Note 16 – Subsequent Events

On June 7, 2018, at a special meeting of stockholders, a proposal was approved to increase the total number of authorized shares of common stock of the Company from 375,000,000 to 450,000,000.

On June 8, 2018, the Company issued to directors, in connection with their annual compensation, stock options covering 600,000 shares of common stock. The stock options have an exercise price of $0.49, a ten-year term and vest quarterly over one year. These awards reflect an increase in the annual non-employee director stock option award from 75,000 to 100,000 shares per year effective for fiscal year 2019, which begins June 1, 2018. Additionally, in conjunction with annual incentive compensation, the Company issued stock options covering 1,825,000 shares of common stock to management and employees. The stock options have an exercise price of $0.49, a ten-year term and 875,000 shares vest annually over three years and 950,000 shares vest ratably over twenty four months.

On June 15, 2018, the Company entered into subscription agreements with certain investors for the sale of 1,970,000 shares of common stock at a purchase price of $0.50 per shares in a registered direct offering, pursuant to a registration statement on Form S-3. The investors in the offering also received warrants to purchase 1,970,000 shares of common stock with an exercise price of $0.75 per share and a five-year term. The Company received net proceeds from the offering of approximately $0.9 million. In addition, the placement agent received warrants covering 133,600 shares of common stock (or 8% of total shares sold to investors) with a per share exercise price of $0.55, a five-year term and include a cashless exercise provision.

On June 26, 2018, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note (the “2018 Note”) with a two-year term to an institutional accredited investor in initial principal amount of $5.7 million. The investor gave consideration of $5.0 million, reflecting original issue discount of $0.6 million and expenses payable by the Company of $0.1 million.

The 2018 Note is the general unsecured obligation of the Company and ranks pari passu with all other creditors of the Company. Interest accrues on the outstanding balance of the 2018 Note at 10% per annum. Upon the occurrence of an event of default, interest accrues at the lesser of 22% per annum or the maximum rate permitted by applicable law. The 2018 Note contains customary default provisions, including provisions for potential acceleration. The investor may convert all or any part the outstanding balance of the 2018 Note into shares of common stock, par value $0.001 per share, of the Company at an initial conversion price of $0.55 per share, at any time after six months from the issue date upon five trading days’ notice, subject to certain adjustments and ownership limitations specified in the 2018 Note. The investor may redeem any portion of the 2018 Note, at any time after six months from the issue date upon five trading days’ notice, subject to a maximum monthly redemption amount of $350,000. The Company may prepay the outstanding balance of the 2018 Note, in part or in full, at a 15% premium to par value, at any time upon five trading days’ notice.

On July 12, 2018, the Company announced certain leadership changes in connection with the strategic expansion and entry into certain cancer and immunologic indications. In connection with such leadership changes and effective July 11, 2018 Denis R. Burger, Ph.D. and A. Bruce Montgomery, M.D. resigned as members of the Company’s Board of Directors and Dr. Burger has also resigned as Chief Science Officer of the Company, which is not an executive officer position.

In connection with the resignations of Dr. Burger and Dr. Montgomery, on July 10, 2018, the Company’s Board of Directors approved a motion to accelerate all outstanding unvested stock options held by Dr. Burger and Dr. Montgomery, to vest immediately upon the effectiveness of their resignations and to retain the stock options’ exercise period through their respective expiration date. Stock options covering 500,000 shares held by Dr. Burger and stock options covering 100,000 shares held by Dr. Montgomery were subject to acceleration. The terms of the stock options remained otherwise unchanged.

Effective July 11, 2018, Anthony D. Caracciolo resigned as Executive Chairman of the Company, which is an executive officer position. Mr. Caracciolo will continue to serve as a member and the non-executive Chairman of the Company’s Board of Directors.