to this product line.
We conducted a clinical trial of FastPack 2.0 in March 2019, and determined in May 2019 that it was uncertain whether the results of the trial would enable the test to receive FDA approval. As a result, we discontinued our FastPack 2.0 project with Sekisui. Currently, no further FastPack 2.0 analyzer or test development is ongoing, and we have licensed and transferred our FastPack 2.0 technology to Yi Xin Zhen Duan Jishu (Suzhou) Ltd. for them to further develop and commercialize as described below.
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Technology Transfer Agreement with Yi Xin
Through our wholly-owned diagnostics subsidiary Qualigen, Inc., we entered into a Technology Transfer Agreement dated as of October 7, 2020 with Yi Xin Zhen Duan Jishu (Suzhou) Ltd. (“Yi Xin”), of Suzhou, China, for Yi Xin to develop, manufacture and sell new generations of diagnostic test systems based on our core FastPack technology. In addition, the Technology Transfer Agreement authorized Yi Xin to manufacture and sell our current generations of FastPack System diagnostic products (1.0, IP and PRO) in China.
Under the Technology Transfer Agreement, we received net cash payments of $670,000, of which we recognized approximately $38,000 in product sales and $632,000 in license revenue during 2021. In addition, we will receive low- to mid-single-digit royalties on any future new-generations and current-generations product sales by Yi Xin. There were no product sales or license revenue for the three months ended March 31, 2022. We recognized approximately $38,000 in product sales and $479,000 in license revenue included in the condensed consolidated statement of operations for the three months ended March 31, 2021.
We provided technology transfer and patent/know-how license rights to facilitate Yi Xin’s development and commercialization.
In the Technology Transfer Agreement (as amended in August 2021), we gave Yi Xin the exclusive rights for China – which is a market we have not otherwise entered – both for Yi Xin’s new generations of FastPack-based products and for Yi Xin-manufactured versions of our existing FastPack product lines. Yi Xin also has the right to sell its new generations of FastPack-based diagnostic test systems throughout the world (but not to or toward current customers of our existing generations of FastPack products). In addition, after March 31, 2022, Yi Xin has the right to sell Yi Xin-manufactured versions of existing FastPack 1.0, IP and PRO product lines worldwide (other than in the United States and other than to or toward current non-US customers of those products). Also, after March 31, 2022, Yi Xin has the right to buy Qualigen-manufactured FastPack 1.0, IP and PRO products from us at distributor prices for resale in and for the United States (but not to or toward current US customers of those products); we did not license Yi Xin to sell in the United States market any Yi Xin-manufactured versions of those legacy FastPack product lines, even after March 31, 2022.
In the Technology Transfer Agreement, we also confirmed that we would not, after the March 31, 2022 expiration of the Sekisui Distribution Agreement, seek new FastPack customers outside the United States.
Yi Xin is a newly-formed company and is subject to many risks. There can be no assurance that Yi Xin will successfully commercialize any products or that we will receive any royalties from Yi Xin.
Warrant Liabilities
In 2004, Qualigen, Inc. issued a series of Series C preferred stock warrants to investors and brokers in connection with a private placement. These warrants were subsequently extended and survived the May 2020 reverse recapitalization transaction and are now exercisable for Qualigen common stock. These warrants contained a provision that if Qualigen, Inc. issued shares (except in certain defined scenarios) at a price below the warrants’ exercise price, the exercise price would be re-set to such new price and the number of shares underlying the warrants would be increased in the same proportion as the exercise price decrease. For accounting purposes, this provision gives rise to “warrant liabilities” (even though there is not any “liability” in the sense that we would be obligated to pay any cash sum to anyone). Accounting principles generally accepted in the United States (“U.S. GAAP”) require us to recognize the fair value of these warrants as warrant liabilities on our condensed consolidated balance sheets and to reflect period-to-period changes in the fair value of the warrant liabilities on our statements of operations.
The size of these warrant liabilities at March 31, 2022 was $1.0 million, and the change in fair value was $0.7 million for the three months ended March 31, 2022. Because fair value will be determined each quarter on a “mark-to-market” basis, this item will usually result in significant variability in our future quarterly and annual statements of operations and condensed consolidated balance sheets based on changes in our public market common stock price. Pursuant to U.S. GAAP, a quarter-to-quarter increase in our stock price would result in a (possibly quite large) increase in the fair value of the warrant liabilities and a quarter-to-quarter decrease in our stock price would result in a (possibly quite large) decrease in the fair value of the warrant liabilities. There were 2,476,251 and 2,481,614 of these warrants outstanding at March 31, 2022 and December 31, 2021, respectively.
COVID-19 Update
The COVID-19 pandemic has had a dramatic impact on businesses globally and our business as well. Our sales of diagnostic products fell significantly during 2020 and our net loss increased significantly, as deferral of patients’ non-emergency visits to physician offices, clinics and small hospitals sharply reduced demand for FastPack tests. Since then we have experienced some recovery in demand. The severity and duration of the pandemic and economic repercussions of the virus and government actions taken in response to the pandemic remain uncertain and will ultimately depend on many factors, including the speed of global dissemination and effectiveness of the vaccination and containment efforts throughout the world, the duration and spread of the virus, as well as seasonality, variants or new outbreaks.
In the United States, federal, state, and local government directives and policies have been put in place throughout the course of the pandemic to manage public health concerns and address the economic impacts of the pandemic, including reduced business activity and overall uncertainty presented by this new healthcare challenge. Similar actions have been taken by governments around the world. Our facilities could be required to temporarily curtail production levels or temporarily cease operations based on government mandates or as a result of the pandemic. To mitigate risks, we continue to evaluate the extent to which COVID-19 may impact our business and operations and adjust risk mitigation planning and business continuity activities as needed.
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Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:
For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| REVENUES | ||||||||
| Net product sales | $ | 722,029 | $ | 1,420,842 | ||||
| License revenue | — | 478,654 | ||||||
| Total revenues | 722,029 | 1,899,496 | ||||||
| EXPENSES | ||||||||
| Cost of product sales | 828,848 | 1,202,479 | ||||||
| General and administrative | 2,898,751 | 2,873,939 | ||||||
| Research and development | 1,864,745 | 3,499,373 | ||||||
| Sales and marketing | 138,323 | 136,587 | ||||||
| Total expenses | 5,730,667 | 7,712,378 | ||||||
| LOSS FROM OPERATIONS | (5,008,638 | ) | (5,812,882 | ) | ||||
| OTHER (INCOME), NET | ||||||||
| Gain on change in fair value of warrant liabilities | (683,242 | ) | (552,808 | ) | ||||
| Interest income, net | (6,309 | ) | (17,343 | ) | ||||
| Other income, net | (36 | ) | (543 | ) | ||||
| Total other income, net | (689,587 | ) | (570,693 | ) | ||||
| LOSS BEFORE PROVISION FOR INCOME TAXES | (4,319,051 | ) | (5,242,189 | ) | ||||
| PROVISION FOR INCOME TAXES | 736 | 530 | ||||||
| NET LOSS | $ | (4,319,787 | ) | $ | (5,242,719 | ) | ||
Revenues
Net product sales
Net product sales are primarily generated from sales of diagnostic tests. Net product sales during the three-month periods ended March 31, 2022 and 2021 were approximately $0.7 million and $1.4 million, respectively, representing a decrease of approximately $0.7 million, or 49%. This decline was due to the termination of the Sekisui Distribution Agreement which caused Sekisui to reduce its purchases from us during the quarter as it sold off its remaining inventory prior to termination of the agreement on March 31, 2022.
License Revenue
There was no license revenue for three months ended March 31, 2022. During the three months ended March 31, 2021 there was approximately $0.5 million, due to the recognition of revenue from Yi Xin under the Technology Transfer Agreement.
Expenses
Cost of Product Sales
Cost of product sales decreased during the three months ended March 31, 2022, to $0.8 million, or 115% of net product sales, compared to approximately $1.2 million, or 85% of net product sales, during the three months ended March 31, 2021. This decrease of $0.4 million, and increase as a percentage of sales was due to a reduction in production volumes compared to the prior period due to the termination of the Sekisui Distribution Agreement which caused negative gross profit, as Sekisui sold off its remaining inventory during the three months ended March 31, 2022.
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General and Administrative Expenses
General and administrative expenses were approximately $2.9 million for both the three months ended March 31, 2022 and 2021. For the three months ended March 31, 2022, payroll related expenses increased by $0.2 million and legal fees increased by $0.2 million, offset by a decrease in consulting fees of $0.4 million compared to the three months ended March 31, 2021.
Research and Development Costs
Research and development costs include therapeutic and diagnostic research and product development costs. Research and development costs decreased from $3.5 million for the three months ended March 31, 2021 to $1.9 million for the three months ended March 31, 2022. Of the $1.9 million of research and development costs for the three months ended March 31, 2022, $1.6 million (85%) was attributable to therapeutics and $0.3 million (15%) was attributable to diagnostics. Of the $3.5 million of research and development costs for the three months ended March 31, 2021, $3.2 million (91%) was attributable to therapeutics and $0.3 million (9%) was attributable to diagnostics.
The decrease in therapeutics research and development costs during the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to a $2.6 million decrease in pre-clinical research costs related to the potential application of QN-165 for the treatment of COVID-19 (which has since been deprioritized), offset by an increase of $0.4 million in pre-clinical research costs for QN-302, which we acquired in January 2022, an increase of $0.4 million in pre-clinical research costs for QN-247, an increase of $0.1 million in pre-clinical research costs for our RAS program, and an increase of about $0.1 million in payroll related expenses.
For the future, we expect our therapeutic research and development costs to continue to outweigh our diagnostic research and development costs, and to be relatively lower in periods when we are focusing on pre-clinical activities and meaningfully higher in periods when we are provisioning for and conducting clinical trials, if any.
Sales and Marketing Expenses
Sales and marketing expenses were approximately $0.1 million for both the three months ended March 31, 2022 and 2021.
Other Income
Change in Fair Value of Warrant Liabilities
During the three months ended March 31, 2022 and 2021, we experienced a $0.7 million and $0.6 million gain, respectively, on change in fair value of warrant liabilities, primarily due to declines in our stock price and warrant exercises during both periods. Typically, a decline in our stock price would result in a decline in the fair value of our warrant liabilities, generating a gain, while an increase in our stock price would result in an increase in the fair value of our warrant liabilities, generating a loss.
Because the fair value of the warrant liabilities will be determined each quarter on a “mark-to-market” basis, this item is likely to continue to result in significant variability in our future quarterly and annual statements of operations based on unpredictable changes in our public market common stock price and the number of liability classified warrants outstanding at the end of each quarter.
Interest Income, Net
There was approximately $6,000 and $17,000 in interest income during the three months ended March 31, 2022 and 2021, respectively.
Other Income, Net
Other income was immaterial during the three months ended March 31, 2022 and 2021.
Liquidity and Capital Resources
As of March 31, 2022, we had $13.6 million of cash. The Company has incurred recurring losses from operations and has an accumulated deficit at March 31, 2022. The Company expects to continue to incur losses subsequent to the condensed consolidated balance sheet date of March 31, 2022. In December 2021, the Company raised $8.82 million through a Securities Purchase Agreement with several institutional investors. Based on the Company’s current cash position, and assuming currently planned expenditures and level of operations, the Company believes it has sufficient capital to fund operations for the 12-month period subsequent to the issuance of the accompanying unaudited condensed financial statements. However, there is no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. Also, beyond such 12-month period, planned research and development activities, capital expenditures, clinical and pre-clinical testing, and commercialization activities of the Company’s products are expected to require significant additional financing. Additional financing may not be available on acceptable terms or at all.
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As a pre-clinical development-stage therapeutics biotechnology company, we expect to continue to have net losses and negative cash flow from operations, which over time will challenge our liquidity. There is no assurance that profitable operations will ever be achieved, or, if achieved, could be sustained on a continuing basis. In order to fully execute our business plan, including full clinical trials of therapeutic drug candidates, we will require significant additional financing. There can be no assurance that further financing can be obtained on favorable terms, or at all. If we are unable to obtain funding, we could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect our business prospects.
Our condensed consolidated balance sheet at March 31, 2022 included $1.0 million of warrant liabilities. We do not consider that the warrant liabilities constrain our liquidity, as a practical matter. Our current liabilities at March 31, 2022 included $1.0 million of accounts payable and $1.3 million of accrued expenses and other current liabilities.
Contractual Obligations and Commitments
On December 15, 2021, our wholly-owned subsidiary Qualigen, Inc. entered into a Second Amendment to Lease with Bond Ranch LP. This Amendment extended the Company’s triple-net leasehold on its existing 22,624-square-foot headquarters/manufacturing facility at 2042 Corte del Nogal, Carlsbad, California for the 61-month period of November 1, 2022 to November 30, 2027. Over the 61 months, the base rent payable will total $1,950,710; however, the base rent for the first 12 months of the 61-month period will be only $335,966. Additionally, Qualigen, Inc. is entitled to a $339,360 tenant improvement allowance. See Note 9 of the consolidated financial statements for additional details.
We have no material contractual obligations not fully recorded on our condensed consolidated balance sheets or fully disclosed in the notes to the financial statements.
We have obligations under various license and sponsored research agreements to make future payments to third parties that become due and payable on the achievement of certain development, regulatory and commercial milestones (such as the start of a clinical trial, filing for product approval with the FDA or other regulatory agencies, product approval by the FDA or other regulatory agencies, product launch or product sales) or on the sublicense of our rights to another party. We have not included these commitments on our balance sheet because the achievement and timing of these events is not fixed and determinable. Certain milestones are in advance of receipt of revenue from the sale of products and, therefore, we may require additional debt or equity capital to make such payments.
These commitments include multiple license and sponsored research agreements with UofL Research Foundation (“ULRF”). Under these agreements, we will take over development, regulatory approval and commercialization of various drug compounds from ULRF and are responsible for maintenance of the related intellectual property portfolio. We agreed to reimburse ULRF for sponsored research expenses of up to $805,000 and prior patent costs of up to $200,000 for QN-247. As of March 31, 2022 we had up to $52,000 remaining due under this sponsored research agreement for QN-247. We also agreed to reimburse ULRF for sponsored research expenses of up to $2.7 million and prior patent costs of up to $112,000 for RAS. As of March 31, 2022 we had up to $1.4 million remaining due under this sponsored research agreement for RAS. We agreed to reimburse ULRF for sponsored research expenses of up to $430,000 and prior patent costs of up to $24,000 for QN-165. As of March 31, 2022 we had no remaining amounts due under this sponsored research agreement for QN-165. For these agreements we are required to make patent maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property. The maximum aggregate milestone payments we may be obligated to make per product are $5 million. We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under these agreements, and we will be required to pay a percentage of any sublicense income.
On January 13, 2022, we entered into a License Agreement with UCL Business Limited to obtain an exclusive worldwide in-license of a genomic quadruplex (G4)-selective transcription inhibitor drug development program which had been developed at University College London, including lead and back-up compounds, preclinical data and a patent estate. (UCL Business Limited is the commercialization company for University College London.) The program’s lead compound will be further developed at Qualigen under the name QN-302 as a candidate for treatment for pancreatic ductal adenocarcinoma (PDAC), which represents the vast majority of pancreatic cancers. The Agreement requires (if and when applicable) tiered royalty payments in the low to mid-single digits, clinical/regulatory/sales milestone payments, and a percentage of any non-royalty sublicensing consideration paid to Qualigen.
Termination of Sekisui Distribution Agreement
In March 2018, the Company extended a strategic partnership entered into in May 2016 with Sekisui Diagnostics, LLC (“Sekisui”). The Company appointed Sekisui as its diagnostics commercial partner and exclusive worldwide distributor with the exception of certain customer accounts retained by Qualigen. Sekisui’s distribution arrangement expired on March 31, 2022. Subsequent to the expiration of the agreement, in the second quarter of 2022 the Company will have a commitment to purchase leased FastPack rental systems back from Sekisui at Sekisui’s net book value, the amount of which has not yet been determined.
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We enter into contracts in the normal course of business, including with clinical sites, contract research organizations, and other professional service providers for the conduct of clinical trials, contract manufacturers for the production of our product candidates, contract research service providers for preclinical research studies, professional consultants for expert advice and vendors for the sourcing of clinical and laboratory supplies and materials. These contracts generally provide for termination on notice, and therefore are cancelable contracts.
Cash Flows
The following table sets forth the significant sources and uses of cash for the periods set forth below:
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (3,881,611 | ) | $ | (2,081,104 | ) | ||
| Investing activities | (49,625 | ) | (69,002 | ) | ||||
| Financing activities | 3,858 | 121,448 | ||||||
| Net increase (decrease) in cash | $ | (3,927,378 | ) | $ | (2,028,658 | ) | ||
Net Cash Used in Operating Activities
During the three months ended March 31, 2022, operating activities used $3.9 million of cash, primarily resulting from a net loss of $4.3 million. Cash flows from operating activities (as opposed to net loss) for the three months ended March 31, 2022 benefitted from $1.2 million in employee/director stock-based compensation expense, a $0.3 million decrease in prepaid expenses and other assets, a $0.2 million decrease in accounts receivable, a $0.1 million increase in accounts payable, and depreciation and amortization of $0.1 million. Cash flows from operating activities (as opposed to net loss) for the three months ended March 31, 2022 were negatively impacted by a $0.5 million decrease in accrued expenses and other current liabilities, a $0.3 million increase in inventory, and a $0.7 million decrease in fair value of warrant liabilities.
During the three months ended March 31, 2021, operating activities used $2.1 million of cash, primarily resulting from a net loss of $5.2 million. Cash flows from operating activities (as opposed to net loss) for the three months ended March 31, 2021 benefitted from a $1.5 million decrease in prepaid expenses and other assets, $1.3 million in employee/director stock-based compensation expense, a $1.1 million increase in accrued expenses and other current liabilities and a $0.1 million decrease in inventory. Cash flows from operating activities (as opposed to net loss) for the three months ended March 31, 2021 were negatively impacted by a $0.6 million decrease in fair value of warrant liabilities, a $0.2 million increase in accounts receivable, and a $0.1 million decrease in deferred revenue. The decrease in prepaid expenses was primarily due to the expensing during the period of $1.1 million of upfront deposits paid to STA Pharmaceutical Co., Ltd., a subsidiary of WuXi AppTec, our manufacturer of QN-165 for our then anticipated clinical trials. QN-165 has since been deprioritized.
Net Cash Used in Investing Activities
During the three months ended March 31, 2022, net cash used in investing activities was approximately $50,000, primarily related to the purchase of property and equipment.
During the three months ended March 31, 2021, net cash used in investing activities was approximately $69,000, primarily related to the purchase of property and equipment.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2022 was approximately $4,000, due to net proceeds from exercise of warrants.
Net cash provided by financing activities for the three months ended March 31, 2021 was $0.1 million, due to $0.2 million of net proceeds from exercise of warrants, offset by a $0.1 million principal payment on notes payable.
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Smaller reporting companies are not required to respond to this Item.
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4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022, the end of the period covered by this Quarterly Report.
Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as of March 31, 2022 were effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act’), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. We believe that a disclosure controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the disclosure controls system are met, and no evaluation of disclosure controls can provide absolute assurance that all disclosure control issues, if any, within a company have been detected.
Changes in Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of condensed consolidated financial statements for external purposes in accordance with U.S. GAAP.
As of December 31, 2021, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (the “2013 Framework”). Based on this assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was not effective because of a material weakness in our internal control over financial reporting related to the lack of accounting department resources and/or policies and procedures to ensure recording and disclosure of items in compliance with generally accepted accounting principles. We have taken and are taking steps to remediate the material weakness, including implementing additional procedures and utilizing external consulting resources with experience and expertise in U.S. GAAP and public company accounting and reporting requirements to assist management with its accounting and reporting of complex and/or non-recurring transactions and related disclosures. Nevertheless, an internal control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the internal control system are met, and no evaluation of internal control can provide absolute assurance that all internal control issues and instances of fraud, if any, within a company are detected.
Except as described above, there were no changes to the Company’s internal control over financial reporting made during the quarter ended March 31, 2022 that we believe materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Notwithstanding the identified material weakness, our management believes that the condensed consolidated financial statements included in this Quarterly Report fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth in “Litigation and Other Legal Proceedings” in Note 9 to the condensed consolidated financial statements included in this Quarterly Report is incorporated herein by reference.
ITEM 1A. RISK FACTORS
The Company’s business, reputation, results of operations and financial condition, as well as the price of its stock, can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of the Company’s 2021 Annual Report under the heading “Risk Factors.” When any one or more of these risks materialize, the Company’s business, reputation, results of operations and financial condition, as well as the price of its stock, can be materially and adversely affected. There have been no material changes to the Company’s risk factors since the 2021 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
None
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
ITEM 5. OTHER INFORMATION
None
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ITEM 6. EXHIBITS
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| 101.INS# | Inline XBRL Instance Document. | |
| 101.SCH# | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL# | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF# | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB# | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE# | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover page Interactive Data File (embedded within the Inline XBRL document) |
* Filed or furnished herewith.
†Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedules will be furnished to the SEC upon request.
+ Indicates management contract or compensatory plan or arrangement.
# XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or Prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| May 13, 2022 | QUALIGEN THERAPEUTICS, INC. | |
| By: | /s/ Michael S. Poirier | |
| Name: | Michael S. Poirier | |
| Title: | Chief Executive Officer | |
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Exhibit 4.15
AMENDED AND RESTATED
COMMON STOCK PURCHASE WARRANT
QUALIGEN THERAPEUTICS, INC.
Warrant Shares: 300,000 Initial Exercisability Date: January 26, 2022 (from December 3, 2021)
THIS AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, GreenBlock Capital LLC or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date first set forth above (the “Initial Exercisability Date”) and on or before 5:00 p.m. (New York City time) on September 14, 2023 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Qualigen Therapeutics, Inc., a Delaware corporation (the “Company”), up to 300,000 shares of Common Stock (subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
This Warrant supersedes, amends and restates, in its entirety, the Common Stock Purchase Warrant that was originally issued to the Holder on December 3, 2021 (the “Original Warrant”) for 600,000 Warrant Shares and the new Common Stock Purchase Warrant that was issued to Holder on January 26, 2022 following the transfer by Holder of 300,000 of the 600,000 Warrant Shares available for purchase under the Original Warrant.
Section 1. Definitions. As used in this Warrant, the following capitalized terms shall have the following meanings:
a) “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
b) “Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
c) “Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
d) “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
e) “Trading Day” means a day on which the principal Trading Market is open for trading.
f) “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question (or, if the Common Stock is not listed or quoted for trading on any of the following markets or exchanges on the date in question but the common stock of the Company is listed or quoted for trading on any of the following markets or exchanges on the date in question, then any of the following markets or exchanges on which the common stock of Parent is listed or quoted for trading on the date in question): the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
g) “Transfer Agent” means the current transfer agent of the Company, and any successor transfer agent of the Company.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercisability Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.60, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day before the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is (at a time when the Holder has a sufficient Rule 144 holding period for the Warrant/Warrant Shares) being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii.Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Securities Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Securities Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re classification.
b) [RESERVED.]
c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.
e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately before the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately before such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the greater of (x) the last VWAP immediately before the public announcement of such Fundamental Transaction and (y) the last VWAP immediately before the consummation of such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within the later of (i) five Business Days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) before such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) before such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately before the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days before the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
h) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.
Section 4. Transfer of Warrant.
a) Transferability. This Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company before the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately before such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.
f) Restrictions. The Holder, by acceptance of this Warrant, acknowledges that the Warrant Shares acquired upon the exercise of this Warrant may have restrictions upon resale imposed by state and federal securities laws. The Holder, by acceptance of this Warrant, covenants to comply with any such restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email attachment at the Holder’s e-mail address on file with the Company at or before 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment at the Holder’s e-mail address on file with the Company on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing to the Holder’s mail address on file with the Company, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the Holder.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
o) Registration of Warrant Shares. The Company acknowledges that, pursuant to the Consulting Agreement dated November 9, 2021 between the Company and GreenBlock Capital LLC, the Company is required to, upon the closing of the Company’s acquisition of NanoSynex Ltd. (in the event such closing occurs), seek and obtain the registration of the Warrant Shares under the Securities Act on a Form S-3 or other similar registration statement; and the Company hereby confirms and agrees that it will do so in such event.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of April 25, 2022.
| QUALIGEN THERAPEUTICS, INC. | ||
| By: | /s/ Michael Poirier |
|
| Name: | Michael Poirier | |
| Title: | Chairman & CEO | |
NOTICE OF EXERCISE
| TO: | QUALIGEN THERAPEUTICS, INC. |
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] [if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE OF HOLDER]
Name of Investing Entity: ________________________________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: ________________________________________________________________________________________
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name:
(Please Print)
Address:
Phone Number:
Email Address: (Please Print)
______________________________________
____________________________________
Dated: _______________ __, ______
Holder’s Signature:
Holder’s Address:
Exhibit 4.16
AMENDED AND RESTATED
COMMON STOCK PURCHASE WARRANT
QUALIGEN THERAPEUTICS, INC.
Warrant Shares: 300,000 Initial Exercisability Date: January 26, 2022 (from December 3, 2021)
THIS AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Christopher Nelson or his assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date first set forth above (the “Initial Exercisability Date”) and on or before 5:00 p.m. (New York City time) on September 14, 2023 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Qualigen Therapeutics, Inc., a Delaware corporation (the “Company”), up to 300,000 shares of Common Stock (subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
This Warrant supersedes, amends and restates, in its entirety, the Common Stock Purchase Warrant that was originally issued to the Holder on January 26, 2022.
Section 1. Definitions. As used in this Warrant, the following capitalized terms shall have the following meanings:
a) “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
b) “Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
c) “Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
d) “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
e) “Trading Day” means a day on which the principal Trading Market is open for trading.
f) “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question (or, if the Common Stock is not listed or quoted for trading on any of the following markets or exchanges on the date in question but the common stock of the Company is listed or quoted for trading on any of the following markets or exchanges on the date in question, then any of the following markets or exchanges on which the common stock of Parent is listed or quoted for trading on the date in question): the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
g) “Transfer Agent” means the current transfer agent of the Company, and any successor transfer agent of the Company.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercisability Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.60, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day before the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or his designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is (at a time when the Holder has a sufficient Rule 144 holding period for the Warrant/Warrant Shares) being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or his designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by his broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to him hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and his Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of his Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of his Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Securities Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Securities Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or his Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re classification.
b) [RESERVED.]
c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as his right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.
e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately before the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately before such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration he receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the greater of (x) the last VWAP immediately before the public announcement of such Fundamental Transaction and (y) the last VWAP immediately before the consummation of such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within the later of (i) five Business Days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) before such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) before such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately before the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at hiss last email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days before the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
h) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.
Section 4. Transfer of Warrant.
a) Transferability. This Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or his designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or his agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or his agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company before the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately before such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.
f) Restrictions. The Holder, by acceptance of this Warrant, acknowledges that the Warrant Shares acquired upon the exercise of this Warrant may have restrictions upon resale imposed by state and federal securities laws. The Holder, by acceptance of this Warrant, covenants to comply with any such restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of his rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email attachment at the Holder’s e-mail address on file with the Company at or before 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment at the Holder’s e-mail address on file with the Company on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing to the Holder’s mail address on file with the Company, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the Holder.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of his rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
o) Registration of Warrant Shares. The Company acknowledges that, pursuant to the Consulting Agreement dated November 9, 2021 between the Company and GreenBlock Capital LLC, the Company is required to, upon the closing of the Company’s acquisition of NanoSynex Ltd. (in the event such closing occurs), seek and obtain the registration of the Warrant Shares under the Securities Act on a Form S-3 or other similar registration statement; and the Company hereby confirms and agrees that it will do so in such event.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of April 25, 2022.
QUALIGEN THERAPEUTICS, INC.
| By: | /s/ Michael Poirier |
|
| Name: | Michael Poirier | |
| Title: | Chairman & CEO |
NOTICE OF EXERCISE
| TO: | QUALIGEN THERAPEUTICS, INC. |
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] [if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE OF HOLDER]
Name of Investing Entity: ________________________________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: ________________________________________________________________________________________
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name:
(Please Print)
Address:
Phone Number:
Email Address: (Please Print)
______________________________________
______________________________________
Dated: _______________ __, ______
Holder’s Signature:
Holder’s Address:
Exhibit 10.1
SERIES B PREFERRED SHARE PURCHASE AGREEMENT
THIS SERIES B PREFERRED SHARE PURCHASE AGREEMENT (this “Agreement”) is made and entered into on April 29, 2022, by and among NanoSynex Ltd., a company established under the laws of the State of Israel (the “Company”), and Qualigen Therapeutics Inc. (the “Investor”). The Company and the Investor may also be referred to hereinafter as the “Parties” and each individually as a “Party”.
W I T N E S S E T H:
WHEREAS, the board of directors of the Company (the “Board”) has determined that it is in the best interests of the Company to raise an amount of up to US $600,000 (the “Investment Amount”), by issuing to the Investor an aggregate amount of up to 381,786 newly authorized series B preferred shares of the Company, nominal value NIS 0.01 per share (the “Preferred B Shares” or the “Purchased Shares”) at the Closing (as defined below), all on the terms and conditions more fully set forth in this Agreement;
WHEREAS, the Investor desires to invest in the Company and acquire the Preferred B Shares pursuant to the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereby agree as follows:
1. The Transaction
1.1. Issue and Allotment of Preferred B Shares. Subject to the terms and conditions hereof, at the Closing, the Company shall issue and allot to the Investor, and the Investor shall purchase from the Company, an aggregate number of 381,786 Preferred B Shares hereto, at a price per share of US$ 1.5716 representing a Company pre-money valuation of $8,000,000 divided by the Company’s issued and outstanding share capital on a Fully Diluted Basis immediately prior to the Closing. For the purposes herein, the term “Fully Diluted Basis” shall mean and include all issued and outstanding shares of the Company after giving effect to: (i) the conversion and exercise of all convertible securities, options and warrants as well as all other rights of any kind to acquire shares of the Company; (ii) all anti-dilution rights and adjustments that may be activated as a result of the transactions contemplated hereunder; and (iii) the reservation of 273,613 of the Company’s ordinary shares, nominal value NIS 0.01 per share (the “Ordinary Shares”), all of which are un-promised, unallocated and free for future grants of options to employees, officers, directors, and/or service providers under the Company’s 2018 Share Option Plan (the “Plan”), which represent 5.00% of the share capital of the Company on a Fully Diluted Basis, immediately following the Closing, assuming the investment of the aggregate Investment Amount (the “ESOP Pool”), all as set forth in the Company’s Capitalization Table, attached hereto as Schedule 1.1 (the “Capitalization Table”).
2. The Closing
2.1 Closing. Subject to the satisfaction or waiver of the applicable closing conditions set-forth in Sections 5 and 6 herein, the issuance of the Preferred B Shares to the Investor shall take place at a closing to be held no later than April 30, 2022 or such other date and time as the Company and Investor shall agree (the “Closing” and the date on which the Closing actually occurs, the “Closing Date”).
2.2 This Agreement may be terminated at any time prior to the Closing by the Investor or the Company if the Closing has not occurred on or prior to June 30, 2022; provided that neither the Investor nor the Company will be entitled to terminate this Agreement pursuant to this Section 2.2 if such party’s breach of this Agreement will have been the principal cause of, or shall have resulted in, the prevention of the satisfaction of the conditions or the consummation of the transactions contemplated hereby at or prior to such time.
2.3 Transactions at the Closing. At the Closing, the following transactions shall occur, which transactions shall be deemed to take place simultaneously and no transaction shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered:
(a) The Company shall deliver to the Investor the following:
A. True and correct copies of the resolutions of the Company’s shareholders by majority of at least 70% of the issued and outstanding share capital of the Company and majority of at least 70% of each of the classes of shares of the Company, in a form to be agreed upon by the Company and the Investor prior to Closing, by which, inter alia: (i) the articles of association of the Company in effect on the date hereof (the “Current Articles”) are replaced with the amended and restated articles of association, in the form attached hereto as Schedule 2.3(a)A(i) that shall include inter alia the grant to the Investor of a right of refusal or a right of first offer, as applicable, in respect to a change of control in the Company (the “Amended Articles”), (ii) a new class of Preferred B Shares is created; and (iii) this Agreement and all other agreements attached or ancillary hereto which require approval of the Company’s shareholders, including the Shareholders’ Rights Agreement (as defined below), the Indemnification Agreements, the Funding Agreement (as defined below) (collectively, the “Transaction Documents”), are duly approved.
B. True and correct copies of resolutions of the Board in a form to be agreed upon by the Company and the Investor prior to Closing by which, inter alia, the Board unanimously approves: (i) the issuance and allotment to the Investor of the Preferred B Shares, and the reservation of a sufficient number of Ordinary Shares for conversion of all such Preferred B Shares; (ii) the Transaction Documents, and (iii) the reservation of the ESOP Pool.
C. Validly executed share certificate covering the Preferred B Shares issued hereunder, issued in the name of the Investor, in a form to be agreed upon by the Company and the Investor prior to Closing.
D. A certificate duly executed by the chief executive officer of the Company, dated as of the Closing Date, in a form to be agreed upon by the Company and the Investor prior to Closing.
E. An opinion of Horn & Co., counsel to the Company, dated as of the Closing Date, in a form to be agreed upon by the Company and the Investor prior to Closing.
F. Director indemnification agreements for each of the directors of the Company (including the directors appointed by the Investor), duly executed and approved by the Company, in a form to be agreed upon by the Company and the Investor prior to Closing (the “Indemnification Agreements”).
G. A copy of the register of shareholders of the Company as of the Closing, evidencing the registration of the issuance of the Preferred B Shares in the name of the Investor, in a form to be agreed upon by the Company and the Investor prior to Closing (the “Shareholders Register”).
H. A waiver, in a form satisfactory to Investor, executed by all of the Company’s shareholders irrevocably waiving any and all preemptive, anti-dilution, conversion, distribution preference and other rights in connection with the transactions contemplated herein, or otherwise an evidence reasonably satisfactory to the Investor that such rights have either been satisfied or expired.
(b) The Investor shall cause the transfer to the Company of the Investment Amount, less an amount of US$ 100,000 which was already transferred by Investor to the Company prior to the date hereof as payment of the exclusivity fee under the letter of intent between the Company and the Investor dated March 14, 2022, by wire transfer, in consideration of the Purchased Shares, to the Company’s bank account, the details of which are set forth in Schedule I.
(c) The Investor shall deliver to the Company a notice of appointment of its designated members to the Board.
(d) The Company, the Investor and the Founders (as defined below) shall execute and deliver the Shareholders’ Rights Agreement, in the form attached hereto as Schedule 2.3(d) (the “Shareholders’ Rights Agreement”).
(e) The Company and the Investor shall execute and deliver the Master Agreement for the Operational and Technological Funding of the Company in the form attached hereto as Schedule 2.2(a)H (the “Funding Agreement”)
(f) The Company and each of the Founders (as defined in the Current Articles) shall execute amendments to the Founders’ employment agreements under the terms attached hereto as Schedule 2.3(e).
(g) The Investor shall provide the standard form of undertaking required of non-Israeli shareholders of Israeli companies (as may be obtained from the website of the Israel Innovation Authority) to uphold the provisions of the Law for Encouragement of Research, Development and Technological Innovation in the Industry 5744-1984.
3. Representations and Warranties of the Company
As of the date hereof and as of the Closing Date, the Company hereby represents and warrants to the Investor, subject to the exceptions set forth in the disclosure schedule in a form to be agreed upon by the Company and the Investor prior to Closing (the “disclosure schedules”), and acknowledges that the Investor is entering into this Agreement in reliance thereon, as follows:
3.1 Organization; Permits. The Company is duly incorporated and validly existing under the laws of the State of Israel and its control and management are in Israel. The Company has all requisite corporate power and authority to execute and deliver this Agreement and the Transaction Documents and to consummate the transactions contemplated hereby and thereby. The Company is duly qualified and is authorized to do business and is in good standing and is not qualified to do business as a foreign corporation in any jurisdiction outside of Israel and the failure to be so qualified would not, in any such case, materially and adversely affect the business of the Company.
3.2 Share Capital. The authorized share capital of the Company as of and subject to the Closing shall be NIS 100,000 divided into:
(a) 6,076,763 Ordinary Shares, of which 1,246,000 are issued and outstanding immediately prior to the Closing and immediately following the Closing; and 521,237 Ordinary Shares are reserved for issuance to officers, directors, employees and consultants of the Company under the ESOP Pool, of which 273,613 are un-promised, unallocated and free for future grants of options to employees, officers, directors, and/or service providers under the Plan representing 5% of the Company’s share capital on a Fully Diluted Basis immediately following the Closing;
| (b) | 2,232,861 Preferred A-1 Shares, all of which are issued and outstanding immediately prior to the Closing; |
| (c) | 418,663 Preferred A-2 Shares , all of which are issued and outstanding immediately prior to the Closing; |
| (d) | 59,543 Preferred A-3 Shares, all of which are issued and outstanding immediately prior to the Closing; |
| (e) | 612,170 Preferred A-4 Shares, all of which are issued and outstanding immediately prior to the Closing; and |
(f) 600,000 Preferred B Shares, 381,786 of which are issued and outstanding immediately prior to the Closing and all of which shall be issued and outstanding immediately following the Closing.
Except as set forth in Schedule 3.2 of the disclosure schedules and for (a) shares and options as set forth in the Company’s Capitalization Table; and (b) the transactions contemplated by this Agreement, there are no outstanding convertible securities, outstanding warrants, options or other rights to subscribe for, purchase or acquire from the Company any share capital of the Company and there are no contracts or binding commitments providing for the issuance of, or the granting of rights to acquire, any share capital of the Company or under which the Company is, or may become, obligated to issue any of its securities. All issued and outstanding share capital of the Company has been duly authorized and is validly issued and outstanding and fully paid and nonassessable. The Preferred b Shares, when issued, sold and delivered in accordance with this Agreement: (i) will be duly authorized, validly issued, fully paid, nonassessable, issued without violation of any preemptive rights, (ii) will have the rights, preferences, privileges, and restrictions set forth in the Amended Articles, and (iii) will be free and clear of any liens, claims, charges, encumbrances, restrictions, rights, options to purchase and/or third party rights of any kind (except as specified in the Amended Articles) and applicable securities laws) (collectively “Encumbrances”) and duly registered in the name of the Investor in the Shareholders Register. The Ordinary Shares issuable upon conversion of the Preferred B Shares have been or will be, on or prior to the Closing, duly authorized and reserved for issuance by all necessary corporate action and, upon conversion in accordance with the terms of the Amended Articles (as may be amended from time to time), shall be duly and validly issued, fully paid, non-assessable, free of any preemptive rights (other than as set forth in the Amended Articles, as may be amended from time to time), will have the rights, preferences, privileges and restrictions set forth in the Amended Articles (as may be amended from time to time).
3.3 Ownership of Shares. The security holders identified in the Capitalization Table as the shareholders of the Company as of immediately prior to the Closing, are the lawful owners of record, and to the reasonable knowledge of the Company, beneficial owners of all of the issued and outstanding share capital of the Company and of all rights thereto (including, for the avoidance of doubt, all options, warrants and other rights to purchase shares of the Company’s share capital), free and clear of all Encumbrances and none of the aforesaid owns any other shares, options or other rights to subscribe for, purchase or acquire any share capital of the Company from the Company or, to the reasonable knowledge of the Company, from each other.
3.4 Subsidiaries and Related Entities. The Company does not own or control, directly or indirectly, any interest in any corporation, joint venture, or business association.
3.5 Directors, Officers. The sole directors and officers of the Company as of immediately prior to the as of the date hereof are the directors and officers listed on Schedule 3.5 of the disclosure schedules. Other than pursuant to the Amended Articles, the Company has no agreement, obligation or commitment with respect to the election of any individual or individuals to the Board and, to the knowledge of the Company, there is no voting agreement or other arrangement among the Company’s shareholders with respect to the election of any individual or individuals to the Board. All agreements, commitments and understandings, whether written or oral, with respect to any compensation provided to any of the Company’s directors and/or officers in their capacities as such have been fully disclosed in writing to the Investor’s counsel.
3.6 Financial Statements; No Changes
(a) Schedule 3.6(a) of the disclosure schedules contains the Company’s audited consolidated financial statements for the period ending on December 31, 2020 and unaudited but reviewed interim financial statements as of December 31, 2021 (the “Financial Statements Date”) (collectively, the “Financial Statements”). The Financial Statements are true and correct in all material respects, are in accordance with the books and records of the Company and have been prepared in accordance with Israeli generally accepted accounting principles (“GAAP”)’ applied on a consistent basis, except that the unaudited Financial Statements may not contain all footnotes required by generally accepted accounting principles. The Financial Statements fairly present in all material respects the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject in the case of the unaudited Financial Statements to normal year-end audit adjustments. Except as set forth in Schedule 3.6(a) of the disclosure schedules or in the Financial Statements, the Company has no liabilities or obligations, absolute, contingent or otherwise, other than (A) liabilities incurred in the ordinary course of business since the Financial Statement Date which; and (B) obligations under contracts and commitments incurred in the ordinary course of business to be performed after the date hereof that would not be required to be reflected in financial statements prepared in accordance with GAAP, none of which liabilities and obligations in (A) and (B) would have, individually or in the aggregate, a material adverse effect on the assets, properties, financial condition or business of the Company.
(b) Since the Financial Statement Date, and except as described in Schedule 3.6(b) of the disclosure schedules, there has not been:
A. any material adverse change in the assets, liabilities, financial condition or business of the Company;
B. any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition or business of the Company;
C. any waiver by the Company of a valuable right or of a material debt owed to it;
D. any satisfaction or discharge of any material lien, material claim or material encumbrance or payment of any material obligation by the Company, except in the ordinary course of business and that is not individually or in the aggregate has a material adverse effect on the assets, properties, financial condition or business of the Company;
E. any change or amendment to a material contract or material arrangement by which the Company or any of its respective assets or properties is bound or subject, which material change has a material adverse effect on the assets, properties, financial condition or business of the Company;
F. any material change in any compensation arrangement or agreement with any key employee, key consultant, director or officer of the Company;
G. any loans or guarantees made by the Company to or for the benefit of its employees, officers, or directors or any members of their immediate families other than travel advances made in the ordinary course of business;
H. any sale, transfer or lease of, except in the ordinary course of business, or mortgage or pledge of imposition of lien on, any of the Company’s material assets;
I. any change in the accounting methods or accounting principles or practices employed by the Company;
J. Any declaration or making of distribution of any kind to shareholders; and
K. any arrangement or commitment by the Company to do any of the things described in this Section 3.6.
3.7 Authorization; Approvals. All action on the part of the Company necessary for: (i) the authorization, execution, delivery, and performance of all of the Company’s obligations under this Agreement and the Transaction Documents; (ii) the authorization, issuance, and sale of the Purchased Shares; and (iii) the reservation of the Ordinary Shares issuable upon conversion of the Preferred B Shares, has been (or will be) taken on or prior to the Closing. This Agreement and the Transaction Documents, when executed and delivered by or on behalf of the Company and assuming the due authorization, execution and delivery by the Investor, shall constitute the valid and legally binding obligations of the Company, legally enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. Other than as set forth in Schedule 3.7 of the disclosure schedules, no consent, approval, order, license, permit, action by, or authorization of or designation, declaration, or filing with any governmental authority on the part of the Company is required that has not been, or will not have been, obtained by the Company on or prior to the Closing in connection with: (i) the valid execution, delivery and performance of this Agreement and the Transaction Documents; and (ii) the offer, sale or issuance of the Preferred B Shares hereunder.
3.8 No Breach. To its knowledge, the Company is not in violation of any domestic and foreign, laws, regulations and orders applicable to it, the violation of which would have a material adverse change in the business or financial condition of the Company. The Company is not: (A) in default, under, and neither the execution and delivery of this Agreement and the Transaction Documents nor compliance by the Company with the terms and provisions hereof or thereof, will conflict with, or result in a breach or violation of, any of the terms, conditions and provisions of: (i) its Current Articles, (ii) any agreement, in any material respect, to which the Company is a party or by which any of its property is bound; or (iii) any applicable law and/or regulation and/or any order, writ, injunction or judgment of any court or any governmental or official authority, applicable to the Company. The Company is not aware of any third party being in default under any material agreement with the Company.
3.9 Ownership of Assets. The Company does not currently own, lease or license any tangible properties or assets, other than assets customarily used in the ordinary course of business (e.g., furniture, equipment, computers and the like) and other than those assets that are listed in Schedule 3.9 of the disclosure schedules (the “Assets”). The Company has good and marketable title or rights to its Assets and none of its Assets are subject to any mortgage, pledge, lien, security interest, conditional sale agreement, encumbrance or charge (other than in the ordinary course of business and which do not materially impair the Company’s ownership or use of such Assets). Except as set forth in Schedule 3.9 of the disclosure schedules, the Company does not currently lease any real property. The Company is not in default or in breach of any material provision of its leases, and the Company holds a valid leasehold in the property it leases.
3.10 Intellectual Property and Other Intangible Assets.
For purposes of this Agreement, the term “Intellectual Property” shall mean and refer to all: (i) patents and patent applications, and any divisional, continuation, continuation in part, reissue, renewal or re-examination patent issuing therefrom (including any foreign counterparts); (ii) copyrights and registrations thereof; (iii) mask works and registrations and applications for registration thereof; (iv) computer software, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code; (v) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise; (vi) trade secrets and other confidential business information, whether patentable or unpatentable and whether or not reduced to practice, know-how, technology, proprietary processes, techniques, methodologies, formulae, algorithms, models, modules, user interfaces, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, inventions, source code, object code, and, with respect to all of the foregoing, related confidential documentation; (vii) trademarks, service marks, trade names, domain names and applications and registrations therefor; (viii) all documentation, including user manuals and training materials relating to any of the foregoing and descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing; and (ix) other proprietary rights relating to the foregoing.
(a) The Company owns and has developed, or has obtained the right to use, free and clear of all liens, claims and restrictions but subject to the license terms thereof, all Intellectual Property used in the conduct of the Company’s business as now conducted and as currently proposed to be conducted (taking into consideration that the Company is in development stages and may require to procure and develop additional Intellectual Property for the purpose of its operation), without, to its knowledge, infringing upon, misappropriating or violating any right, lien, or claim of others, including without limitation, of the founders of the Company listed on Schedule I attached hereto (the “Founders”), and present employees of the Company. The Company is not obligated or under any liability whatsoever to make any payments by way of royalties, fees or otherwise to any owner or licensee of, or other claimant to any Intellectual Property or any other intangible asset, with respect to the use thereof or in connection with the conduct of its business as now conducted or as currently proposed to be conducted (taking into consideration that the Company is in development stages and may require to procure and develop additional Intellectual Property for the purpose of its operation). The Company’s registered Intellectual Property is listed in Schedule 3.10(a) of the disclosure schedules. Each item of the Company’s registered Intellectual Property is subsisting, and to the Company’s knowledge, after conducting a reasonable inquiry (but without conducting a freedom to operate analysis), enforceable and valid, subject to the payment of the relevant fees and compliance with the registration requirements applicable thereto.
(b) Any and all Intellectual Property of any kind which has been developed, or is currently being developed, by any employee or consultant of the Company in the course of their employment by, or engagement with, the Company and for the Company, is the property solely of the Company. The Company has taken security measures to protect the secrecy, confidentiality and value of all the Company’s Intellectual Property, which measures are reasonable and customary in the industry in which the Company operates. Each of the Company’s employees, consultants and other persons who, either alone or in concert with others, developed, invented, discovered, derived, programmed or designed the Company’s Intellectual Property, including (without limitation) the Founders, have entered into a written agreement with the Company, assigning to the Company, all rights in Intellectual Property developed, created, discovered, derived, programmed, designed, invented or otherwise made by them in the course of their engagement with the Company or in connection to the Company’s activities and irrevocably and explicitly waiving all non-assignable rights, including all moral rights and rights to receive royalties in connection therewith, including, with respect to employees, under the Israeli Patent Law – 1967 (including, without limitation, Section 134 thereof) and/or other applicable law.
(c) Except as set forth in Schedule 3.23.10(c) of the disclosure schedules, none of the Company’s Intellectual Property has been developed for a government corporation, military, university, college, other academic institution or research center, and no governmental or military entity, university, college, other academic institution or research center funding, equipment, facilities or other resources were was used in the development of the Company’s Intellectual Property. No current employee, or to the knowledge of the Company, consultant or independent contractor of the Company, who was involved in, or who contributed to, the creation or development of any Company’s Intellectual Property, has performed services for or otherwise was under restrictions resulting from his/her relations with any government, university, college or other educational institution or research center during a period of time during which such employee, consultant or independent contractor developed any of the Company’s Intellectual Property.
(d) To the Company’s knowledge, the Company has not violated, infringed or misappropriated, by conducting its business as currently conducted, any Intellectual Property or other proprietary rights of any other person or entity. To the Company’s knowledge, none of the Company’s employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency (in their capacity as such), that would interfere with the use of such employee’s best efforts to promote the interests of the Company or that would conflict with the Company’s business as conducted or as currently proposed to be conducted. Neither the execution nor delivery of the Agreement, nor the carrying on of the Company’s business by the employees of the Company as currently conducted, nor the conduct of the Company’s business as currently conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. To the knowledge of the Company, it is not necessary to utilize any inventions of any of the Company’s employees and/or consultants (or people the Company currently intends to engage) or inventions made prior to their engagement by the Company in order to continue the Company’s business as currently conducted, other than those that have been validly assigned to the Company pursuant to the proprietary information and non-competition agreement signed by such employee.
(e) All Intellectual Property developed by the Founders prior to or following the incorporation of the Company for the benefit of or in relation to the Company or its business, (“Founders’ IP”) which is used in the conduct of the Company’s business as now conducted and as currently proposed to be conducted, was duly assigned by the Founders to the Company at the time of the incorporation of the Company or later on (but in any event prior to the date hereof), free and clear of any security interest, and, to the extent already required, all declarations and documents required by the various patent offices in the countries in which the Company’s Intellectual Property is registered in order to register such assignments have been duly executed, submitted, approved and registered. Neither the Founders nor, any other party (except for the Company) has any interest in or rights to any of the Founders’ IP.
(f) Other than as set forth in Schedule 3.10(f) of the disclosure schedules, there are no outstanding licenses, or agreements of any kind relating to the Company’s Intellectual Property necessary for the Company’s business as currently conducted or currently proposed to be conducted (taking into consideration that the Company is in development stages and may require to procure and develop additional Intellectual Property for the purpose of its operation), nor is the Company bound by or a party to any licenses or agreements relating to any software or other material that is distributed as “free software”, “open source software” or under a similar licensing or distribution model). The Company is not aware of any Intellectual Property owned by any third party which is needed by the Company to conduct its business as currently conducted.
(g) No source code of any of the Company’s proprietary software has been licensed or otherwise provided or disclosed to another person or entity, and the Company does not have any duty or obligation (whether present, contingent, or otherwise) to license or otherwise provide the source code for any of the Company’s proprietary software to any person or entity, except to its employee, consultants, advisors and service providers and/or anyone else on its behalf, as necessary for its development in the ordinary course of business.
(h) Public Software
A. Schedule 3.10(h)A of the disclosure schedules identifies: (i) each item of Open Source Materials (as defined below) that is contained in, distributed with or used in the development of the Company Source Code or from which any part of any Company Source Code is derived; (ii) the version or versions of each such item of Open Source Materials; (iii) the Company Products or other use to which each such item of Open Source Materials relates; (iv) the applicable license for each such item of Open Source Material; (v) whether each such item of Open Source Materials has been modified by or for the Company; and (vi) whether such modules or modifications have been distributed or made available to any third party by Company.
B. The Company has not: (i) incorporated Open Source Materials into, or combined Open Source Materials with, the Company IP Rights or Company Products (as such terms are defined below); (ii) distributed Open Source Materials in conjunction with any Company IP Rights or Company Products; or (iii) used Open Source Materials, in such a way that, with respect to (i), (ii), or (iii), creates, or purports to create, obligations for the Company with respect to any Company IP Rights, or grant, or purports to grant, to any third party, any rights or immunities under any Company IP Rights (including using any Open Source Materials that require, as a condition of use, modification and/or distribution of such Open Source Materials that other software incorporated into, derived from or distributed with such Open Source Materials be: (A) disclosed or distributed in source code form; (B) be licensed for the purpose of making derivative works; and/or (C) be redistributable at no charge).
C. The Company is in compliance in all material respects with the provisions of the licenses of the Open Source Materials set forth in Schedule 3.10(h)A of the disclosure schedules, and none of the Company IP Rights, Company Products, or Company Source Code is subject to the provisions of any license for Open Source Materials or similar agreement which would reasonably : (i) oblige and/or require the Company: (A) to license such Company IP Rights, Company Products, or Company Source Code or any portion thereof for the purpose of making modifications or derivative works; (B) to distribute such Intellectual Property of the Company or any portion thereof; (C) to permit any person to decompile, disassemble, or otherwise reverse-engineer any Company IP Rights, Company Products, or Company Source Code; and/or (D) to disclose, license, or distribute any Company Source Code; (ii) cause the Company, by virtue of its use of the Open Source Materials set forth in Schedule 3.10(h)A of the disclosure schedules, to make available to any third party the Company Source Code or any other software, including any such software that is used internally or distributed by the Company; and/or (iii) (except for limitations stipulated by permissive Open Source licenses) otherwise impose a limitation, restriction or condition on the right of the Company to distribute any Company IP Rights, Company Products, or Company Source Code or any portion thereof.
D. Neither the Company nor, to its knowledge, any other person then acting on its behalf has disclosed (except for disclosure between the Company, its employees, service providers, advisors, consultants and/or anyone else on its behalf, in connection with the conduct of the Company’s business as now conducted or as currently proposed to be conducted), delivered or licensed to any person or permitted the disclosure or delivery to any escrow agent or other person, any Company Source Code. No event has occurred, that (with or without notice or lapse of time, or both) would result in the disclosure, delivery or license, by the Company to any person, of any Company Source Code.
E. As used in this Agreement, the following terms shall have the meanings: (i) “Company IP Rights” means any Intellectual Property currently used in the conduct of the business of the Company as currently conducted or currently proposed to be conducted, including, without limitation, Intellectual Property currently under development by or for the Company (whether or not in collaboration with another person); (ii) “Company Products” means all products and services developed and/or currently under development by the Company; (iii) “Company Source Code” means, collectively, all software source code and all proprietary information and algorithms contained in or relating to any software source code or specifications or designs, of any Intellectual Property owned or used by the Company; (iv) “Computer Software” means computer software (including websites, HTML code, firmware and other software embedded in hardware devices), data files, source and object codes, APIs, tools, user interfaces, manuals and other specifications and documentation and all know-how relating thereto; (v) Open Source Materials” means any Computer Software that contains, or is derived in any manner (in whole or in part) from, or is distributed under “open source” (as that term is defined by the Open Source Initiative) or “free software” (as that term is defined by the Free Software Foundation) terms or similar licensing or distribution models, including without limitation any Computer Software distributed under the GPL, LGPL, AGPL, Mozilla License, Apache License, Common Public License, MIT license, BSD license or similar terms and including without limitation any Computer Software distributed with any license term or condition that: (a) requires or could require, or conditions or could condition, the use or distribution of such Computer Software on the disclosure, licensing, or distribution of any source code for any portion of such Computer Software or any derivative work of such Computer Software; (b) requires or could require, or conditions or could condition, that any portion of such Computer Software or any derivative work of such Computer Software be licensed for the purpose of making modifications or derivative works or be redistributable at no charge.
(i) The Company does not use or develop, or engage in, encryption technology, or other technology the development, commercialization or export of which is restricted under applicable Israeli Law (including the Defense Export Control Law – 2007), and the Company’s business does not require the Company to obtain a license from the Israeli Ministry of Defense or an authorized body thereof pursuant to Section 2(a) of the Control of Commodities and Services Declaration (Engagement in Encryption), 1974, as amended, or the Control of Commodities and Services Order (Export of Warfare Equipment and Defense Information) 1991, as amended.
3.11 Taxes. Except as set forth in Schedule 3.11 of the disclosure schedules the Company has timely filed all material Tax Returns that are required to be filed on behalf of the Company (subject to any extensions) and all such Tax Returns are correct in all material respects. Except as set forth in Schedule 3.11 of the disclosure schedules, the Company has timely paid all Taxes due and owing (whether or not shown on any Tax Return). Since the date of its incorporation, the Company has not incurred any taxes, assessments or governmental charges other than in the ordinary course of business in amounts which are not material to its business. The Company has not made any elections under applicable laws or regulations (other than elections that related solely to methods of accounting, depreciation or amortization) that would have a material adverse effect on the business, condition, operations or assets of the Company. Any amounts required, have been withheld by the Company from its employees and/or service providers for all periods in compliance with the tax, social security and any applicable employment withholding provisions of applicable law and the Company has no knowledge, of any proposed liability for any tax to be imposed. The Company is currently not liable for any income tax, capital gains tax, value added tax, or other tax, except for taxes paid in the ordinary course of business, such as V.A.T, social security and withholding of income taxes, in respect of which payments the Company is not under any default. None of the income tax returns of the Company has ever been audited by governmental authorities. The Company is not subject to any private letter ruling of the Israeli Tax Authority or comparable rulings of any other taxing authority. All transactions with related parties to which the Company is or has been a party have been made at arm’s length, and have been, to the extent required, properly reported to the relevant taxing authority. “Taxes” means any national, federal, state, local, provincial or municipal, or foreign tax, including, but not limited to, any income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, unclaimed property, escheat, value added, gross receipts, business and occupation, social security, employment, payroll, stamp and withholding taxes, and all other fees, duties, levies, customs, tariffs, imposts, assessments, obligations and charges of the same or similar nature as the foregoing imposed by any governmental authority, as well as any interest, penalties or other additions to tax thereon. “Tax Return” means any return, declaration, report, claim for refund, or information return or statement with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof, in each case filed or required to be filed with any Tax authority.
3.12 Agreements. Schedule 3.12(a) of the disclosure schedules contains a true and complete list of all agreements, understandings and instruments to which the Company is a party or by which it is bound and which involve obligations (contingent or otherwise) of, or payments to, the Company in excess of US$50,000 annually. Each such agreement is in full force and effect, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies, and neither the Company nor, to the best knowledge of the Company, any other party thereto is in breach thereof. The Company has not received any written notice of any intention to terminate any such agreement. Other than as set forth in Schedule 3.12(b) of the disclosure schedules, there are no agreements to which the Company is a party or by which it is bound which involves: (i) the license of any patent, copyright, trade secret or other proprietary right to or from the Company (other than customary licenses in confidentiality agreements); (ii) provisions restricting or affecting the development, manufacture, assembly or distribution of the Company’s products or services; (iii) granting exclusive rights to manufacture, produce, assemble, license, market or sell products or services; (iv) the indemnification by the Company with respect to infringements of proprietary rights; (v) restrictions or limitations on the Company’s right to do business or compete in any area or field with any person, firm or company; and/or (iv) any transaction or engagement to which the Company is a party, or by which it or any of its property is bound, and in which the amount involved exceeds US$50,000 annually, as of or prior to the date hereof, except for employment agreements. The Company has not knowingly waived any of its rights under any such agreement.
3.13 Employment. Except as set forth in Schedule 3.13 of the disclosure schedules, the Company has no employment contract with any officer or employee or any other consultant or person that is not terminable by it at will without liability subject to applicable law, upon prior notice period of 30 days or less or otherwise as prescribed by applicable law. As of the date hereof, except as set forth in Schedule 3.13 of the disclosure schedules, the Company has no deferred compensation or share option covering any of its officers or employees. As of the date hereof, there is no strike or other labor dispute involving the Company pending, or threatened, nor is the Company aware of any labor organization activity involving its employees. The Company has complied with all applicable employment laws, policies, procedures and agreements relating to employment, terms and conditions of employment and to the proper withholding and remission to the proper tax and other authorities of all sums required to be withheld from employees under applicable laws respecting such withholding. The Company has paid in full to all of its respective employees, wages, salaries, commissions, bonuses, benefits and other compensation due and payable to such employees on or prior to the date hereof. Schedule 3.13 of the disclosure schedules lists all employees of the Company, including a detailed description of their position and all compensation, including salary, bonus, accrued vacation days, severance obligations and deferred compensation paid or payable to such employees. True and correct copies of such agreements have been made available to the Investor’s counsel. Other than as set forth in Schedule 3.13 of the disclosure schedules, all current employees of the Company have signed employment agreements under which they have duly agreed to be subject to the terms of Section 14 of the Severance Pay Law 5723-1963 as of their commencement date of employment and the Company is and has been in compliance, with its obligations with respect to such Section 14 which is in full force and effect with respect to such employees. Any severance pay liabilities that are not covered by the aforementioned application of Section 14 are allocated for and reserved in the Financial Statements. The Company is not bound by or subject to any written or verbal, express or implied, contract, commitment or arrangement with any labor union, including any collective bargaining agreements (“Heskemim Kibutziyim”) (other than collective bargaining agreements that apply to all employees in Israel generally through extension orders), and, no labor union has requested or, to the knowledge of the Company, has sought to represent any of the employees of the Company.
3.14 Litigation. No action, proceeding governmental inquiry or investigation is pending or, to the Company’s knowledge, threatened against the Company or any of its officers or directors (in each case, solely in their capacity as such), including for the removal of doubt, the Founders, or against any of the Company’s properties, before any court, arbitration board or tribunal or administrative or other governmental agency, nor, to the knowledge of the Company, is there any reasonable basis for the foregoing. The foregoing includes, without limiting its generality, actions pending or, to Company’s knowledge, threatened, involving the prior employment of any of the Founders or unauthorized use by any of them in connection with the Company’s business of any information, property or techniques allegedly proprietary to any of their former employers. Neither the Company nor, to its knowledge, any of the Founders is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or governmental agency or instrumentality relating to the Company or the conduct of its business. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate.
3.15 No Public Offer. Neither the Company nor anyone acting on its behalf has offered securities of the Company or any part thereof or any similar securities for issuance or sale to, or solicited any offer to acquire any of the same from, anyone so as to make issuance and sale of the Purchased Shares hereunder not exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the “Securities Act”) or the Israeli Securities Law, 1968. None of the shares of the Company’s share capital issued and outstanding has been offered or sold in such a manner as to make the issuance and sale of such shares not exempt from such registration requirements, and all such share capital has been offered and sold in compliance in all respects with all applicable securities laws.
3.16 Interested Party Transactions. No officer or director of the Company or any affiliate of any such person or entity, has or has had, either directly or indirectly (a) an interest in any person or entity which: (i) furnishes or sells services or products which are furnished or sold by the Company; or (ii) purchases from or sells or furnishes to the Company any goods or services, or (b) other than as set forth in Schedule 3.16 of the disclosure schedules, a beneficial interest in any contract or agreement to which any of the Company is a party or by which it may be bound or affected. There are no existing arrangements or proposed transactions between the Company and any officer, director, or shareholder of the Company (prior to the date hereof) or any affiliate or associate of any such person, other than as set forth in Schedule 3.16 of the disclosure schedules.
3.17 Brokers. No agent, broker, investment banker, person or firm acting in a similar capacity on behalf of or under the authority of the Company is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, on account of any action taken by the Company in connection with any of the transactions contemplated under the Agreement.
3.18 Obligations of Management. Except as set forth in Schedule 3.18, of the disclosure schedules each Founder is currently devoting one hundred percent (100%) of his or her business time to the conduct of the business of the Company. The current scope of each of the Company’s officers and key employees is set forth in Schedule 3.18 of the disclosure schedules. The Company is not currently aware of any officer or key employee of the Company planning to work less than the current scope of their employment at the Company in the future.
3.19 Government Funding. Except as set forth in Schedule 3.19 of the disclosure schedules, the Company has not received any grant, subsidy or other support or benefits (including, without limitation, tax benefits) from the Investment Center of the Ministry of Economy and Industry of the State of Israel or grants from the Israeli Innovation Authority (formerly named Office of the Chief Scientist) of the State of Israel or from any other Israeli, other foreign binational or multinational foundation, association, university, consortiums, institution or federal, state or local governmental authority.
3.20 Foreign Corrupt Practices Act. Neither the Company nor any of its directors, officers or employees (in each case, acting on its behalf) have made, directly or indirectly, any payment or promise to pay, or gift or promise to give or authorized such a promise or gift, of any money or anything of value, directly or indirectly, to: (a) any foreign official (as such term is defined in the U.S. Foreign Corrupt Practices Act) for the purpose of influencing any official act or decision of such official or inducing her or him or her to his influence to affect any act or decision of a governmental authority; or (b) any foreign political party or official thereof or candidate for foreign political office for the purpose of influencing any official act or decision of such party, official or candidate or inducing such party, official or candidate to use her, his or its influence to affect any act or decision of a foreign governmental authority, in the case of both (a) and (b) above in order to assist the Company or any of its affiliates to obtain or retain business for, or direct business to the Company or any of its affiliates, as applicable. None of the Company, nor any of its directors, officers or employees (in each case, acting on its behalf) has made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation.
3.21 Compliance with Other Corrupt Practices Legislation. To the Company’s best knowledge: (i) none of the Company’s cash and other property is or will be, directly or indirectly, derived from any activity that is deemed criminal under United States law or Israeli Law or that contravenes federal, state, foreign or international laws and regulations dealing with money laundering; (ii) no actions of the Company will cause it to be in violation of the United States Bank Secrecy Act, the United States Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorism Financing Act of 2001 or any similar Israeli laws; and (iii) neither the Company nor, to the Company’s best knowledge, any of its directors, officers or employees are listed on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Asset Control, Department of the Treasury.
3.22 Data Privacy. Other than as set forth in Schedule 3.22 of the disclosure schedules, the Company does not collect and/or have access to and/or process any Personal Information (as defined below) of any person. No public action, claim, proceeding, compliant, inquiry, audit or investigation is pending or, to the Company knowledge, threatened against the Company or any of its officers, directors, or employees (in each case, solely in their capacity as such) by any private party or any governmental authority, foreign or domestic, with respect to Personal Information. There has been no loss, unauthorized access to or other misuse by the Company or, to the knowledge of the Company, on its behalf of such Personal Information. To the extent Company does collect Personal Information, Company is in material compliance with all Privacy Laws and Requirements. For the purposes hereof, the term (i) “Privacy Laws and Requirements” shall mean all legal requirements applicable to the Company (including Israel’s Protection of Privacy Law 5741-1981 and related regulations, directives and orders and, to the extent applicable, the EU General Data Protection Regulation (“GDPR”), contractual obligations applicable to Personal Information or the access thereto or use or transfer thereof, the Company’s internal and public-facing privacy policies, third party privacy policies which the Company (or any Person on its behalf) has been contractually obligated to comply with; and (ii) “Personal Information” shall mean individually-identifiable information from or about an individual, including, but not limited to, an individual’s: (a) personally identifiable information (e.g., name, address, telephone number, email address, financial account number, government-issued identifier, and any other data used or intended to be used to identify, contact or precisely locate a person), (b) Personal Information as defined under Article 4 of the GDPR and any applicable data protection and privacy law, and (c) “information” as defined by the Israeli Protection of Privacy Law 5741 - 1981 and applicable Israeli judicial precedents defining that term and as otherwise defined in other relevant jurisdictions.
3.23 Insurance. A list of all Company’s insurance policies is set forth in Schedule 3.23 of the disclosure schedules. There is no claim by the Company pending under any of such policies. All premiums due under such policies have been paid and the Company is otherwise in compliance with the terms and conditions of all such policies. All such policies are in full force and effect. The Company has not received any written notice that any action taken by the Company, or omitted to be taken by the Company, could render any such insurance policy void or voidable or would result in a material increase in the premium for any such insurance policy, nor has the Company received any written notice from the relevant insurance company in respect of any of its insurance policies that may adversely affect such policies coverage or the entitlement of the Company thereunder. To the Company’s knowledge, no event has occurred, and no condition or circumstance exists, that would (with or without notice or lapse of time) give rise to or serve as a basis for any claim under any insurance policy.
3.24 Preclinical Development and Clinical Trials The studies, tests, preclinical development and clinical trials, if any, conducted by or on behalf of the Company are being conducted in all material respects in accordance with experimental protocols, procedures and controls pursuant to accepted professional and scientific standards for products or product candidates comparable to those being developed by the Company and all applicable laws and regulations, including the Federal Food, Drug, and Cosmetic Act (“FDCA”) and 21 C.F.R. parts 50, 54, 56, 58, 312, and 812. The descriptions of, protocols for, and data and other results of, the studies, tests, development and trials conducted by or on behalf of the Company that have been furnished or made available to the Investors are accurate and complete. The Company is not aware of any studies, tests, development or trials the results of which reasonably call into question the results of the studies, tests, development and trials conducted by or on behalf of the Company, and the Company has not received any notices or correspondence from the U.S. Food and Drug Administration (“FDA”) or any other governmental entity or any institutional review board or comparable authority requiring the termination, suspension or material modification of any studies, tests, preclinical development or clinical trials conducted by or on behalf of the Company.
3.25 Regulatory Permits and Compliance.
(a) The Company is and has been in compliance in all material respects with all applicable laws administered or issued by the FDA or any similar governmental entity, including the FDCA and all other laws regarding developing, testing, manufacturing, marketing, distributing or promoting the products of the Company, or complaint handling or adverse event reporting.
(b) The Company possesses all applicable material permits, licenses, registrations, certifications, authorizations, orders, clearances, and approvals from the appropriate federal, state or foreign regulatory authorities necessary to conduct its business as now conducted, including all such permits, licenses, registrations, certificates, authorizations, orders and approvals required by the FDA, the Centers for Medicare and Medicaid (CMS), or any other applicable federal, state or foreign agencies or bodies engaged in the regulation of medical devices, clinical laboratories, in vitro diagnostics and reagents, sample collection materials, diagnostic testing service, biohazardous materials, and medical or diagnostic billing (collectively, “Regulatory Permits”). The Company has not received any notice of proceedings relating to the suspension, modification, revocation or cancellation of any such Regulatory Permits.
(c) All applications, submissions, information, claims, reports and statistics, and other data and conclusions derived therefrom, utilized as the basis for or submitted in connection with any and all requests for a Regulatory Permit of the FDA, CMS or other governmental authority relating to the Company products and current business, when submitted to the FDA, CMS or other governmental authority were true, complete and correct in all material respects as of the date of submission and any legally necessary or required updates, changes, corrections or modifications to such applications, submissions, information, claims, reports or statistics have been submitted to FDA, CMS and other governmental authority.
(d) Neither the Company nor, to the Company’s knowledge, any officer, employee or agent of the Company has been convicted of any crime or engaged in any conduct that has previously caused or would reasonably be expected to result in (A) disqualification or debarment by the FDA under 21 U.S.C. Sections 335(a) or (b), or any similar law, rule or regulation of any other governmental entities, (B) debarment, suspension, or exclusion under any federal healthcare programs or by the General Services Administration, or (C) exclusion under 42 U.S.C. Section 1320a-7 or any similar law, rule or regulation of any governmental entities. Neither the Company nor, to the Company’s knowledge, any of its officers, employees, contractors or agents is the subject of any pending investigation by FDA pursuant to its “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” policy as stated at 56 Fed. Reg. 46191 (September 10, 1991) (the “FDA Application Integrity Policy”) and any amendments thereto, or by any other similar governmental entity pursuant to any similar policy. Neither the Company nor any of its officers, employees, contractors, and agents has committed any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for FDA to invoke the FDA Application Integrity Policy or for any similar governmental entity to invoke a similar policy. Neither the Company nor, to the Company’s knowledge, any of its officers, employees, contractors or agents has made any materially false statements on, or material omissions from, any notifications, applications, approvals, reports and other submissions to FDA or any similar governmental entity.
(e) There are no investigations, audits, actions or other proceedings pending with respect to a violation by the Company of the FDCA, Clinical Laboratory Improvement Amendments (CLIA), or other applicable law and implementing regulations, or with respect to any certification or accreditation body, that would reasonably be expected to result in administrative, civil or criminal liability, and, to the knowledge of the Company, there are no facts or circumstances existing that would reasonably be expected to serve as a basis for such an investigation, audit, action or other proceeding, in each case with respect to the Company’s current business.
(f) The Company is in compliance in all material respects with all health care laws applicable to the Company and its business, including the following: FDCA, the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)); the Federal False Claims Act (31 U.S.C. §§ 3729-3733); the Civil Monetary Penalties Law (42 U.S.C. §§ 1320a-7a); Physician Self-Referral Law (42 U.S.C. § 1395nn); the Clinical Laboratory Improvement Amendments of 1988; the Health Insurance Portability and Accountability Act of 1996 (as amended and codified at 45 CFR Parts 160, 162 and 164); corporate practice of medicine laws; the FDCA; the Federal Trade Commission Act; the exclusion laws (42 U.S.C. § 1320a-7), Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act) and regulations promulgated pursuant to such laws, and any other related federal, state, and local law, regulation, guidance, and other issuance of any governmental authority or any similar law, rule or regulation of any governmental entities, that regulates kickbacks, fee-splitting, patient or program charges, claims submissions, recordkeeping, referrals, the hiring of employees or acquisition of services or supplies from those who have been excluded or debarred from government health care programs, quality, safety, privacy, security, licensure or any other aspect of providing or operating a clinical laboratory or performing diagnostic tests or testing services (collectively, the “Health Care Laws”).
(g) The Company is not a party to, or bound by, a Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services, or any other monitoring agreements, special reporting obligations, consent decrees, settlement agreements, or similar agreements imposed by any governmental entity concerning compliance with Health Care Laws and has not been required to pay any fines or penalties relating to or arising from any alleged or actual violation of any Health Care Law. To the Company’s knowledge, no person or entity has filed or threatened to file against the Company an action under any federal or state whistleblower statute, including under the False Claims Act of 1863 (31 U.S.C. § 3729 et seq.) or any similar law, rule or regulation of any governmental entities. The Company has not received any notification of any pending or, to the Knowledge of the Company, threatened, action from any governmental entity, including, without limitation, the Centers for Medicare & Medicaid Services, the U.S. Department of Health and Human Services Office of Inspector General, the U.S. Department of Justice or any state attorney or agency alleging potential or actual non-compliance by, or liability of, the Company or any Company Subsidiaries under any Health Care Laws.
3.26 Records. The minutes and resolutions of the Company which have been made available to the Investor’s counsel contain accurate and complete copies of all of the resolutions and minutes of the meeting of the Company’s shareholders and Board (and any committee thereof) since incorporation. The corporate records of the Company have been maintained in accordance with all applicable statutory requirements and are complete and accurate in all respects.
3.27 Full Disclosure. Neither this Agreement (including the Schedules attached hereto) nor any certificate made or delivered in connection with this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading, in view of the circumstances in which they were made. The Company has made available to the Investor’s counsel, all information reasonably available to the Company that the Investor has requested for deciding whether to invest in the Company.
4. Representations and Warranties of the Investor
The Investor hereby represents and warrants to the Company and acknowledges that the Company is entering into this Agreement in reliance thereon, as follows:
4.1 Organization. The Investor has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its formation. The Investor has full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereunder.
4.2 Authorization. The execution, delivery and performance of the obligations of the Investor hereunder have been duly authorized by all necessary corporate action. The consummation by the Investor of the transaction contemplated herein does not: (a) require any consent or approval of its respective shareholders, partners, member, owners and/or other third parties, which has not been obtained prior to the Closing; or (b) conflict with, or violate any material provision of, any agreement and/or law having applicability to the Investor.
4.3 Brokers. No agent, broker, investment banker, person or firm acting in a similar capacity on behalf of or under the authority of the Investor is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, on account of any action taken by the Investor in connection with any of the transactions contemplated under this Agreement.
4.4 Purchase for Own Account. The Investor represents that: (a) it intends to acquire the Purchased Shares for its own account and that the Purchased Shares to be purchased by the Investor will be acquired by it for investment for the Investor’s own account and not with a view to the distribution or resale thereof; subject, nevertheless, to the condition that the disposition of the property of the Investor shall at all times be within its control; (b) the execution of this Agreement and the other applicable Transaction Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action (if any) on the part of the Investor, and each of this Agreement and other applicable Transaction Documents, when executed and delivered by the Investor in accordance with this Agreement and the other applicable Transaction Documents, has or at the Closing shall have been duly executed and delivered, and constitutes or at the Closing shall constitute a valid, legal, binding and enforceable agreement of the Investor, as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (c) it has taken no action which would give rise to any claim by any other person for any other person for any brokerage commissions, finders’ fees or the like relating to this Agreement or the transaction contemplated hereby.
4.5 Risk of Loss; Disclosure of Information. Without derogating from the Investor’s right to rely on the representations and warranties of the Company set forth in Section 3 above, the Investor further represents and warrants to the Company with respect to its purchase of the Purchased Shares as follows:
(a) The Investor acknowledges that in purchasing the Purchased Shares it must be prepared to continue to bear the economic risk of such investment for an indefinite period of time.
(b) The Investor acknowledges that it and its advisers and representatives have had an opportunity to ask questions of, and receive answers from, a person acting on behalf of the Company concerning such investment, and discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Purchased Shares with the Company’s management.
(c) The Investor is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933.
(d) Nothing in this Section 4 limits or modifies the representations and warranties of the Company in Section 3 of this Agreement or the right of the Investor to rely thereon.
5. Conditions to Closing of the Investor
The obligations of the Investor to purchase the Purchased Shares and pay the Investment Amount at the Closing (if applicable) is subject to the fulfillment on or before the Closing of each of the following conditions, the waiver of which shall not be effective unless given by the Investor in writing:
5.1 Representations and Warranties. The representations and warranties of the Company hereunder shall be true and correct when made and (insofar that the date hereof and the Closing Date are not concurrent) shall be true and correct on and as of the Closing Date, in all material respects, with the same effect as though such representations and warranties had been made on and as of the Closing Date.
5.2 Performance. The Company shall have performed and complied with all agreements, obligations and conditions that are required to be performed or complied with by it on or before the Closing.
5.3 Delivery of Documents. All of the documents to be delivered by the Company pursuant to Section 2.3 shall be in a form and substance satisfactory to the Investor and shall have been made available to the Investor’s counsel.
5.4 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Investor’s counsel, and Investor’s counsel shall have received all such counterpart original and certified or other copies of such documents as they may reasonably request.
5.5 Waivers. The Company’s shareholders shall have waived all pre-emptive rights, anti-dilution rights and any other requisite approvals and/or consents as may be necessary from the Company’s shareholders.
5.6 Secondary SPA. All conditions to the closing of the share purchase agreement between the Investor and Alpha Capital Anstalt dated as of the date hereof (the “Secondary SPA”) shall have been satisfied in accordance with the Secondary SPA and closing of the transactions thereunder shall have occurred.
6. Conditions to Closing of the Company
6.1 The Company’s obligations to sell and issue the Purchased Shares at the Closing are subject to the fulfillment at or before the Closing of the following conditions, which conditions may be waived in whole or in part by the Company in writing: (a) all covenants, agreements and conditions contained in this Agreement to be performed, or complied with, by the Investor prior to the Closing shall have been performed or complied with by the Investor prior to or at the Closing; (b) the representations and warranties made by the Investor in this Agreement shall have been true and correct when made, and (insofar that the date hereof and the Closing Date are not concurrent) shall be true and correct as of Closing Date; (c) the Investor shall have paid to the Company the Investment Amount in consideration for the Purchased Shares.
7. Affirmative Covenants
7.1 Use of Proceeds. The Company will use the proceeds of the issuance and sale of the Purchased Shares for working capital and general corporate purposes in accordance with the budget and use of proceeds in the form to be agreed upon by the Company and the Investor prior to Closing, (as may be amended from time to time).
7.2 Expenses. Each party will be solely responsible for the expenses of its legal, financial, accounting and other advisors incurred in connection with the investment contemplated hereby.
7.3 Notices to the Registrar. Promptly within reasonable time following the Closing, the Company shall make all necessary reports to and filings and with the Israeli Registrar of Companies in respect of the actions and transactions effected at such Closing, subject to receipt by the Company from the Investor of the applicable documentation required for such report (including a copy of Investor’s certificate of incorporation and good standing certificate, if applicable).
7.4 Controlled Foreign Corporation. The Company shall, within sixty (60) days after the end of any taxable year, (a) notify the Investor in writing of its good faith belief, based on the information available to the Company and due inquiry with its tax advisors, as to whether the Company or any of its subsidiaries was a “controlled foreign corporation” (“CFC”) (within the meaning of Section 957 of the Internal Revenue Code of 1986, as amended (the “Code”)) at any time during such taxable year, and (b) upon written request of the Investor, provide (or cause to be provided) to the Investor, (i) such information as is in its possession and available to it concerning its or any of its subsidiaries’ shareholders, requested by the Investor to timely assist the Investor in determining whether the Company or any of its subsidiaries was a CFC at any time during such taxable year, and (ii) access to all such other information of the Company or any of its subsidiaries as may be requested by the Investor to determine the Company’s or any of its subsidiaries’ status as a CFC during such taxable year. If the Company or any of its subsidiaries is a CFC at any time during any taxable year and the Investor is a “United States shareholder” (“U.S. Shareholder”) (within the meaning of Section 951(b) of the Code) thereof, the Company shall provide (or cause to be provided) to the Investor, within sixty (60) days after the end of such taxable year, such information as the Investor may request to allow the Investor (or any of its direct or indirect owners) to timely comply with all applicable United States federal, state, and local tax laws (including elections available to the Investor or any of its direct or indirect owners thereunder), tax reporting requirements, and income tax return filing obligations, including but not limited to Internal Revenue Service Form 5471.
7.5 Passive Foreign Investment Company. The Company shall, within forty sixty (60) days after the end of any taxable year during which (x) the Company or any of its subsidiaries was not a CFC for all or any portion of such taxable year or (y) the Company or any of its subsidiaries was a CFC and the Investor was not a U.S. Shareholder thereof for all or any portion of such taxable year (in each case, as determined and mutually agreed to by the Company and the Investor in accordance with Section 7.4), (a) notify the Investor in writing of its good faith belief, based on the information available to the Company and due inquiry with its tax advisors, as to whether the Company or any of its subsidiaries is a “passive foreign investment company” (“PFIC”) (within the meaning of Section 1297 of the Code) for such taxable year with respect to the Investor or is reasonably likely to become a PFIC with respect to the Investor for the current taxable year or any future taxable years, and (b) upon written request of the Investor, provide (or cause to be provided) to the Investor, such information as is in its possession and available to it as may be requested by the Investor to timely assist the Investor in determining whether the Company or any of its subsidiaries was a PFIC with respect to the Investor at any time during such taxable year or is reasonably likely to become a PFIC with respect to the Investor for the current taxable year or any future taxable years. If the Company or any of its subsidiaries is a PFIC for any taxable year with respect to the Investor, the Company shall provide (or cause to be provided) to the Investor, within sixty (60) days after the end of such taxable year, (a) such information as the Investor may request to allow the Investor to timely comply with all applicable United States federal, state, and local tax laws (including elections available to the Investor), tax reporting requirements, and income tax return filing obligations, including but not limited to Internal Revenue Service Form 8621, and (b) such statements, information and documentation as the Investor may request to allow the Investor to timely make an election to treat the Company or any of its subsidiaries as a “Qualified Electing Fund” (“QEF Election”) under Section 1295 of the Code or timely file a “Protective Statement” pursuant to Treasury Regulations Section 1.1295-3, as amended (or any successor thereto). In connection with a QEF Election made by the Investor or a Protective Statement filed by the Investor, the Company shall provide annual financial information (including but not limited to information required under Treasury Regulations Section 1.1295-1(g)) to the Investor as soon as reasonably practicable following the end of each taxable year (but in no event later than sixty (60) days following the end of each such taxable year), and shall provide the Investor with access to such other information of the Company and its subsidiaries as the Investor may request to allow the Investor to timely comply with all applicable United States federal, state, and local tax laws, tax reporting requirements, and income tax return filing obligations in connection with such QEF Election or Protective Statement.
8. Miscellaneous
8.1 Survival of Warranties. Unless otherwise set forth in this Agreement, the representations and warranties of the Company and the Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of the Investor or the Company.
8.2 Further Assurances. Each of the parties hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Agreement and the intentions of the parties as reflected thereby.
8.3 Governing Law. This Agreement shall be governed by and construed solely in accordance with the laws of the State of Israel excluding that body of law pertaining to conflict of law. The parties hereto agree to submit to the exclusive jurisdiction of the State of Israel and the courts of Tel Aviv- Jaffa with respect to the breach or interpretation of this Agreement or the enforcement of any and all rights, duties, liabilities, obligations, powers, and other relations between the parties arising under this Agreement.
8.4 Successors and Assigns; Assignment. Except as otherwise expressly limited herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto. None of the rights, privileges, or obligations set forth in, arising under, or created by this Agreement may be assigned or transferred without the prior consent in writing of each party to this Agreement, with the exception of the following assignments and transfers which may be made freely without such consent: assignments and transfers from the Investor (a) to a Permitted Transferee (as defined in the Amended Articles) of the Investor; or (b) to a transferee of shares purchased hereunder by the Investor, together with such transfer of such shares made in accordance with the terms of the Company’s Articles of Association as in effect from time to time.
8.5 Entire Agreement; Amendment and Waiver. This Agreement and the Schedules hereto (including without limitation the Amended Articles and the Shareholders’ Rights Agreement) constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and thereof and supersedes any other written or oral agreement relating to the subject matter hereof existing between the parties (provided that this Agreement and the respective Transaction Documents may be amended in accordance with their applicable terms). Any term of this Agreement may be amended and the observance of any term hereof may be waived (either prospectively or retroactively and either generally or in a particular instance) only with the written consent of the Company, and the Investor.
8.6 Notices, etc. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) upon personal delivery to the party to be notified, (b) on the first business day following delivery after having been sent by electronic mail (with electronic confirmation of delivery), (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next business day delivery, with written verification of receipt. All notices and other communications to (i) an Investor, shall be sent to Investor’s address as set forth in Schedule II ; (ii) the Company, shall be sent to Company’s address as set forth in Schedule I, or, in each case, to such other address as such party shall provide to the Company by written notice in accordance with this Subsection 8.6.
8.7 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Agreement, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent, or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. Unless otherwise set forth herein, all remedies, either under this Agreement or by law or otherwise afforded to any of the parties, shall be cumulative and not alternative.
8.8 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.
8.9 Counterparts. This Agreement may be executed in any number of counterparts (including by email or electronic signature), each of which shall be deemed an original and enforceable against the parties actually executing such counterpart, and all of which together shall constitute one and the same instrument.
8.10 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF the parties have signed this Series B Share Purchase Agreement as of the date first hereinabove set forth.
| COMPANY: | ||
| /s/ Diane Abensur Bessin | ||
| NanoSynex Ltd. | ||
| Name: | Diane Abensur Bessin | |
| Title: | CEO | |
[SIGNATURE PAGE OF SERIES B SHARE PURCHASE AGREEMENT (1)]
IN WITNESS WHEREOF the parties have signed this Series B Share Purchase Agreement as of the date first hereinabove set forth.
| INVESTOR: | ||
| /s/ Michael Poirier | ||
| QUALIGEN THERAPEUTICS INC. | ||
| By: | Michael Poirier |
|
| Title: | Chairman & CEO | |
SIGNATURE PAGE OF SERIES B SHARE PURCHASE AGREEMENT (2)]
SCHEDULE I
COMPANY:
NanoSynex Ltd.
Pinhas Sapir 3, Ness Tziona
6334600 – Weizmann Science Park, Israel
with a copy (which shall not constitute notice) to:
Uri Dotan, Adv.
Horn & Co.
Amot Investments Tower, 2 Weizmann St., 24th Floor
Tel-Aviv 6423902, Israel.
Phone: +972-3-637 8200
Email: udotan@hornlaw.co.il
Bank Account Information:
FOUNDERS:
1. Diane Abensur Bessin.
2. Michelle Heymann.
SCHEDULE II
INVESTOR:
Name Contact Details Investment
Amount Number of Preferred
B Shares
Qualigen Therapeutics Inc. __________ US$ 600,000 381,786
Total US$ 600,000 381,786 Preferred B Shares
SCHEDULE 1.1
Capitalization Table
[attached]
SCHEDULE 2.2(a)(H)
MASTER AGREEMENT FOR THE OPERATIONAL AND TECHNOLOGY FUNDING OF NANOSYNEX LTD.
THIS MASTER AGREEMENT FOR THE OPERATIONAL AND TECHNOLOGY FUNDING OF NANOSYNEX LTD. (this “Agreement”), dated as of April 29, 2022, is entered into by and among NanoSynex Ltd., a company incorporated under the laws of the State of Israel (the “Company”) and Qualigen Therapeutics Inc. a Delaware corporation based in California, U.S., (the “Funder”).
R E C I T A L S
WHEREAS, the Company is seeking additional financing in order to fund its day-to-day operations and advancement of its technology; and
WHEREAS, the Funder is a majority owner of the Company and desires to protect and grow the value of its investment in the Company by providing ongoing funding to the Company to support the operational and technology development of the Company; and
WHEREAS, each of the Entitled Holder of the Company (as defined in the Company’s then current articles of association, as may be amended from time to time (the “Articles”), has waived all Pre-emptive Rights (as defined in the Articles) with regards to any participation in the ongoing funding of the Company in an amount of up to US$10,420,000 (the “Aggregate Funding Amount”) all subject to and in accordance with the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and intending to be legally bound, the parties hereto agree as follows:
1. The Ongoing Funding.
1.1. The Ongoing Funding Amount. Subject to the terms and conditions of this Agreement, the Funder shall pay to the Company a portion of the Aggregate Funding Amount, as set forth in Exhibit A hereto (each, an “Installment Funding Amount”), on such dates and subject to the achievement of the applicable milestones associated with each such Installment Funding Amount, as set forth in Exhibit A hereto (each such payment date, an “Installment Date”). At each Installment Date, the Company shall issue to Funder, a promissory note (which may contain convertible features) with a face value in the amount of the Installment Funding Amount paid by Funder to the Company on such Installment Date, in substantially the form attached as Exhibit B hereto (each a “Note” and together the “Notes”).
1.2. On or prior to each Installment Date, the management of the Company shall deliver to the Funder a written notice of the achievement of the milestone/s applicable to such Installment Date (the “Completion Notice”) and unless the Funder objects to, disputes or disagrees with the Completion Notice (the “Dispute”), then the Funder shall provide the Installment Funding Amount within 3 business days following the receipt of the Completion Notice against the issuance and execution of the corresponding Note (each, an “Installment Closing”). To the extent that there is a Dispute, then the Funder shall provide the Company with a written notice which shall include, in reasonable detail, the basis for such Dispute (the “Objection Notice”). Funder shall be deemed to agree that the applicable milestone/s applicable to a particular Installment Date have been successfully achieved if it has not provided to the Company an Objection Notice within 7 days of receipt of the Company’s Notice. In the event that the Funder shall have provided an Objection Notice, the Company and the Funder shall use their commercially reasonable efforts to resolve the Dispute with respect to the Completion Notice (and the milestone fulfillment) in an amicable manner. If the Funder and the Company are not able to reach an understanding with respect to the achievement of the milestone/s pursuant to which a Completion Notice has been delivered to the Funder within 7 days of delivery of the Objection Notice to the Company, the items in Dispute shall be referred to an independent expert, who shall be agreed upon between the parties (the “Expert”) for final determination within 30 days after the date of such referral. If the Funder and the Company shall fail to agree upon the identity of such Expert within 7 days, then the Expert shall be appointed by the Head of the Israel Bar Association. This provision for arbitration shall be specifically enforceable by the parties, and the determination of the Expert in accordance with the provisions hereof shall be final and binding upon the Company and the Funder with no right of appeal therefrom. The costs of the Expert shall be borne as to one-half by the Company, and as to one-half, by the Funder.
1.3. It is agreed that in the event that certain milestone/s have not been achieved on or before the applicable Installment Date (“Missed Installment Date”), and such milestone/s have been achieved on or prior to the subsequent Installment Date, then the Funder shall provide the Company the respective Installment Funding Amount for the Missed Installment Date on such subsequent Instalment Date (in addition to any Installment Funding Amount owed with respect to such subsequent Installment Date).
2. Closing; Transfer of Funding Amount.
2.1. The initial closing under this Agreement shall be held remotely via the exchange of documents and signatures simultaneously with the Closing under the Series B Preferred Share Purchase Agreement between the Company and Funder, dated as of April 29, 2022 (the “Series B SPA”) (such date, the “Initial Closing”). At the Initial Closing, the Company shall deliver to the Funder: (i) true and correct copies of the necessary resolutions of the Company’s Board of Directors and shareholders approving, inter alia, this Agreement and the transactions contemplated hereby; and (ii) waivers of rights of preemption or other participation rights, executed by all entitled to such rights under the Articles, or confirmation by the Company that any shareholder entitled to such rights under the Articles that have not executed such waiver, failed to duly exercise such right with respect to the Agreement and the transactions contemplated herein such that such right has irrevocably lapsed with respect hereof.
3. Representations and Warranties of the Company
The Company’s representations and warranties under Section 3 to the Series B SPA, are hereby fully incorporated by reference (the “Reps”) and the Company hereby represents and warrants the Reps to Funder as of the Initial Closing.
4. Representations and Warranties of the Funder.
The Funder represents and warrants to the Company that it has knowledge and experience in financial and business matters, is capable of evaluating the merits and risks of the transactions evidenced by this Agreement, can bear the economic consequences of such investment for an indefinite period of time, has been furnished with all information it has requested and been afforded the opportunity to ask questions concerning the Company. The Funder further acknowledges that the Company is an early-stage company, engaging in speculative research and development and that that there are substantial risks of loss of investment incidental to the transactions contemplated by this Agreement. The Funder is an “accredited investor” within the meaning of Regulation D of the Securities Act of 1933, as amended. The foregoing shall not derogate from the Company’s representations in Section 3 above.
5. Conditions to Funding by the Funder
The obligations of the Funder to pay the applicable Installment Funding Amount at each Installment Closing is subject to the fulfillment on or before the Initial Closing and each subsequent Installment Closing (as applicable) of each of the following conditions, the waiver of which shall not be effective unless given by the Funder in writing:
5.1. Each of the Reps are true and correct as of the date of this Agreement and shall be true and correct on and as of the Initial Closing.
5.2. No Company Material Adverse Effect has occurred or exists since the date of this Agreement and as of the Initial Closing and each subsequent Installment Closing. “Material Adverse Effect” means (i) any event, occurrence, fact, condition, change or development that has had or could reasonably be expected to have, either alone or together with other events, occurrences, facts, conditions, changes or developments, a material adverse effect on the business, properties, assets, key employees, operations, results of operations, condition (financial or otherwise), prospects, assets or liabilities of the Company; (ii) any event, occurrence, fact, condition, change or development that prevents, materially impairs or materially delays the Company’s ability to conduct the Company’s business as it is now being conducted and as presently proposed to be conducted, (iii) any of the following Reps is not true and correct in all material respects as of each Installment Closing, with the exception of non-adverse ordinary course changes in the Reps due to ordinary course development and progress of the business following the initial Closing : Section 3.1 (“Organization; Permits”), Section 3.2 (“Share Capital”), Section 3.7 (“Authorization; Approvals”), Section 3.8 (“No Breach”), Section 3.10 (“Intellectual Property and Other Intangible Assets”), Section 3.11 (“Taxes”), Section 3.24 (“Preclinical Development and Clinical Trials”), and Section 3.25 (“Regulatory Permits and Compliance”) (all as set forth in the Series B SPA); or (iv) either of the following covenants is not true and correct as of each Installment Closing: Section 7.4 (“Controlled Foreign Corporation”) and 7.5 (“Passive Foreign Investment Company”).
5.3. The Company has performed and complied with each of the covenants and obligations under this Agreement and/or the Notes required to be performed and complied with by the Company prior to or as of the Initial Closing and each subsequent Installment closing.
6. Affirmative Covenants
6.1. Company shall not distribute and/or declare any dividend from the date of this Agreement and until the last subsequent Installment closing under this Agreement.
6.2. So long as this Agreement and/or any of the Notes remain outstanding, the Company undertakes not to create or permit to subsist any mortgage, charge, pledge, lien or other encumbrance upon any or all of its present or future assets to secure any present or future Bond Issue without at the same time, or prior thereto, securing the Notes equally and rateably therewith. “Bond Issue” means any indebtedness of the Company which is, in the form of, or is represented by, any bond, security, certificate or other instrument which is or is capable of being listed, quoted or traded on any stock exchange or in any securities market (including any over-the-counter market) and any guarantee or other indemnity in respect of such indebtedness.
7. Termination.
Notwithstanding anything to the contrary in this Agreement, Funder may terminate this Agreement at any time following the date that is six (6) months after the date of this Agreement in its sole discretion (“Termination”) upon 120 days’ notice (the “Termination Notice Period”); provided however, such termination shall not limit Funder’s obligation to pay any non-disputed Installment Funding Amount that otherwise becomes due under this Agreement during the Termination Notice Period as a result of the Company’s having completed or substantially completed Milestones prior to or during the Termination Notice Period; and provided further, that if such Termination is due to a Material Adverse Effect under Section 5(1), the notice of Termination may be delivered immediately upon such occurrence, including during the first six (6) months following the date of this Agreement, and the required Termination Notice Period shall be 20 days instead of 120 days. The Company’s sole recourse in the event Funder terminates this Agreement in accordance with this Section 7 shall be pursuant to this Section 7 and Article 46 of the Company’s Articles relating to the removal of a Funder-appointed director to the Company’s board of directors.
8. Miscellaneous.
8.1. Taxes. Out of any amount payable by the Company to the Funder under any Note issued by the Company to the Funder pursuant to this Agreement, the Company shall withhold tax at the rate provided by applicable law and shall transfer such withheld tax to the Israeli Tax Authority, unless otherwise specified in any tax certificate issued by the Israeli Tax Authority, in which case the Company shall withhold tax as provided in such tax certificate. To the extent that amounts are so withheld and paid to the Israeli Tax Authority by the Company, such withheld amounts shall be treated for all purposes of this Agreement as having been paid by the Company to the Funder, in accordance with the provisions of this Agreement. Upon conversion of any portion of a Note issued by the Company to the Funder to Preferred Shares pursuant to the terms of such Note, the Funder, at its sole discretion, shall be entitled to waive the repayment of its respective Interest thereon. Alternatively, in the event that the Funder does not wish to waive the repayment of its respective Interest, the Funder shall either, at his election: (i) transfer to the Company a certificate issued by the Israeli Tax Authority which exempts the Company from withholding tax with respect to such respective Interest; (ii) transfer to the Company an amount equal to the applicable withholding tax on such respective Interest, in order for the Company to transfer such amount to the Israeli Tax Authority (on account of withheld tax) or (iii) convert only Principal amount (and not Interest thereon).
8.2. Further Assurances. Each of the parties hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Agreement and the intentions of the parties as reflected hereby, including, without limitation, to create, reserve or approve any action for the creation or reservation (as applicable) of a sufficient type and number of securities of the Company to allow the conversion of the Funding Amount (or the portion thereof actually invested) pursuant to the terms of this Agreement.
8.3. Governing Law; Jurisdiction. This Agreement shall be governed by and construed and interpreted according to the laws of the State of Israel, without regard to the conflict of laws provisions thereof. Any dispute arising under or in relation to this Agreement shall be resolved exclusively in the competent courts located in Tel Aviv, Israel, and each of the parties hereby irrevocably submits to the exclusive jurisdiction of such courts.
8.4. Entire Agreement; Amendment and Waiver. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof and supersedes any prior agreements between the parties with respect to such subject matter. Any term of this Agreement may be amended, and the observance of any term hereof may be waived (either prospectively or retroactively and either generally or in a particular instance) only with the written consent of the Company and the Funder.
8.5. Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) upon personal delivery to the party to be notified, (b) on the first business day following delivery after having been sent by electronic mail (with electronic confirmation of delivery), (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next business day delivery, with written verification of receipt. Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Agreement, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring.
8.6. Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.
8.7. Counterparts. This Agreement may be executed and delivered in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. Signed counterparts of this Agreement may be delivered by facsimile and by scanned pdf. image.
8.8. Successors and Assigns. This Agreement may not be assigned by either party without the consent of the Company (if by an Funder) or the Funder (if by the Company), however, Funder may assign or transfer its rights, privileges, or obligations set forth in, arising under, or created by this Agreement to its “Permitted Transferees” as defined in the Articles, provided, however, that any such Permitted Transferee agrees in writing, prior to or at such assignment or transfer, to be bound by all agreements, warranties and representations binding upon such Funder under this Agreement.
8.9. Survival of Representations and Warranties. All agreements, representations and warranties contained herein shall survive the execution and delivery of this Agreement and the closing of the transactions contemplated hereby without regard to any investigation or discovery made by the Funder or knowledge of the subject matter thereof. None of the Funder’s rights under this Agreement will be limited or otherwise affected by any imputed knowledge or knowledge obtained by the Funder at any time before or after the Initial Closing with respect to any inaccuracy of any of the Reps.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first written above.
| THE COMPANY: | ||
| NANOSYNEX LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first written above.
| FUNDER: | ||
| QUALIGEN THERAPEUTICS INC. | ||
| By: | ||
| Title: | ||
Exhibit A
Schedule of Installments
Exhibit B
Form of Note
THIS NOTE HAS BEEN ISSUED WITHOUT REGISTRATION OR QUALIFICATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF WITHOUT SUCH REGISTRATION AND QUALIFICATION, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER IN FORM AND SUBSTANCE THAT SUCH SALE, TRANSFER, OR DISPOSITION MAY LAWFULLY BE MADE WITHOUT REGISTRATION OR QUALIFICATION.
FOR PURPOSES OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE HOLDER OF THIS NOTE MAY CONTACT [INSERT NAME OF THE APPROPRIATE REPRESENTATIVE OF THE COMPANY] AT [INSERT PHONE NUMBER], WHO WILL, NOT LATER THAN TEN DAYS AFTER THE DATE HEREOF, PROMPTLY MAKE AVAILABLE TO HOLDERS, UPON REQUEST, THE FOLLOWING INFORMATION: (1) THE ISSUE PRICE AND ISSUE DATE OF THIS NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS NOTE, AND (3) THE YIELD TO MATURITY OF THIS NOTE.
| PROMISSORY NOTE | |
| US $[______] | _____ __, 2022 |
FOR VALUE RECEIVED, NanoSynex Ltd., a company incorporated under the laws of the State of Israel (the “Company”), hereby promises to pay to Qualigen Therapeutics Inc. (the “Funder”), a Delaware company based in California, U.S., in the manner hereinafter specified, the principal sum of _[_____] US Dollars ($[____],000.00) (the “Principal”), together with interest from the date hereof at a rate of 9.00% per annum on the principal balance from time to time outstanding (the “Interest”). Principal and Interest due under this Promissory Note (the “Note”) shall be due and payable in lawful money of the United States. Payments hereunder shall be made via wire transfer to the Funder’s bank account as set forth in Exhibit A attached hereto or such other address as Funder may hereafter designate by written notice to Company.
This Note is being made pursuant to that Master Agreement for the Operational and Technology Funding of NanoSynex Ltd. between Company and Funder, dated April 29, 2022 (the “Funding Agreement”), and all terms set forth therein shall apply to this Note mutatis mutandis.
1. Payments.
a. The Principal and Interest under this Note shall be due and payable upon the sooner to occur of: (i) five (5) years from the date of this Note; (ii) the acquisition by any person or entity of all or substantially all of the share capital of Company, through share purchase, issuance of shares or merger of the Company or the purchase of all or substantially all of the assets of Company; or (iii) the initial public offering (“IPO”) of Company (the “Maturity Date”). All payments under this Note shall be applied first to accrued but unpaid Interest, and next to outstanding Principal.
b. Prepayment. Principal and accrued Interest due hereunder may be prepaid or paid in advance by Company in its sole discretion, in whole or in part, at any time upon fifteen (15) days prior written notice without any premium or penalty imposed on Company.
2. Conversion. If at any time, Funder’s ownership of the share capital of the Company on an issued and outstanding basis falls or is reasonably expected to fall below 50.1%, solely as a result of the exercise of existing or future options (or an equivalent instrument) or as a result of issuance of restricted, shares, restricted stock units (or an equivalent instruments) under the Company’s 2018 Share Option Plan or an equivalent plan adopted by the Company’s board of directors (a “Trigger Event”), Funder may, in its sole discretion, convert all or any portion of the outstanding Principal amount (such portion of Principal amount that is so converted, the “Convertible Amount”) into shares of the Company’s most senior class of Preferred Shares (as such term is defined under the Company’s then current articles of association, as may be amended from time to time (the “Articles”) existing immediately prior to such conversion. The number of such shares to be issued upon such conversion shall be equal to the quotient obtained by dividing the Convertible Amount by a price per share equal to the higher of (i) the Original Issue Price of the Preferred B Shares –(or the Conversion Price of the Preferred B Shares, if such Conversion Price is lower than the Original Issue Price) (as such terms are defined in the Articles); and (ii) a price that reflects a discount of 20% (twenty percent) on the Original Issue Price of the Company’s most senior class of Preferred Shares at the time of conversion that are issued in a bona fide financing, so that, following such conversion, Funder shall regain 50.1% of Company’s issued and outstanding share capital. The Convertible Amount shall be deemed to be repaid at the time of conversion. For as long as the Principal amount has not been repaid or converted in full, the Company shall deliver a thirty (30) days prior written notice to the Funder, or shorter notice if thirty (30) days is not practically possible, of any contemplated Trigger Event. The conversion right of the Funder described in this Section 2, shall not apply in case the Funder’s ownership of the share capital of the Company on an issued and outstanding basis falls below 50.1% due to exercise of options or an equivalent instrument immediately prior to, and contingent upon, a consummation of subsections (i), (ii) or (iii) of the definition of a Deemed Liquidation (as such term is defined in the Articles).
3. Default and Remedies. The occurrence of any one or more of the following events shall constitute an event of default under this Note (an “Event of Default”): (i) if Company fails to pay when due any payment of Principal or Interest on this Note or any other Note issued to Funder under the Funding Agreement and such failure continues for five (5) business days after the due date; (ii) if, pursuant to or within the meaning of the United States Bankruptcy Code or any other applicable law of Company’s home jurisdiction relating to insolvency or relief of debtors (the “Code”), Company (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a trustee, receiver, assignee, liquidator, or similar official; or (D) makes an assignment for the benefit of its creditors; (iii) if a court of competent jurisdiction enters an order or decree under the Code that (A) is for relief against Company in an involuntary case; (B) appoints a trustee, receiver, assignee, liquidator, or similar official for Company, or substantially all of Company’s assets; or (C) orders the liquidation of Company, and in each case the order or decree is not dismissed within sixty (60) days, which breach goes uncured for five (5) business days after Funder notifies Company of such breach in writing; or (iv) Company becomes insolvent. Upon the occurrence of an Event of Default:
a. All unpaid amounts under this Note shall, without notice, become immediately due and payable at the option of Funder (which may demand immediate repayment of all or part of any unpaid amount);
b. Funder shall have all rights and remedies under applicable law; and
c. Interest shall accrue at the default rate of eighteen percent (18%) per annum.
4. Revival. To the extent that Company makes a payment or Funder receives any payment or proceeds for Company’s benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under the Code, then, to such extent, the obligations of Company hereunder intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Funder.
5. Miscellaneous.
a. Modifications and Amendments. The terms and provisions of this Note may be modified or amended only by written agreement executed by Company and Funder.
b. Assignment/Binding Effect. Neither this Note, nor any right hereunder, may be assigned by Company without the prior written consent of Funder. This Note shall be binding upon, and inure to the benefit of, the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.
c. Severability. In the event that any court of competent jurisdiction shall finally determine that any provision, or any portion thereof, contained in this Note shall be void or unenforceable in any respect, then such provision shall be deemed limited to the extent that such arbitral tribunal determines it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall determine any such provision, or portion thereof, wholly unenforceable, the remaining provisions of this Note shall nevertheless remain in full force and effect.
d. Interpretation. The parties hereto acknowledge and agree that: (i) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Note, and (ii) the terms and provisions of this Note shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Note.
e. Headings and Captions. The headings and captions of the various subdivisions of this Note are for convenience of reference only and shall in no way modify, or affect, or be considered in construing or interpreting the meaning or construction of any of the terms or provisions hereof.
f. Governing Law; Jurisdiction. This Agreement shall be governed by and construed and interpreted according to the laws of the State of Israel, without regard to the conflict of laws provisions thereof. Any dispute arising under or in relation to this Agreement shall be resolved exclusively in the competent courts located in Tel Aviv, Israel, and each of the parties hereby irrevocably submits to the exclusive jurisdiction of such courts.
g. Notices. All notices and other communications given or made pursuant to this Note shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) upon personal delivery to the party to be notified, (b) on the first business day following delivery after having been sent by electronic mail (with electronic confirmation of delivery), (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next business day delivery, with written verification of receipt.
h. Counterparts. This Note may be executed in any number of counterparts (including by email or electronic signature), each of which shall be deemed an original and enforceable against the parties actually executing such counterpart, and all of which together shall constitute one and the same instrument.
i. Waivers. The Company and all others who may become liable for payment of all or any part of the obligations hereunder do hereby severally waive presentment and demand for payment, protest, notice of nonpayment, notice of intent to accelerate the maturity hereof, notice of protest, notice of dishonor and notice of maturity. Any delay by the Funder hereof in exercising any power or right hereunder shall not operate as a waiver thereof, nor shall the exercise of any single or partial right hereunder create any other or further exercise thereof or exercise of any other power or right, nor shall the Funder hereof be liable for exercising or failing to exercise any such power or right. The rights, remedies and benefits herein specified are cumulative and not exclusive of any rights, remedies or benefits which the Funder hereof otherwise may have.
[Signature on following page]
IN WITNESS WHEREOF, the parties have executed this Note effective as of the date first above written.
| “COMPANY” | ||
| NANOSYNEX LTD. | ||
| By: | ||
| “FUNDER” | ||
| QUALIGEN THERAPEUTICS INC. | ||
| By: | ||
Exhibit A
Bank Account
[___]
Exhibit 10.2
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of April 29, 2022 (the “Effective Date”), by and between Qualigen Therapeutics Inc. (the “Purchaser”) and Alpha Capital Anstalt (the “Seller”).
W I T N E S S E T H:
WHEREAS, the Seller owns and desires to sell 2,232,861 Preferred A-1 Shares, nominal value NIS 0.01 each (the “Purchased Shares”), of NanoSynex Ltd., an Israeli company (the “Company”);
WHEREAS, the Purchaser has expressed its desire to purchase from the Seller, and the Seller has agreed to sell and transfer to the Purchaser the Purchased Shares, for a price per Purchased Share of US$1.5672 (the “PPS”), for an aggregate purchase price of US$ 3,500,000 (the “Purchase Price”), which Purchase Price shall be paid in shares of common stock, par value $0.001 per share (the “Common Stock”), of the Purchaser, subject to the terms set forth herein.
WHEREAS, the Purchaser, concurrently with the transaction contemplated herein, is investing additional amounts in the Company in accordance with and pursuant to the terms set forth in that certain Series B Preferred Share Purchase Agreement (the “Main SPA”) of even date herewith (such transaction described therein, the “Series B Financing”);
WHEREAS, the Seller has agreed to, concurrently with the consummation of the Series B Financing, (i) sell the Purchased Shares to Purchaser and (ii) transfer and assign to the Purchaser all of its rights under the Series A Preferred Share Purchase Agreement dated September 20, 2018 (the “Series A SPA”), by and among the Company, the Founders, the Purchaser and the Lenders (as such terms are defined in the Series A SPA); and
WHEREAS, the Series B Financing is inter alia contingent upon the completion of the transactions contemplated herein, and the transactions contemplated herein are inter alia contingent upon the completion of the Series B Financing;
NOW THEREFORE, intending to be legally bound, the parties agree as follows:
ARTICLE I. PURCHASE PRICE.
1.01 Purchase and Sale. Upon the terms and subject to the conditions of this Agreement (including the payment of the Purchase Price), the Seller agrees to sell to the Purchaser and the Purchaser agrees to purchase from the Seller at the Closing (as defined below), the Purchased Shares.
1.02 Tax Withholding. The Purchaser shall be entitled to deduct and withhold from any consideration payable by it to Seller pursuant to this Agreement, such amounts as it is required to deduct and withhold with respect to the making of such payments under the Israeli Income Tax Ordinance (New Version) 1961, unless Seller provides the Purchaser with an applicable withholding certificate issued by the Israeli Tax Authority (the “ITA” and “Tax Withholding Certificate”, respectively) with respect to the Seller, which certificate exempts the Purchaser from such withholding requirement or reduces the withholding tax due in respect of such payment, in which case the taxes shall not be withheld, or shall be deducted and withheld from any consideration payable or otherwise deliverable to Seller pursuant to this Agreement at the reduced rate as indicated in the Tax Certificate, and the balance of the Purchase Price payable to the Seller not so withheld shall be promptly paid to the Seller. For the avoidance of doubt, to the extent that Seller does not obtain prior to Closing a Tax Withholding Certificate that exempts the Purchaser from withholding tax (i.e., either Purchaser needs to withhold the full tax amount or just a reduced tax rate), then Seller shall transfer to Purchaser cash in an amount equivalent to such amounts as Purchaser is required to deduct and withhold with respect to the Purchase Price under the Israeli Income Tax Ordinance (New Version) 1961. To the extent that amounts are so withheld by the Purchaser, the Purchaser shall (i) promptly pay such amounts to the ITA and (ii) promptly provide the Seller with written confirmation as to the amount so withheld. Any withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Seller as part of the Purchase Price due to the Seller from the Purchaser hereunder. To the extent that the Purchase Price is not reduced (or is not sufficiently reduced) by the Purchaser or taxes are not otherwise properly paid by the Seller and as a result thereof the Purchaser is required to pay amounts above and beyond the Purchase Price (the “Excess Amount”) to the ITA or any other governmental or regulatory authority due to the sale and purchase of the Purchased Shares, the Seller shall indemnify the Purchaser for any such Excess Amount.
1.03 Closing. The transactions contemplated in this Agreement shall take place concurrently with and conditioned upon the closing of the Main SPA via the exchange of documents and signatures (the “Closing”).
1.04 Closing Transactions. At the Closing, the following transactions shall occur, which transactions shall be deemed to take place simultaneously and no transaction shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered:
(a) The Purchaser shall deliver:
(i) to the Seller, the Purchase Price (for the avoidance of any doubt, without deduction or withholding of any amounts therefrom), by way of issuance of a number of shares of Common Stock (the “Consideration Shares”), equal to the Purchase Price divided by the Nasdaq Official Closing Price of the Purchaser’s Common Stock as listed on the Nasdaq Capital Market on the last business day prior to the date of the Closing; provided however, that in the instance that the total number of Consideration Shares to be issued to the Seller shall be greater than 9.9% of the total shares of Purchaser’s Common Stock issued and outstanding at the time of payment of the Purchase Price, inclusive of the issuance of the Consideration Shares representing the Purchase Price (the “Maximum Common Stock Issuance”), then the Purchaser shall only issue to the Seller such number of shares of Common Stock that represent the Maximum Common Stock Issuance, and the difference between the total Purchase Price and the aggregate value of the Consideration Shares issued by the Purchaser to Seller shall instead be issued as pre-funded common stock warrants in the form attached hereto as Exhibit A (the “Pre-Funded Warrants”); and
(ii) to the Company, the Share Transfer Deed (as defined below) signed by the Purchaser.
(b) Seller shall deliver the following documents:
(i) to the Purchaser, a duly authorized and executed share transfer deed, in the form attached hereto as Exhibit B, effecting the transfer of the Purchased Shares from the Seller to the Purchaser (the “Share Transfer Deed”);
(ii) to the Purchaser, the original share certificate issued to the Seller representing the Purchased Shares for cancellation by the Company or an affidavit of lost share certificate(s) in a form acceptable to the Company executed by the Seller; and
(iii) to the Purchaser, a duly authorized and executed assignment of rights agreement in the form attached hereto as Exhibit C effecting the assignment of Seller’s rights under the Series A SPA to the Purchaser (the “Assignment of Rights”).
ARTICLE II. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS OF THE SELLER
The Seller represents and warrants to the Purchaser as of the Effective Date and as of the Closing, acknowledging that the Purchaser is relying on Seller’s representations in entering into the transactions to purchase the Purchased Shares, as follows:
2.01 Existence and Power. The Seller is an entity duly established and validly existing under the laws of its jurisdiction of incorporation or formation and has all corporate or entity powers and authorizations to carry on its business as now being conducted and to execute and deliver this Agreement and any ancillary documents and to consummate the transactions contemplated hereby.
2.02 Authorization. The execution, delivery and performance by the Seller of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate, entity or partnership action on its part. This Agreement constitutes a valid and binding agreement of the Seller, enforceable against the Seller in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. No consent, approval, order, license, permit, action by, or authorization of or designation, declaration, or filing with any person or governmental authority is required that has not been, or will not have been, obtained by the Purchaser prior to the Closing in connection with the valid execution, delivery and performance of this Agreement and any ancillary documents and the transfer of the payment of the Purchase Price to the Seller.
2.03 Non-contravention. The execution, delivery and performance of this Agreement does not and will not, contradict or violate, result in a breach of, or constitute a default under: (i) any court ruling or decree, any decision of a quasi-judicial body or any administrative order or decision in any country to which the Seller is subject or by which the Shares are bound; (ii) any agreement, instrument, obligation or restriction to which the Seller is a party or by which the Seller or any Purchased Shares are bound; or (iii) any applicable law.
2.04 Transfer Restrictions. The Seller has the full and unrestricted legal right to sell and transfer the Purchased Shares to the Purchaser as provided herein, subject to the restrictions on transfer imposed by the Company’s Corporate Documents (as defined below). The Seller is selling the Purchased Shares for its own account and is not acting as an agent, representative, intermediary, nominee or in a similar capacity for any other person or entity, nominee account or beneficial owner. The Purchased Shares have not been registered under the United States Securities Act of 1933, as amended (the “Act”), or any other securities laws, and after transfer to the Purchaser pursuant hereto, each Purchased Share will be subject to the transfer restrictions contained in the Company’s Corporate Documents. All provisions governing any transfer or assignment restrictions specified in any of the Company’s Corporate Documents have been (or will have been prior to or at the Closing) complied with (or waived in writing by the beneficiaries thereof) in respect of the sale of the Purchased Shares contemplated herein, and, pursuant to the Company’s Corporate Documents (and subject to compliance with their terms) and to applicable law, the Seller is free to sell the Purchased Shares to the Purchaser in the manner contemplated herein. For purposes of this Agreement, the term “Corporate Documents” means the Company’s Amended and Restated Articles of Association (the “Amended Articles”) and the Investors’ Rights Agreement between the Company and certain of its shareholders in each case effect as of the Closing.
2.05 Ownership of the Purchased Shares. The Seller is the legal and beneficial owner of the Purchased Shares, free and clear of any liens, charges, judgments, security interests, encumbrances, debt, limitations or restrictions (including, but not limited to, any restriction on the right to vote, sell or otherwise dispose of the Purchased Shares, any mortgage, pledge, charge, title retention, right to acquire, hypothecation, option, right of first offer, tag along or right of first refusal), rights, claims, options to purchase, proxies, voting trusts and other voting agreements, calls and commitments of any kind, or third party rights of any kind, (collectively, “Liens”), other than as set forth in Company’s Corporate Documents and will transfer and deliver to the Purchaser at the Closing valid title to the Purchased Shares free and clear of any Liens, other than as set forth in Company’s Corporate Documents. Immediately following the Closing, the Purchaser shall be the sole owner of the Purchased Shares free and clear of all Liens, other than any future restrictions on the sale and transfer of the Purchased Shares set forth in the Company’s Corporate Documents (it being clarified that the Company’s Corporate Documents do not restrict the sale and transfer of the Purchased Shares to the Purchaser as contemplated under this Agreement, except such aforementioned restrictions which have been complied with or waived in writing by the beneficiaries thereof).
2.06 Certain Conduct. Except as set forth in this Agreement, the Seller has not (i) sold, assigned, transferred, delivered, or otherwise disposed of the Purchased Shares, (ii) converted, exchanged or redeemed any of the Purchased Shares, (iii) taken any action which would cause the amendment, cancellation or termination of any governing document pertaining to the Company, (iv) created or permitted to exist any Lien on the Purchased Shares, (v) taken any action or failed to take any action the effect of which would be to cause the Purchaser to incur a penalty or other specified consequences under the applicable governing documents of the Company or (vi) agreed to do any of the foregoing.
2.07 No Bankruptcy; No Dissolution. The Seller has never filed any petition under applicable bankruptcy laws, no such petition has ever been filed involuntarily against the Seller, no custodian or receiver has ever been appointed with respect to the Seller’s assets, and the Seller is not insolvent (before or after giving effect to the sale of the Purchased Shares).
2.08 Litigation. There is no action, suit, investigation or proceeding pending against or threatened in writing against the Seller before any court, arbitrator or any governmental authority which, individually or in the aggregate, if determined or resolved adversely in accordance with the plaintiff’s demands, could challenge or seek to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.
2.09 No Continuing Rights. The Seller hereby acknowledges that following the Closing, Seller shall have no rights with respect to the Purchased Shares, as a shareholder of the Company or otherwise, including, without limitation with respect to any ownership interest in the Purchased Shares, rights to distributions or the proceeds of any future sale, acquisition, merger, liquidation, dissolution or other similar event regarding the Company (any of the foregoing, a “Liquidation Transaction”). Seller further acknowledges that any such Liquidation Transaction may result in the payment by the Company or a third party of assets, funds or other proceeds to the Company’s shareholders in a manner such that the value attributed to the Purchased Shares in such Liquidation Transaction may be greater than the Purchase Price. Further, the Seller acknowledges that the market value of the Purchased Shares could, in the future and depending on the success of the Company’s business, become worth substantially more than the Purchase Price.
2.10 Sophistication; Non-Reliance on Purchaser; Purchase Price. The Seller is a sophisticated, experienced investor, capable of evaluating the value of the Purchased Shares and the Consideration Shares (and the Pre-Funded Warrants, if any), has made its own due diligence analysis in its decision to sell the Purchased Shares to the Purchaser in exchange for the Consideration Shares (and Pre-Funded Warrants, if applicable), pursuant to this Agreement, can bear the economic risk of an investment in the Consideration Shares (and Pre-Funded Warrants, if applicable), and has not relied in connection with the sale of the Purchased Shares to Purchaser in exchange for the Consideration Shares (and Pre-Funded Warrants, if applicable) upon any representations, warranties or agreements of the Purchaser other than those set forth in this Agreement. The Purchaser has no obligation to provide information to the Seller relating to the value of the Purchased Shares, the Consideration Shares, the Pre-Funded Warrants, if any, or otherwise. The Seller acknowledges that the Purchase Price represents a negotiated price and may not reflect the fair market value of the Purchased Shares. The Seller has had the opportunity to ask the Company questions and receive information and has received all the information it considers necessary or appropriate for deciding whether to sell the Purchased Shares to the Purchaser in exchange for the Consideration Shares (and Pre-Funded Warrants, if applicable) pursuant to this Agreement. The Seller has had the opportunity to ask the Purchaser questions and receive information and has received all the information it considers necessary or appropriate for deciding whether to sell the Purchased Shares to the Purchaser in exchange for the Consideration Shares (and Pre-Funded Warrants, if applicable). The Seller acknowledges that (i) neither the Purchaser, the Company nor their respective Related Parties (as defined below) has made any representation or warranty to the Seller, express or implied, except for any representations or warranties of the Purchaser that are expressly set forth in this Agreement, regarding any aspect of the sale and purchase of the Purchased Shares or the Consideration Shares (and any Pre-Funded Warrants, if applicable), the operation or financial condition of the Company or the Purchaser or the value of the Purchased Shares or the Consideration Shares (or the Pre-Funded Warrants, if applicable), (ii) the Seller is not relying upon the Purchaser, the Company or their respective Related Parties in making its decision to sell the Purchased Shares to the Purchaser in exchange for the Consideration Shares (and Pre-Funded Warrants, if applicable) pursuant to this Agreement and (iii) the Purchaser is relying upon the truth of the representations and warranties in this Article III in connection with the purchase of the Purchased Shares in exchange for the Consideration Shares (and Pre-Funded Warrants, if applicable) hereunder. The Seller further acknowledges that none of the Purchaser, the Company nor their respective Related Parties is acting as a fiduciary or financial or investment advisor to the Seller, and none of such parties has given the Seller any investment advice, opinion or other information on whether the sale of the Purchased Shares in exchange for the Consideration Shares (and Pre-Funded Warrants, if applicable)is prudent. For purposes of this Agreement, “Related Parties” shall mean current and former directors, managers, officers, partners, employees, attorneys, agents, successors, assigns, shareholders, members, partners or other equity owners, representatives, predecessors, parents, affiliates, associates and subsidiaries, and their respective successors and assigns.
2.11 Taxes. The Seller acknowledges that none of the Purchaser, the Company or the Related Parties of Purchaser or the Company has made any representation to, or provided any legal, tax or investment advice to, the Seller with respect to the tax treatment of the transactions contemplated by this Agreement. The Seller acknowledges that the execution of this Agreement and the sale of the Purchased Shares may have immediate tax consequences and that any tax liability triggered as a result of the sale of the Purchased Shares by the Seller shall be borne exclusively by the Seller. Neither Seller nor any of its limited and/or general partners is an Israeli residence for tax purposes.
2.12 Purchased Shares Authorized. To Seller’s knowledge, the Purchased Shares have been duly authorized and are validly issued, fully paid and non-assessable.
2.13 Brokers and Finders. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller.
2.14 No Broker-Dealer. The Seller has not effected this sale of Purchased Shares through a broker-dealer in any public offering.
2.15 No General Solicitation. At no time has the Purchaser presented the Seller or any Related Parties of the Seller with, or solicited the Seller or any Related Parties of the Seller through, any publicly issued or circulated newspaper, mail, radio, television, internet or other form of general advertisement or solicitation in connection with the sale of the Purchased Shares or the purchase of the Consideration Shares (and any Pre-Funded Warrants, if applicable).
2.16 Accredited Investor. Seller is an “accredited investor” within the meaning of Rule 501 of Regulation D of the Act, as presently in effect.
2.17 Sale Exempt. The Seller has not offered any of the share capital of the Company held by it for sale to, or solicited any offers to buy any of the foregoing, or otherwise approached or negotiated with any other person in respect thereof, in such a manner as to require registration of the Purchased Shares under the Act or the comparable law of any other jurisdiction.
2.18 Purchase Exempt. The Seller is acquiring the Consideration Shares (and any Pre-Funded Warrants, if applicable) from Purchaser solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Seller acknowledges that the Consideration Shares (and any Pre-Funded Warrants, if applicable) to be issued to it have not been registered under the Act or any state securities laws, and that the Consideration Shares may not be transferred or sold except pursuant to the registration provisions of the Act or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as of the Effective Date and as of the Closing, as follows:
3.01 Existence and Power. The Purchaser is an entity duly established and validly existing under the laws of its jurisdiction of incorporation or formation and has all corporate or entity powers and authorizations to carry on its business as now being conducted and to execute and deliver this Agreement and any ancillary documents and to consummate the transactions contemplated hereby.
3.02 Authorization. The execution, delivery and performance by the Purchaser of this Agreement and the consummation of the transactions contemplated hereby are within its powers and have been duly authorized by all necessary corporate, entity or partnership action on its part. This Agreement constitutes a valid and binding agreement of the Seller, enforceable against the Seller in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. No consent, approval, order, license, permit, action by, or authorization of or designation, declaration, or filing with any person or governmental authority is required that has not been, or will not have been, obtained by the Purchaser prior to the Closing in connection with the valid execution, delivery and performance of this Agreement and any ancillary documents and the transfer of the payment of the Purchase Price to the Seller.
3.03 Litigation. There is no action, suit, investigation or proceeding pending against or threatened in writing against the Purchaser before any court, arbitrator or any governmental authority which, individually or in the aggregate, if determined or resolved adversely in accordance with the plaintiff’s demands, could reasonably be expected to challenge or seek to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.
3.04 Sophistication; Non-Reliance on Seller. The Purchaser is a sophisticated, experienced investor, capable of evaluating the value of the Purchased Shares, has made its own due diligence analysis in its decision to purchase the Purchased Shares to the Purchaser in exchange for the Consideration Shares (and Pre-Funded Warrants, if applicable) pursuant to this Agreement, can bear the economic risk of an investment in the Purchased Shares, and has not relied in connection with the purchase of the Purchased Shares in exchange for the Consideration Shares (and any Pre-Funded Warrants, if applicable) upon any representations, warranties or agreements of the Seller or the Company other than those set forth in this Agreement. The Seller has no obligation to provide information to the Purchaser relating to the value of the Purchased Shares, or otherwise. The Purchaser acknowledges that the Purchase Price represents a negotiated price and may not reflect the fair market value of the Purchased Shares. Purchaser has had the opportunity to ask the Company questions and receive information and has received all the information it considers necessary or appropriate for deciding whether to purchase the Purchased Shares pursuant to this Agreement in exchange for the Consideration Shares (and Pre-Funded Warrants, if applicable). The Purchaser acknowledges that (i) neither the Seller, the Company nor their respective Related Parties has made any representation or warranty to the Purchaser, express or implied, except for any representations or warranties of the Seller that are expressly set forth in this Agreement, regarding any aspect of the sale and purchase of the Purchased Shares or the Consideration Shares (and any Pre-Funded Warrants, if applicable), the operation or financial condition of the Company or the value of the Purchased Shares, (ii) the Purchaser is not relying upon the Seller, the Company or their respective Related Parties in making its decision to purchase the Purchased Shares in exchange for the Consideration Shares (and any Pre-Funded Warrants, if applicable) pursuant to this Agreement and (iii) the Seller is relying upon the truth of the representations and warranties in this Article III in connection with the sale of the Purchased Shares in exchange for the Consideration Shares (and any Pre-Funded Warrants, if applicable) hereunder. The Purchaser further acknowledges that none of the Seller, the Company nor their respective Related Parties is acting as a fiduciary or financial or investment advisor to the Purchaser, and none of such parties has given the Purchaser any investment advice, opinion or other information on whether the purchase of the Purchased Shares in exchange for the Consideration Shares (and any Pre-Funded Warrants, if applicable) is prudent.
3.05 Purchase Exempt. The Purchaser is acquiring the Purchaser Shares from Seller solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Purchaser acknowledges that the Purchaser Shares to be issued to it have not been registered under the Act or any state securities laws, and that the Purchase Shares may not be transferred or sold except pursuant to the registration provisions of the Act or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable.
3.06 Accredited Investor. Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D of the Act, as presently in effect.
3.07 No Public Market. The Purchaser understands that no public market now exists for the Purchased Shares and that the Company has made no assurances that a public market will ever exist for the Purchased Shares.
ARTICLE IV. COVENANTS OF THE PURCHASER AND THE SELLER
4.01 Best Efforts. Subject to the terms and conditions of this Agreement, the Purchaser and the Seller will use their best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable to consummate the transactions contemplated by this Agreement.
4.02 Cooperation. The Seller and the Purchaser shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any governmental authority is required, or any waivers, actions, consents or approvals are required to be obtained from the Company or third parties, in connection with the consummation of the transactions contemplated by this Agreement; and (ii) in taking such actions, making any such filings or furnishing any information required in connection therewith and timely seeking to obtain any such actions, consents, approvals or waivers.
4.03 Resale Registration Statement. As soon as reasonably practicable following the issuance of the Consideration Shares, but in any event within thirty (30) days following the issuance of the Consideration Shares, the Purchaser shall file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-1 or Form S-3 pursuant to Rule 415 (the “Resale Registration Statement”) under the Act, pursuant to which all of the Consideration Shares and shares issuable upon exercise of the pre-Funded Warrants shall be registered to enable the public resale on a delayed or continuous basis of the Consideration Shares by the Seller. The Purchaser shall use its commercially reasonable efforts to have the Resale Registration Statement declared effective under the Securities Act as soon as reasonably practicable.
4.04 Registration Statement Questionnaire. The Seller shall provide the Purchaser with a completed and executed stockholder questionnaire in the form attached hereto as Exhibit D within ten (10) days of the date of this Agreement (the “Questionnaire”). Notwithstanding anything to the contrary contained in this Agreement, if the Seller has not returned a completed and executed Questionnaire within thirty (30) days following the issuance of the Consideration Shares, the Purchaser shall not be obligated to file the Resale Registration Statement in accordance with Section 5.03 until the date that is ten (10) days after the date the Seller delivers the completed and executed Questionnaire to the Purchaser.
4.05 Waiver and Release. Seller hereby releases, remises and forever discharges the Purchaser, the Company and each of their respective Related Parties (the “Purchaser Released Parties”), from any and all actions, causes of action, claims, demands, rights, suits, accountings, debts, dues, accounts, bonds, covenants, contracts, agreements, duties and obligations of whatsoever kind or nature, whether at law or in equity, or otherwise known or unknown, by reason of any matter or thing whatsoever (collectively, “Claims”) which the Seller has, had or may have against any Purchaser Released Parties in its capacity as a shareholder of the Company with respect to the Purchased Shares, in connection with the sale of the Purchased Shares on or prior to the Closing, or the Seller’s ownership and sale of the Purchased Shares, other than any Claims against the Purchaser or the Company that may result from the transactions contemplated by this Agreement and the promissory notes between Seller and the Company dated as of March 16, 2020, March 24, 2021, September 2, 2021 and October 27, 2021 in the aggregate principal amount of $900,000, which shall remain in full force and effect. The Seller represents and warrants that it has not initiated any Claims against any Purchaser Released Parties relating to the Purchased Shares and that it has not assigned any Claims against any Purchaser Released Parties relating to the Purchased Shares to any other person or entity.
4.06 No Sale Below Purchase Price. The Purchaser shall not sell any shares of its Common Stock (or any security convertible or exchangeable into its Common Stock) at a price below the Purchase Price per share until 30 days after the effective date of the resale registration statement.
ARTICLE V. CONDITIONS TO CLOSING
5.01 Conditions to Obligation of the Purchaser. The obligation of the Purchaser to consummate the Closing with respect to the Seller is subject to the satisfaction, on or prior to the Closing of each the following conditions, any or all of which may be waived by the Purchaser in its sole discretion:
(a) The Seller shall have performed in all respects all of their obligations hereunder required to be performed by them on or prior to the Closing.
(b) The representations and warranties of the Seller contained in this Agreement shall be true and correct in all respects as of the Effective Date and as of the Closing, as if made at and as of such date.
(c) All conditions to the closing of the Series B Financing shall have been satisfied in accordance with the Main SPA and closing of the Series B Financing shall have occurred.
(d) All of the documents to be delivered by the Seller to the Purchaser pursuant to Article 1.04(b) shall have been delivered to the Purchaser on or before the Closing.
(e) The Seller shall have received all of the consents, authorizations and approvals that are required under applicable law or the Company’s Corporate Documents for the consummation of the transactions contemplated by this Agreement.
(f) No action, suit, litigation, arbitration, proceeding or investigation shall been instituted, be pending or be threatened against the Seller with regard to the transactions contemplated by this Agreement.
(g) The Seller shall have provided the Purchaser with a Tax Withholding Certificate with respect to the Seller exempting the Purchaser from withholding tax in respect of the Purchase Price obtained from the ITA, or, to the extent that Seller does not obtain a Tax Withholding Certificate that exempts the Purchaser from withholding tax (i.e. either Purchaser needs to withhold the full tax amount or just a reduced tax rate), then Seller shall transfer to Purchaser cash in an amount equivalent to such amounts as Purchaser is required to deduct and withhold with respect to the Purchase Price under the Israeli Income Tax Ordinance (New Version) 1961.
5.02 Conditions to Obligation of the Seller. The obligation of the Seller to consummate the Closing is subject to the satisfaction, on or prior to the Closing of each of the following conditions, any or all of which may be waived by the Seller in its sole discretion.
(a) The Purchaser shall have performed in all respects all of Purchaser’s agreements, obligations and conditions hereunder required to be performed by the Purchaser at or prior to the Closing, including the payment by the Purchaser of the Purchase Price and the transfer thereof to the Seller.
(b) The representations and warranties of the Purchaser contained in this Agreement shall be true and correct in all respects as of the Effective Date and as of the Closing, as if made at and as of such date.
ARTICLE VI. MISCELLANEOUS
6.01 Survival of Warranties. The warranties, representations and covenants of the Seller contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing, and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Purchaser.
6.02 Notices. All notices and other communications required or permitted hereunder to be given to a party to this Agreement shall be in writing and shall be sent by facsimile, email or mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed to such party’s address as set forth in each party’s signature page below or at such other address as the party shall have furnished to each other party in writing in accordance with this provision.
6.03 Amendments, Waivers and Remedies. Any provision of this Agreement may be amended, waived, or discharged (either prospectively or retroactively, and either generally or in a particular instance), by a written instrument signed by the Seller and the Purchaser. No failure, delay or omission by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Any waiver, permit, consent, or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law, or otherwise afforded to any of the parties, shall be cumulative and not alternative.
6.04 Public Announcements. Except as required by law (including SEC rules), no party shall issue any press release, publish any circular or issue or release any other public statement or disclose to any person any information, in each case relating to or connected with or arising out of this Agreement or the matters contained herein, without the prior written approval of the other parties to its contents and the manner of its presentation and publication. Nothing in the foregoing shall prevent the Purchaser from disclosing the terms of this Agreement to (i) its lawyers, accountants and other professional advisors and (ii) its investors and limited partners (provided that they shall be bound by a confidentiality obligation with respect to such information).
6.05 Successors and Assigns. Except as otherwise expressly stated to the contrary herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns under law, heirs, executors, and administrators of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto.
6.06 Governing Law; Jurisdiction. This Agreement shall be governed by and construed according to the laws of the State of New York, USA, without regard to the conflict of laws provision thereof. Any claim arising under or in connection with this Agreement shall be resolved exclusively in the appropriate courts of the State of New York, USA. Each of the parties hereby irrevocably consents to the exclusive jurisdiction of such courts and waives and agrees not to assert any objection to the jurisdiction or convenience thereof.
6.07 Third Party Beneficiaries. No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any person other than the parties hereto, their respective Related Parties, and their respective successors and assigns.
6.08 Further Assurances. Each of the parties hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Agreement and the intentions of the parties as reflected thereby.
6.09 Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement.
6.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and enforceable against the parties actually executing such counterpart, and all of which together shall constitute one and the same instrument, and delivery may be by facsimile, e-mail or other means of electronic transmission.
6.11 Heading, Preamble, and Annexes. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. The preamble and exhibits to this Agreement are an integral and inseparable part of this Agreement.
6.12 Specific Performance. Each of the parties acknowledges and agrees that irreparable injury to the other parties hereto may occur if any provision of this Agreement was not performed in accordance with its specific terms or was otherwise breached and that such injury would not be adequately compensable in damages because of the difficulty of ascertaining the amount of damages that will be suffered if this Agreement was breached. It is accordingly agreed that each of the parties shall be entitled, in addition to any other remedy to which they are entitled at law or in equity, to specific enforcement of, and injunctive relief, without proof of actual damages, to prevent any violation of the terms hereof, and the other parties hereto will not take action, directly or indirectly, in opposition to the party seeking such relief on the grounds that any other remedy or relief is available at law or in equity. Any requirements for the securing or posting of any bond with such remedy are hereby waived.
6.13 Severability. If any provision of this Agreement, or the application of any such provision, becomes or is declared by a court of competent jurisdiction to be illegal, void, or unenforceable, then the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties as expressed in this Agreement. The parties further agree to replace any such illegal, void, or unenforceable provision with a legal, valid, and enforceable substitute provision that will achieve, to the greatest extent possible, the economic, business, and other purposes of the illegal, void, or unenforceable provision.
6.14 Interpretation. The parties acknowledge and agree that this Agreement has been negotiated at arm’s-length and among parties equally sophisticated and knowledgeable in the matters dealt with in this Agreement. Accordingly, any rule of law or legal decision that would require interpretation of any ambiguities in this Agreement against the party that has drafted it is not applicable and is waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of the parties as set forth in this Agreement.
6.15 Costs of Enforcement. If any party or parties seeks to enforce its rights under this Agreement by legal proceeding against any other party, the non-prevailing party or parties named in such legal proceeding shall pay all costs and expenses incurred by the prevailing party, including without limitation, all reasonable attorneys’ fees.
6.16 Voluntary Execution of the Agreement; Independent Counsel. This Agreement is executed voluntarily, without any duress or undue influence on the part of any party or on behalf of any party. Each party acknowledge that such party has (a) read this Agreement, (b) understands the terms and consequences of this Agreement, and (c) is fully aware of the legal and binding effect of this Agreement. Seller further acknowledges that no legal counsel of the Purchaser has represented or acted as legal counsel to the Seller in the preparation, negotiation, and execution of this Agreement, and that the Seller has been represented by legal counsel of the Seller’s own choice or that the Seller has voluntarily declined to seek such counsel.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have signed this Agreement as of the Effective Date.
| SELLER: | ||
| Alpha Capital Anstalt | ||
| By: | /s/ Nicola Feuerstein | |
| Name: | Nicola Feuerstein | |
| Title: | Director | |
| Address: | Altenbach 8 / 9490 Vaduz, Liechtenstein | |
| Email: | ||
[Secondary SPA (NanoSynex)– Alpha – Qualigen - Signature Page]
IN WITNESS WHEREOF, the parties have signed this Agreement as of the Effective Date.
| PURCHASER: | ||
| Qualigen Therapeutics Inc. | ||
| By: | /s/ Michael Poirier | |
| Name: | Michael Poirier | |
| Title: | Chairman & CEO | |
| Address: | 2042 Corte Del Nogal, Carlsbad, CA 92084, USA | |
| Email: | ||
[Secondary SPA (NanoSynex)– Alpha – Qualigen - Signature Page]
EXHIBIT A
FORM OF PRE-FUNDED WARRANT
EXHIBIT B
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
PRE-FUNDED COMMON STOCK PURCHASE WARRANT
| Warrant Shares: [_______] | Initial Exercise Date: [_______], 20[__] |
THIS PRE-FUNDED COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,Alpha Capital Anstalt or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date set forth above (the “Initial Exercise Date”) and until this Warrant is exercised in full (the “Termination Date”), but not thereafter, to subscribe for and purchase from Qualigen Therapeutics, Inc., a Delaware corporation (the “Company”), up to ______ shares (as subject to adjustment hereunder, the “Warrant Shares”) of the Company’s Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Share Purchase Agreement (the “Purchase Agreement”), dated April 29, 2022, by and among the Company, the Holder and NanoSynex Ltd.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. The Company shall have no obligation to inquire with respect to or otherwise confirm the authenticity of the signature(s) contained on any Notice of Exercise nor the authority of the person so executing such Notice of Exercise. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price. The aggregate exercise price of this Warrant, except for a nominal exercise price of $0.001 per Warrant Share, was pre-funded to the Company on or prior to the Initial Exercise Date and, consequently, no additional consideration (other than the nominal exercise price of $0.001 per Warrant Share) shall be required to be paid by the Holder to any Person to effect any exercise of this Warrant. The Holder shall not be entitled to the return or refund of all, or any portion, of such pre-paid aggregate exercise price under any circumstance or for any reason whatsoever, including in the event this Warrant shall not have been exercised prior to the Termination Date. The remaining unpaid exercise price per share of Common Stock under this Warrant shall be $0.001, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. This Warrant may also be exercised, in whole or in part, by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 12:00 p.m. (New York City time) on the Initial Exercise Date, which may be delivered at any time after the time of execution of the Purchase Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise by delivering notice to the Company at any time prior to the delivery of such Warrant Shares (in which case any liquidated damages payable under Section 2(d)(i) shall no longer be payable).
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any such failure that is solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re classification.
b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time that this Warrant is outstanding the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to all of the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to all holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation); provided that the Holder’s right to receive such Distribution shall terminate on, and shall not be held in abeyance for any period subsequent to the Termination Date.
d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person and the Company is not the surviving entity, (ii) the Company or any Subsidiary, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization (other than a stock split) of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization (other than a stock split), spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock or 50% or more of the voting power of the common equity of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
e) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
f) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment; provided, however, that the Company may satisfy the notice requirement in this Section 3(f) by filing such information with the Commission on its EDGAR system pursuant to a Current Report on Form 8-K or Quarterly Report on Form 10-Q or Annual Report on Form 10-K.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form (other than a stock split)) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights (excluding any grant or issuance of rights to all of the Company’s stockholders pursuant to a stockholder rights plan), (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (or any of its Subsidiaries) is a party, any sale or transfer of all or substantially all of its assets, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least five (5) calendar days prior to the applicable record or effective date hereinafter specified (unless such information is filed with the Commission on its EDGAR system in which case a notice shall not be required), a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 4. Transfer of Warrant.
a) Transferability. This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| QUALIGEN THERAPEUTICS, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
NOTICE OF EXERCISE
| TO: | QUALIGEN THERAPEUTICS, INC. |
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] [if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
[SIGNATURE OF HOLDER]
Name of Investing Entity: ________________________________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: ________________________________________________________________________________________
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: | |
| (Please Print) | |
| Address: | |
| Phone Number: | |
| Email Address: (Please Print) | |
| ______________________________________ | |
| ______________________________________ | |
| Dated: _______________ __, ______ | |
| Holder’s Signature: | |
| Holder’s Address: |
FORM OF SHARE TRANSFER DEED
I, a duly authorized representative of Alpha Capital Anstalt (the “Transferor”), do hereby transfer to Qualigen Therapeutics Inc. (the “Transferee”), 2,232,861 Preferred A-1 Shares of NanoSynex Ltd. (the “Company”), each one of NIS 0.01 nominal value, to be held by the Transferee in accordance with all the provisions of the Articles of Association of the Company and subject to any applicable investors’ rights agreement; and I, a duly authorized representative of the Transferee, hereby accept the above-mentioned shares to be held in accordance with all the provisions of the Articles of Association of the Company and any applicable investors’ rights agreement.
This Share Transfer Deed may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one deed. The exchange of a fully executed deed (in counterparts or otherwise) by electronic transmission in PDF format or the like or by facsimile shall be sufficient to bind the parties to the terms and conditions of this deed as an original.
In witness whereof, we affix our signatures hereto this __ day of ________, 2022.
Transferor:
Alpha Capital Anstalt Transferee:
Qualigen Therapeutics Inc.
| By: | By: | |||
| Name: | Name: | |||
| Title: | Title: |
EXHIBIT C
ASSIGNMENT OF RIGHTS AGREEMENT
EXHIBIT D
STOCKHOLDER QUESTIONNAIRE
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael S. Poirier, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Qualigen Therapeutics, Inc., a Delaware corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of condensed consolidated financial statements for external purposes with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| May 13, 2022 | By: | /s/ Michael S. Poirier |
| Name: | Michael S. Poirier | |
| Title: | Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher L. Lotz, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Qualigen Therapeutics, Inc., a Delaware corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of condensed consolidated financial statements for external purposes with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| May 13, 2022 | By: | /s/ Christopher L. Lotz |
| Name: | Christopher L. Lotz | |
| Title: | Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of the undersigned, Michael S. Poirier, Chief Executive Officer of Qualigen Therapeutics, Inc., a Delaware corporation (the “Company”), and Christopher L. Lotz, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, that, to his knowledge (1) the quarterly report on Form 10-Q of the Company for the three months ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 13, 2022
| By: | /s/ Michael S. Poirier | |
| Name: | Michael S. Poirier | |
| Title: | Chief Executive Officer (Principal Executive Officer) |
May 13, 2022
| By: | /s/ Christopher L. Lotz | |
| Name: | Christopher L. Lotz | |
| Title: | Chief Financial Officer (Principal Financial Officer) |
These certifications accompanying and being “furnished” with this Report, shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.