| Item 1.01. |
Entry Into a Material Definitive Agreement. |
Convertible Note and Warrant Subscription Agreements; Key Company Stockholder Subscription Agreement
On April 28, 2023, Peak Bio, Inc., a Delaware corporation (the “Company”), and certain investors (the “Convertible Note and Warrant Investors”) entered into separate subscription agreements (the “Convertible Note and Warrant Subscription Agreements”) for the purchase of convertible promissory notes (the “Convertible Notes”) in the aggregate principal amount of $2,195,034 (the “Convertible Notes”) and an aggregate amount of 3,491,710 warrants (the “Warrants”).
As previously disclosed on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on April 7, 2023, the Company and Hoyoung Huh, MD, PhD (the “Key Company Stockholder”) entered into a Debt Conversion Agreement effective April 5, 2023 (the “Key Company Stockholder Debt Conversion Agreement”), pursuant to which the Key Company Stockholder agreed to convert a pro rata portion of the Company’s outstanding debt owed to the Key Company Stockholder (and his affiliate, Hannol Ventures LLC), in the aggregate amount of $2,031,034, on a pro rata basis based upon his approximately 34% ownership of the Company’s outstanding common stock into future qualified financings of at least $1 million during the 180-day period following the date of the Key Company Stockholder Debt Conversion Agreement. In accordance with the Key Company Stockholder Debt Conversion Agreement, effective April 28, 2023, the Key Company Stockholder and the Company entered into a subscription agreement providing for the conversion of a pro rata portion of such debt in the amount of $1,130,775 into a Convertible Note and 1,884,625 Warrants (the “Key Company Stockholder Subscription Agreement”) at the initial closing of the Convertible Note and Warrant Subscription Agreements and providing for the future conversion of up to the remaining pro rata portion of such debt upon future closings of additional Convertible Note and Warrant Subscription Agreements.
Accordingly, the aggregate principal amount of the Convertible Notes issued to the Convertible Note and Warrant Investors and to the Key Company Stockholder was $3,325,809. Pursuant to the Convertible Note and Warrant Subscription Agreements and the Key Company Stockholder Subscription Agreement, the Company issued (i) Convertible Notes that carry an interest rate of 6% per annum, have a maturity date six months following the issuance date, and are convertible prior to maturity by the holder into shares of the Company’s common stock at a price per share of $0.60 and (ii) for each share of common stock of the Company into which a Convertible Note is convertible, the Convertible Note and Warrant Investor, or the Key Company Stockholder, as the case may be, received a Warrant to purchase an equal number of shares of the Company’s common stock at a price per share of $0.60. The Warrants have a 5-year term.
In addition, with respect to the Key Company Stockholder Forward Purchase Agreement, dated April 28, 2022 (as amended on December 29, 2022) (the “Key Company Stockholder Forward Purchase Agreement”), as previously disclosed on the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2023, the Key Company Stockholder Subscription Agreement replaced and superseded the Key Company Stockholder Forward Purchase Agreement.
Placement Agent Warrant
In connection with the issuance of the Convertible Notes and the Warrants, on April 28, 2023, in consideration for its services in respect of the financing described above, the Company also issued to Paulson Investment Company, LLC (the “Placement Agent”) a Purchase Warrant (the “Placement Agent Warrant”) to purchase 194,670 shares of the Company’s common stock at a price per share of $0.60. The Placement Agent Warrant has a 5-year term. In addition, the Company paid the Placement Agent a commission of approximately $116,000.
The foregoing descriptions of the Convertible Note and Warrant Subscription Agreements, the Convertible Notes, the Warrants, and the Key Company Stockholder Subscription Agreement, the Placement Agent Warrant, and the transactions contemplated thereby are not complete and are subject to, and qualified in their entirety by reference to, the text of the Form of Convertible Note and Warrant Subscription Agreements, the Form of Convertible Notes, the Form of Warrant, the Key Company Stockholder Subscription Agreement and the Placement Agent Warrant which are included as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, to this Current Report on Form 8-K and incorporated herein by reference.