11. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10 million shares of preferred stock, par value $0.0001 as of September 30, 2020 and 2019.  No shares of preferred stock were issued or outstanding as of September 30, 2020 or 2019.

Common Stock

The Company has authorized 250 million shares of common stock, $0.0001 par value per share as of September 30, 2020 and 2019. Each share of common stock is entitled to one voting right.  Common stock owners are entitled to dividends when funds are legally available and declared by the Company’s board of directors.

Common Stock Offering

On April 30, 2020, the Company closed an underwritten public offering of 6,037,500 shares of its common stock (inclusive of 787,500 shares that were sold pursuant to the underwriters' full exercise of their option to purchase additional shares of the Company's common stock), at a price to the public of $6.00 per share. The Company received net proceeds from the offering of approximately $33.3 million, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company. The Company intends to use the net proceeds from this offering for working capital and general corporate purposes and to advance the development of its product candidates and expand its pipeline.

Pre-Acquisition Financing

On July 11, 2019, Legacy NeuBase closed a private placement transaction, whereby, among other things, Legacy NeuBase issued to certain investors shares of Legacy NeuBase common stock immediately prior to the Ohr Acquisition in a private placement transaction (the “Pre-Acquisition Financing”).

At the closing of the Pre-Acquisition Financing, Legacy NeuBase issued and sold to the Pre-Acquisition Financing investors an aggregate of 5,202,879 shares of Legacy NeuBase’s common stock, resulting in approximately $8.3 million net of issuance costs. Upon the consummation of the Ohr Acquisition, the Pre-Acquisition Financing shares were converted pursuant to the Exchange Ratio in the Acquisition Agreement into the right to receive 5,302,005 shares of common stock.

Post-Acquisition Private Placement

On July 12, 2019, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with certain accredited investors for the sale by the Company in a private placement (the “Private Placement”) of an aggregate 1,538,462 shares of common stock, at a purchase price of $3.25 per share. The closing of the Private Placement occurred on July 15, 2019. The aggregate net proceeds from the sale of the common stock was approximately $5.0 million.

Convertible Notes

As described in Note 10, in connection with the closing of the Pre-Acquisition Financing, the convertible notes plus unpaid interest, of approximately $1.0 million were converted into 598,472 shares of Legacy NeuBase common stock at a price of $1.6145 per share.  Upon the consummation of the Ohr Acquisition, the convertible note shares were converted pursuant to the Exchange Ratio in the Acquisition Agreement into the right to receive 609,874 shares of common stock.

Asset Acquisitions

As described in Note 5, in connection with the acquisition of the CMU License Agreement, Legacy NeuBase issued 820,000 shares of Legacy NeuBase common stock. Upon the consummation of the Ohr Acquisition, the shares issued in connection with the CMU License Agreement were converted pursuant to the Exchange Ratio in the Acquisition Agreement into the right to receive 835,625 shares of common stock.

As described in Note 4, in connection with the acquisition of Ohr, the Company issued to Legacy NeuBase stockholders, option holders, warrant holders and noteholders of NeuBase a number of shares of Ohr common stock at the exchange rate of 1.019055643 shares of common stock for each share of Legacy NeuBase’s common stock outstanding immediately prior to the Ohr Acquisition. The common stock of the combined company that Ohr stockholders owned as of the closing of the Ohr Acquisition on July 12, 2019 is 2,829,248 shares of common stock.

Treasury Stock

At September 30, 2018, Legacy NeuBase had sold 5,620,000 shares of Legacy NeuBase common stock (or 5,727,090 shares of common stock of the Company converted at the Exchange Ratio provided for in the Acquisition Agreement) to Legacy NeuBase’s founders and other employees and service providers for gross proceeds of $55. The Legacy NeuBase common stock issued to the Company’s employees was eligible to be repurchased by the Company for a 36 month period following the sale, subject to the amount available for repurchase, in the event the purchaser is no longer providing services to the Company. The Company’s repurchase of eligible shares was to be at a price per share equal to the lesser of (i) the fair market value of the shares at the time the repurchase option is exercised, as determined by the Company’s board of directors, and (ii) the original purchase price. The Company was able to exercise its repurchase option as to any or all of the shares available for repurchase at any time after the restricted stock purchaser ceases to provide services to Legacy NeuBase. During the year ended September 30, 2019, the Company repurchased 1,375,000 shares of Legacy NeuBase common stock (or 1,401,202 shares of common stock of the Company converted at the Exchange Ratio provided for in the Acquisition Agreement) for $14. During the year ended September 30, 2019, the Company retired the 1,375,000 shares of Legacy NeuBase common stock (or 1,401,202 shares of common stock of the Company converted at the Exchange Ratio provided for in the Acquisition Agreement).

Warrants

Below is a summary of the Company’s issued and outstanding warrants as of September 30, 2020:

 

 

 

During the year ended September 30, 2020, the Company issued 105,000 warrants in exchange for certain financial advisory services. The warrants vest over a six-month period, have an exercise price of $8.73 per share and expire on July 6, 2023. The Company determined the warrants issued in exchange for financial advisory services met the scope exception in ASC 815 and are therefore classified as equity. The Company determined the initial fair value of be $0.5 million, which will be recognized as share-based compensation expense over the vesting period of the warrants, see Note 13.

During the year ended September 30, 2019, in connection with the Ohr Acquisition described in Note 1, the Company assumed outstanding warrants issued by Ohr and were measured at fair value. The Company determined 792,440 of the warrants assumed from Ohr should be accounted for as a liability in accordance with the guidance in ASC 815, Derivatives and Hedging.  The subsequent changes in the fair value of the derivative warrants are recorded in earnings each reporting period. The Company determined 12,500 warrants assumed from Ohr met the scope exception in ASC 815 and are therefore classified as equity. Subsequent changes in fair value are not recognized as long as the contract continues to be classified in equity.

During the year ended September 30, 2019, 76,501 warrants acquired from Ohr were redeemed for cash of approximately $0.1 million.

During the year ended September 30, 2019, in connection with the acquisition described in Note 5, the Company issued a warrant, exercisable only upon the occurrence of certain events, for a number of shares of Legacy NeuBase common stock sufficient such that when added to the 820,000 shares of Legacy NeuBase common stock issued to CMU, CMU would hold in the aggregate an amount equal to 8.2% of the fully-diluted shares of the Legacy NeuBase’s common stock; provided, however, that for the purpose of calculating the 8.2%, only the first $2 million in funding shall be considered (the “CMU Warrant”).  The CMU Warrant had an aggregate exercise price of $10.00, was exercisable upon the earlier of the (i) the day that the Company’s cumulative capital funding and/or receipt of cumulative revenue equals the sum of $2.0 million or (ii) 30 days prior to any Qualified Sale (as defined in the CMU License Agreement) or any other merger, consolidation, reorganization, combination or similar transaction in which the Owners of the Company immediately before such transaction do not continue to control at least a majority of the voting interests in the Company after such transaction. The CMU Warrants became exercisable upon the Pre-Acquisition Financing and the CMU Warrant was exercised for 101,847 shares of Legacy NeuBase common stock (the “CMU Warrant Shares”). Upon the consummation of the Ohr Acquisition, the CMU Warrant Shares were converted pursuant to the Exchange Ratio in the Acquisition Agreement into 103,787 shares of common stock.