Note 14 – Subsequent Events

Between December 7, 2018 and December 11, 2018, the Company conducted a private equity offering, in which accredited investors purchased common stock at $0.50 per share with warrant coverage ratio of 50%. Pursuant to the offering, the Company sold a total of 2,018,000 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $1.0 million and issued to the investors five-year warrants covering 1,009,000 shares of common stock with an exercise price of $0.75 per share. In connection with the equity offering, the Company paid an aggregate cash fee of approximately $0.1 million to the placement agent and issued warrants covering an aggregate of 201,800 shares of common stock to the placement agent as additional compensation. The placement agent warrants have a five-year term and an exercise price of $0.50 per share and a cashless exercise provision.

On December 10, 2018, Anthony D. Caracciolo resigned as the Chairman of the Board, but remains a director and Scott A. Kelly, M.D., was named Chairman of the Board. On December 19, 2018, the Compensation Committee of the Board approved an amendment to certain compensation arrangements for Anthony D. Caracciolo, pursuant to which his employment with the Company would be extended through April 16, 2019, at a salary reduced from $16,667 to $5,000 per month, with continuing benefits. In addition, the Compensation Committee approved an extension to 10-years of the expiration terms of certain previously awarded stock options covering an aggregate of 150,000 shares of the Company’s common stock, provided that such stock options are out-of-the-money upon the date of such extension. These arrangements were conditioned upon Mr. Caracciolo’s agreement to resign from the Board upon identification by the Company of an appropriately qualified candidate to fill the vacancy. Mr. Caracciolo has agreed to the foregoing terms. These arrangements were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On December 22, 2018 the board of directors appointed Nitya G. Ray, Ph.D., as Chief Technology Officer – Head of Process Sciences, Manufacturing and Supply Chain. In connection with Dr. Ray’s appointment, the Company and Dr. Ray entered into an Employment Agreement that provides for (i) an annual base salary of $335,000, (ii) a target annual bonus equal to 50% of base salary, (iii) an initial signing bonus of $100,000 to be paid in two equal installments of $50,000 over the course of six months from the date of signing and (iv) other customary benefits described in the form of employment agreement. In connection with the appointment of Dr. Ray, the Company also issued Dr. Ray a stock option award under the Company’s equity incentive plan, covering 400,000 shares of the Company’s common stock, vesting in three equal annual installments from the grant date.

On December 27, 2018, the Company received a redemption notice from the holder of the Company’s convertible note issued on June 26, 2018, requesting the redemption of $100,000 of the outstanding balance thereof. In satisfaction of the redemption notice, the Company issued 255,532 shares of common stock to the note holder in accordance with the terms of the convertible note. Following the redemption, the outstanding balance of the convertible note, including accrued but unpaid interest, was approximately $5.9 million.

Beginning December 28, 2018 through January 8, 2019, the Company issued $3.1 million (of which $0.5 million was purchased by Michael A. Klump, a director, on terms identical to all other investors) in aggregate principal amount of unsecured convertible promissory notes (the “Notes”) and related warrants (the “Warrants”) to purchase common stock of the Company (the “Common Stock”), to accredited investors (the “Private Placements”) pursuant to subscription agreements entered into with each investor (collectively, the “Subscription Agreements”), in exchange for cash in an equal amount. The proceeds of the Private Placements are anticipated to be used for general working capital and to fund clinical trials.

The principal amount of the Notes plus unpaid accrued interest at an annual rate of 10.0% is convertible at the election of the holders into shares of Common Stock at any time prior to maturity, at an initial conversion price of $0.50 per share, with an aggregate of 6,200,000 shares of the Company’s Common Stock initially underlying the Notes. As part of the investment in the Notes, the Company also issued Warrants exercisable for 50% of the shares into which the Notes are convertible, with Warrants for an aggregate of 3,100,000 shares of Common Stock issued in the Private Placements. The Warrants are exercisable at a price of $0.30 per share. The Warrants are currently exercisable in full and will expire five years from the date of issuance. The Subscription Agreements contain certain “piggyback” registration rights relating to resales of shares of Common Stock underlying the Notes and the Warrants.

As a result of the issuance of the Notes, pursuant to the terms of the Placement Agent Agreement, dated July 26, 2018, entered into in connection with a recently completed private securities offering, the placement agent in that offering earned a “tail fee” comprising warrants exercisable for 620,000 shares of Common Stock (the “Placement Agent Warrants”) and a cash fee of $372,000. The Placement Agent Warrants are exercisable at a price of $0.50 per share and will expire five years from the date of issuance. The Placement Agent Warrants provide for cashless exercise.