On March 8, 2023 TRACON Pharmaceuticals, Inc. (Nasdaq: TCON), a clinical stage biopharmaceutical company utilizing a cost-efficient, CRO-independent product development platform to advance its pipeline of novel targeted cancer therapeutics and to partner with other life science companies, reported financial results for the fourth quarter and year ended December 31, 2022 (Press release, Tracon Pharmaceuticals, MAR 8, 2023, View Source [SID1234628331]). The Company will host a conference call and webcast today at 4:30 PM Eastern Time / 1:30 PM Pacific Time

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

The significant progress we achieved in the fourth quarter sets up 2023 to be a potentially transformational year for TRACON," said Charles Theuer, M.D., Ph.D., President and CEO of TRACON. "In December we announced interim efficacy results from the ongoing ENVASARC pivotal trial demonstrating that envafolimab achieved a double-digit objective response rate, both as a single agent and in combination with Yervoy, in 36 patients with refractory sarcoma. We also secured a non-dilutive non-recourse financing of up to $30 million related to the I-Mab arbitration award decision which we expect this month, of which $3.5 million was funded in December. Importantly, accrual in ENVASARC remains ahead of projections and we expect the second and final interim efficacy analysis of 92 patients in the third quarter, after each patient has had two on-study scans, and to complete accrual before year end, leading to final data in 2024

Recent Corporate Highlights

In November 2022, we announced dosing of the first patient in a Phase 1/2 trial that studies envafolimab with our proprietary CTLA-4 antibody YH001 in combination with doxorubicin in front line sarcoma

In November 2022, we completed the Phase 1 study of the CD73 antibody TJ4309, triggering I-Mab’s right to reacquire the asset for a payment to TRACON of $9M

In December 2022, we announced positive interim results in the ENVASARC Phase 2 pivotal trial based on a double-digit objective response rate (ORR) by central radiographic review in the cohort of single agent envafolimab (N=18) and the cohort of envafolimab given in combination with Yervoy (N=18). The primary endpoint of the pivotal ENVASARC trial is achievement of an 11.25% ORR by central radiographic review in either 80 patient cohort

In December 2022, we announced a non-recourse non-dilutive financing of up to $30M related to the arbitration with I-Mab. We received $3.5M up front and the remainder will be available subject to the award exceeding a threshold and satisfaction of other conditions.

Expected Upcoming Milestones

Report the binding decision of the International Chamber of Commerce Arbitration Panel on the ongoing arbitration involving the TJ4309 and bispecific antibody agreements with I-Mab Biopharma where we are seeking to recover over $200 million in damages, which we expect in the first quarter of 2023

Report the second and final interim efficacy analysis from the ENVASARC pivotal trial following the review of more than 12 weeks of efficacy data (including two on-study CT scans) by the independent data monitoring committee from 46 patients who receive envafolimab as a single agent and 46 patients who receive envafolimab in combination with Yervoy, which we expect in the third quarter of 2023

Complete full accrual of the ENVASARC pivotal trial before the end of 2023

Report Phase 1 data from the Phase 1/2 clinical trial of YH001 in combination with envafolimab and doxorubicin in patients with soft tissue sarcoma, which we expect in the second half of 2023

Fourth Quarter 2022 Financial Results

Cash and cash equivalents were $17.4 million at December 31, 2022, compared to $24.1 million at December 31, 2021, and is expected to fund the company into mid-2023

Research and development expenses for the fourth quarter of 2022 were $3.9 million, compared to $3.1 million for the fourth quarter of 2021

General and administrative expenses for the fourth quarter of 2022 were $2.0 million, compared to $4.6 million for the fourth quarter of 2021. The decrease was primarily attributable to legal expenses incurred in the fourth quarter of 2021 in connection with the arbitration with I-Mab

Net loss for the fourth quarter of 2022 was $7.0 million, compared to $7.7 million for the fourth quarter of 2021

Conference Call Details

To access the call by phone, please register using this link and you will be provided with dial-in details

A live webcast of the conference call will be available online from the Investor/Events and Presentation page of the Company’s website at www.traconpharma.com

After the live webcast, a replay will remain available on TRACON’s website for 60 days

About Envafolimab

Envafolimab (KN035), a single-domain antibody against PD-L1 invented by Alphamab Oncology and licensed by TRACON, is the first approved subcutaneously injected PD-(L)1 inhibitor. Envafolimab was approved by the Chinese NMPA in November 2021 in adult patients with MSI-H/dMMR advanced solid tumors who failed systemic treatment and have no satisfactory alternative treatment options. In December 2019, Alphamab Oncology, 3D Medicines and TRACON entered into a collaboration whereby TRACON has the right to develop and commercialize envafolimab in soft tissue sarcoma in North America. Envafolimab is currently being studied in the pivotal ENVASARC Phase 2 trial in the United States sponsored by TRACON and a Phase 3 pivotal trial in combination with gemcitabine and oxaliplatin in advanced biliary tract cancer patients as well as multiple Phase 1 and Phase 2 clinical trials in China sponsored by TRACON’s corporate partners, Alphamab Oncology and 3D Medicines. TRACON has received orphan drug designation from the U.S. Food and Drug Administration for envafolimab for patients with soft tissue sarcoma and fast track designation from the U.S. Food and Drug Administration for envafolimab for patients with locally advanced, unresectable or metastatic undifferentiated pleomorphic sarcoma (UPS) and myxofibrosarcoma (MFS) who have progressed on one or two prior lines of chemotherapy

About ENVASARC (NCT04480502

The ENVASARC pivotal trial is a multicenter, open label, randomized, non-comparative, parallel cohort study at 30 top cancer centers in the United States and the United Kingdom that began dosing in December 2020. TRACON expects the trial to enroll more than 160 patients with UPS or MFS who have progressed following one or two lines of prior treatment and have not received an immune checkpoint inhibitor, with 80 patients enrolled into a cohort of treatment with single agent envafolimab at 600 mg every three weeks and 80 patients enrolled into a cohort of treatment with envafolimab at 600 mg every three weeks with Yervoy. The primary endpoint is objective response rate by central review with duration of response a key secondary endpoint

About YH001

YH001 is an IgG1 antibody against CTLA-4 that has shown enhanced antibody dependent cellular cytotoxicity and complement dependent cytotoxicity in vitro. In preclinical studies YH001 demonstrated superior T cell activation and superior tumor growth inhibition activity compared to ipilimumab. YH001 also demonstrated superior activity compared to ipilimumab in human transgenic mouse tumor models when combined with a PD-(L)1 antibody. In these models, single agent YH001 depleted regulatory T cells and increased CD8+ T cells in tumor tissue. YH001 is being studied with envafolimab and doxorubicin in a Phase 1/2 clinical trial sponsored by TRACON (NCT05448820), and has been studied in multiple Phase 1 trials in China and Australia sponsored by TRACON’s corporate partner Eucure, a division of Biocytogen

About TRC102

TRC102 (methoxyamine) is a novel small molecule inhibitor of the DNA base excision repair pathway, which is a pathway that causes resistance to alkylating and antimetabolite chemotherapeutics. TRC102 is currently being studied in multiple Phase 1 and Phase 2 clinical trials sponsored by the National Cancer Institute through a Cooperative Research and Development Agreement (CRADA) and has orphan drug designation from the FDA in malignant glioma, including glioblastoma

About TJ004309

TJ004309 is a novel, humanized antibody against CD73, an ecto-enzyme expressed on stromal cells and tumors that converts extracellular adenosine monophosphate to adenosine, which is highly immunosuppressive. TJ004309 was studied in a Phase 1 trial sponsored by TRACON (NCT03835949) to assess safety and preliminary efficacy as a single agent and when combined with the PD-L1 checkpoint inhibitor Tecentriq in patients with advanced solid tumors.

On March 8, 2023 Northwest Biotherapeutics, Inc. (the "Company") reported that it has entered into a Commercial Loan Agreement and Note (collectively, the "Loan Agreement") with Streeterville Capital, LLC (the "Holder") in the amount of $11,005,000. The Loan Agreement has a maturity of 22 months (Filing, 8-K, Northwest Biotherapeutics, MAR 8, 2023, View Source [SID1234628330]). Repayments do not start until November 2, 2023.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Following November 2, 2023, the Loan Agreement will be amortized in 14 equal monthly installments of principal at 110% of the pro rata amount, plus accrued interest. Interest on the Loan Agreement accrues at a rate of 8% per annum, and the Loan Agreement includes an original issue discount of ten percent. The Loan Agreement allows pre-payment at any time at the Company’s election. If the Company elects to pre-pay, the pre-payment would include a 10% charge. The Loan Agreement contains customary default provisions, including for potential acceleration.

The proceeds will be used for further buildout of the Sawston facility, and ongoing expanded activities related to preparation of an application for product approval, in addition to regular company operations.

On March 8, 2023 ChromaDex Corp. (NASDAQ:CDXC) reported fourth quarter and fiscal year 2022 financial results (Press release, ChromaDex, MAR 8, 2023, View Source [SID1234628329]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Fourth Quarter 2022 and Recent Highlights

Total net sales were $21.0 million, up 18% from $17.8 million for the prior year quarter.
Tru Niagen net sales were $16.1 million, up 14% from $14.1 million for the prior year quarter.
Selling and marketing expense as a percentage of net sales was 29.5% versus 48.7% in the prior year quarter, an improvement of 1,920 basis points.
Net loss was $1.4 million or $0.02 loss per share, an improvement of $0.06 per share from the prior year quarter.
Adjusted EBITDA, a non-GAAP measure, was a profit of $0.4 million, a $3.8 million improvement from the prior year quarter.
Signed long-term supply agreement with Nestlé Health Science, extending non-exclusive rights to sell Niagen in multi-ingredient dietary supplements.
Raised $7.7 million, net of offering costs, with Nestlé Health Science and existing strategic investors in October 2022.
Granted two new U.S. patents, including one on NRH, which preclinical research suggests may be among the most potent and efficient of the NAD+ precursors, and shows promise as a new therapeutic approach to ameliorating age-related NAD+ decline.
Appointed Dr. Vilhelm Bohr, a leading aging and neurodegenerative disease researcher, to the Scientific Advisory Board.
In December 2022, a clinical study published in the peer-reviewed journal Aging Cellfinds that NR oral supplementation significantly increased NAD+ levels in the brain and positively impacted neurodegenerative biomarkers.
In January 2023, a clinical study published in the peer-reviewed journal Science Advances finds that NR oral supplementation increased muscle mitochondrial biogenesis.
Full Year 2022 Highlights

Delivered on latest financial outlook to investors across all metrics, and exceeded G&A outlook.
Total net sales of $72.0 million, up 7% from $67.4 million year over year.
Tru Niagen net sales of $60.1 million, up 6% from $56.7 million year over year.
Selling and marketing expense as a percentage of net sales improved 270 basis points year over year.
General and administrative expense decreased $8.1 million year over year.
Net loss was $16.5 million or $0.24 loss per share, an improvement of $0.16 per share year over year.
Adjusted EBITDA, a non-GAAP measure, was a loss of $10.0 million, an $8.9 million improvement year over year.
Granted additional U.S. continuation patent to protect the novel manufacturing process of NR and its various salt forms, which now cover NR Chloride, NR Malate, and NR Tartrate salts through 2037. ChromaDex also holds two patents covering crystal forms of important intermediates in the production of NR Chloride, one of which was granted in 2022.
Signed agreement with Sinopharm Xingsha, a subsidiary of one of China’s largest pharmaceutical companies, to conduct cross-border sales of Tru Niagen in Mainland China. Sinopharm Xingsha debuted Tru Niagen at the China International Natural Health & Nutrition Expo (NHNE), a major trade show.
"ChromaDex proudly reported its best quarter ever, achieving $21.0 million in revenue in the fourth quarter, up 18% year-over-year and 23% sequentially," said Rob Fried, ChromaDex Chief Executive Officer. "We also achieved $0.4 million in Adjusted EBITDA, an important operational milestone as we reposition ChromaDex for growth with profitability in mind during these turbulent economic times. We end the year with $20.4 million in cash, no debt, some excellent new partners with Nestlé and Sinopharm and are poised for a great 2023."

Results of operations for the three months ended December 31, 2022

For the three months ended December 31, 2022 ("Q4 2022"), ChromaDex reported net sales of $21.0 million, an increase of $3.2 million, or 18%, compared to the fourth quarter of 2021 ("Q4 2021"). The increase in Q4 2022 revenues compared to Q4 2021 was driven by a $2.0 million increase in Tru Niagen sales and $1.3 million higher Niagen ingredient sales. Growth in Tru Niagen sales was driven by higher sales to A.S. Watson, a related party, and a new partnership. Growth in Niagen ingredient sales was due to an upfront minimum purchase commitment from Nestlé Health Science as part of the newly amended supply agreement.

Gross margin percentage declined by 400 basis points to 57.2% in Q4 2022 compared to 61.2% in Q4 2021. The decline in gross margin percentage is largely attributable to business mix and overall input cost and wage inflation.

Operating expense decreased $2.7 million to $13.5 million in Q4 2022, compared to $16.2 million in Q4 2021. Lower operating expense was largely due to a $2.4 million decrease in selling and marketing (S&M) expense paired with a $0.5 million decrease in general and administrative (G&A) expense which was partially offset by $0.2 million in higher research and development (R&D) expense. During Q4 2022, the Company continued to scale back selling and marketing expense to focus on the most efficient channels and investments, resulting in selling and marketing expense as a percentage of net sales of 29.5% compared to 48.7% in Q4 2021, an improvement of 1,920 basis points. The decline in general and administrative expense was primarily driven by a $0.4 million decrease in legal expense.

Net loss for Q4 2022 was $1.4 million or $0.02 loss per share compared to a net loss of $5.3 million or $0.08 loss per share for Q4 2021. Adjusted EBITDA, a non-GAAP measure, was a profit of $0.4 million for Q4 2022, a $3.8 million improvement from Q4 2021. See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of non-GAAP measures to net loss, the most directly comparable GAAP measure.

For Q4 2022, net cash outflow from operating activities was $0.3 million, compared to $4.9 million in Q4 2021 largely due to improvements in net loss of $3.9 million paired with changes in working capital.

Results of operations for the year ended December 31, 2022

For the full year ended December 31, 2022 ("FY 2022"), ChromaDex reported net sales of $72.0 million, up 7% compared to $67.4 million during the full year ended December 31, 2021 ("FY 2021"). The increase in FY 2022 revenues compared to FY 2021 was driven by growth in Tru Niagen sales of $3.4 million, primarily from e-commerce, and $1.6 million higher Niagen ingredient sales which were partially offset by a decrease in other ingredient sales of $0.3 million. Growth in Niagen ingredient sales was due to an initial purchase commitment from Nestlé Health Science as part of the newly revised supply agreement.

Gross margin percentage declined by 210 basis points to 59.4% in FY 2022 compared to 61.5% in FY 2021. The decline in gross margin percentage is attributable to increases in supply chain headcount, including higher wages, and other inflationary pressures.

Operating expense decreased $7.1 million to $61.4 million in FY 2022, compared to $68.6 million in FY 2021. The decline in operating expense was largely due to $8.1 million in lower G&A expense which was partially offset by $1.0 million in higher R&D expense. The $8.1 million decline in G&A expense was primarily driven by lower legal expense of $9.9 million which was partially offset by higher severance and restructuring expense of $0.7 million paired with investments in technology, overall wage inflation and higher royalties expense. R&D expense increased due to increased headcount, share-based compensation expense and timing of projects.

Net loss for FY 2022 was $16.5 million or $0.24 loss per share compared to a net loss of $27.1 million or $0.40 loss per share for FY 2021. Adjusted EBITDA, a non-GAAP measure, was a loss of $10.0 million for FY 2022, an improvement of $8.9 million from FY 2021 primarily driven by improvements in net loss including lower legal expense and higher net sales. See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of non-GAAP measures to net loss, the most directly comparable GAAP measure.

For FY 2022, net cash outflow from operating activities was $15.1 million, compared to $24.2 million for FY 2021 due to improvements in net loss of $10.6 million partially offset by changes in working capital. ChromaDex ended FY 2022 with $20.4 million in cash and cash equivalents.

2023 Outlook

Looking forward, for the full year, the Company expects at least 10% revenue growth, with a realistic possibility of significantly greater growth this year. The conservative end of the Company’s outlook reflects prevailing macroeconomic uncertainty and only considers recurring, steady revenue growth from the e-commerce business and established partnerships. However, potential upside lies in new partnerships, channels, and products. The Company projects that gross margin will remain stable year over year as cost savings initiatives are expected to largely offset continued inflationary pressures. Moreover, further optimization, coupled with new and focused customer acquisition strategies are expected to result in reduced selling and marketing expense as a percentage of net sales. The Company plans to increase investments in research and development to drive future innovation and expects a reduction in general and administrative expense of $2 to $3 million year over year.

Investor Conference Call

A live webcast will be held Wednesday, March 8, 2023 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss ChromaDex’s fourth quarter and fiscal year 2022 financial results and provide a general business update.

To listen to the webcast, or to view the earnings press release and its accompanying financial exhibits, please visit the Investor Relations section of ChromaDex’s website at www.chromadex.com. The toll-free dial-in information for this call is 1-888-330-2446 with Conference ID: 4126168.

The webcast will be recorded, and will be available for replay via the website from 7:30 p.m. Eastern time on March 8, 2023 to 11:59 p.m. Eastern time on March 14, 2023. The replay of the call can also be accessed by dialing 800-770-2030, using the Replay ID: 4126168.

Important Note on Forward Looking Statements:

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Statements that are not a description of historical facts constitute forward-looking statements and may often, but not always, be identified by the use of such words as "expects," "anticipates," "intends" "estimates," "plans," "potential," "possible," "probable," "believes" "seeks," "may," "will," "should," "could," "predicts," "projects," "continue," "would" or the negative of such terms or other similar expressions. Forward-looking statements include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things: the quotation from ChromaDex’s Chief Executive Officer, and statements related to the Company’s 2023 financial outlook including but not limited to revenue growth, gross margin, expenses, and investment plans.

Risks that contribute to the uncertain nature of the forward-looking statements include, but are not limited to, our relationships with major customers; our ability to maintain our sales, marketing, and distribution capabilities; a decline in general economic conditions nationally and internationally; inflationary conditions; the impact of the COVID-19 pandemic on our business and operations, as well as the business or operations of our suppliers, customers, manufacturers, research partners and other third parties with whom we conduct business; the market and size of the vitamin mineral and dietary supplement market; decreased demand for our products and services; market acceptance of our products; the ability to protect our intellectual property rights; impact of any litigation or infringement actions brought against us; competition from other providers and products; risks in product development; our reliance on of a limited number of third-party party suppliers for certain raw materials; inability to raise capital to fund continuing operations; changes in government regulation; the ability to complete customer transactions and capital raising transactions and the risks and uncertainties associated with our business and financial condition in general, described in our filings with the Securities and Exchange Commission (SEC), including, without limitation, our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q as filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and actual results may differ materially from those suggested by these forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement and ChromaDex undertakes no obligation to revise or update this release to reflect events or circumstances after the date hereof.

On March 8, 2023 Cellectar Biosciences, Inc. (NASDAQ: CLRB), a late-stage clinical biopharmaceutical company focused on the discovery, development, and commercialization of drugs for the treatment of cancer, reported the company will participate in and be available for 1×1 meetings at the following upcoming conferences (Press release, Cellectar Biosciences, MAR 8, 2023, View Source [SID1234628328]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Roth Capital Partners 35th Annual Conference
Date: March 13, 2023
Time: 8:30 – 8:55 AM ET
Format: Fireside Chat and available for 1×1 investor meetings
Webcast: To register, click on the link HERE

Oppenheimer 33rd Annual Healthcare Conference
Date: March 14, 2023
Time: 10:00 – 10:30 AM ET
Format: Virtual presentation and available for 1×1 investor meetings
Webcast: To register, click on the link HERE
A replay of the Oppenheimer presentation will be available on the Events Page of the company website.

On March 8, 2023 Adhera Therapeutics, Inc. (the "Company") reported that it has entered into a Securities Purchase Agreement ("SPA") with an accredited investor pursuant to which the Company issued and sold the investor a non-convertible Original Issue Discount Senior Secured Promissory Note (a "Note") in the principal amount of $214,285.72 and 424,652 Common Stock Purchase Warrants ("Warrants") for total gross proceeds of $150,000 The proceeds from these financings were used for working capital purposes (Filing, 8-K, Adhera Therapeutics, MAR 8, 2023, View Source [SID1234628327]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

In connection with the January financing, the Company also agreed to increase the principal amount of prior Original Issue Discount Promissory Notes issued to the investors in May 2022 (the "Prior Notes") by 25%, from a total of $1,000,000 in principal to $1,250,000 in principal (not including accrued and unpaid interest). The Prior Notes rank pro rata with the new Notes with respect to interest payments. The terms of the Prior Notes are summarized in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022 under "Part II. – Item 5. – Other Information," and a form of the Prior Notes is filed as Exhibit 10.4 thereto.

The terms of the Notes and Warrants are summarized below.

The Notes are due on the earlier of (i) the 12 month anniversary of the issuance date, and (ii) the date on which the Company completes a public offering for cash of common stock and/or common stock equivalents which results in the listing of the Company’s common stock on a "national securities exchange" as defined in the Securities Exchange Act of 1934 (a "Qualified Financing"), provided that unless there is an event of default, the Company may extend the maturity date by six months in its discretion. The Notes bear interest at 8% per annum, payable monthly, subject to an increase to 15% in case of an event of default as provided for therein. Furthermore, at any time before the 12 month anniversary of the date of issuance of a Note, the Company may, after providing written notice to the holder, prepay all of the then outstanding principal amount of the Note for cash in an amount equal to the sum of 105% of the then outstanding principal amount of the Note, accrued but unpaid interest and all liquidated damages and other amounts due in respect of the Note (if any).

The Notes may, at the discretion of the Company, be converted into shares of a new class of convertible preferred stock of the Company (the "Convertible Preferred Stock") on the closing date of the Qualified Financing. In the event of the conversion, the holder will receive a number of shares of Convertible Preferred Stock equal to the quotient obtained by dividing (i) the unpaid principal amount of this Note (together with any interest accrued but unpaid thereon) by (ii) the closing price of the securities issued in the Qualified Financing on the closing date of the Qualified Financing. Upon issuance, the conversion price of the Convertible Preferred Stock (the "Preferred Conversion Price") will be equal to the closing price of the securities issued in the Qualified Financing, subject to adjustment.

The Notes provide for certain customary events of default which include failure to maintain the required reserve of shares for the Warrants, a restatement of the financial statements of the Company resulting in a reduction to the stock price by an enumerated threshold, and certain other customary events of default, subject to certain exceptions and limitations. Upon an event of default, the Notes will become immediately due and payable at a 125% premium, which will be reduced to 100% if the event of default occurs while the Company’s common stock is listed on a national securities exchange.

The Notes contain customary restrictive covenants which apply for as long as at least 75% of the Notes remain outstanding, including covenants against incurring new indebtedness or liens, repurchasing shares of common stock or common stock equivalents, paying dividends or distributions on equity securities, and transactions with affiliates, subject to certain exceptions and limitations. In addition, the SPA imposes certain additional negative covenants and obligations on the Company, including a prohibition on filing a registration statement (other than on Form S-8) unless at least 30% of the Notes have been repaid as of such filing, a prohibition on incurring new indebtedness at any time while any Notes are outstanding, and a 90-day restriction against issuing shares of common stock or common stock equivalents, subject to certain exceptions and limitations.

Under the SPA, the Company also granted each investor the right to participate in future financings that are exempt from registration under the Securities Act of 1933 (the "Securities Act") in an amount equal to 15% of such financings, which right has a term equal to the earlier of (i) the 24 month anniversary of the SPA, and (ii) the date the Notes are no longer outstanding. The SPA also provides the investors with most-favored nations treatment, giving them the right to amend their securities if the Company issues securities with more favorable terms while the investor’s securities are outstanding, subject to certain exceptions and limitations.

The Warrants are exercisable for a period of five-years and six months from issuance at an exercise price of $0.82 per share, subject to certain limitations including beneficial ownership limitations, and subject to adjustment including downward adjustment upon a dilutive issuance of securities at a per-share price that is below the exercise price. Unless the holder’s sale of shares of common stock issuable upon exercise of the Warrants at prevailing market prices (not at a fixed price) is registered on an effective registration statement under the Securities Act, the Warrants may be exercised cashlessly

The Company’s obligations under the Notes are secured by a lien on all assets of the Company and its subsidiaries pursuant to Security Agreements each dated the date of the respective SPA (the "Security Agreement").
The SPA requires a reserve of authorized but unissued shares equal to four times the number of shares issuable to the investors upon exercise of the Warrants, subject to reduction as the Warrants are exercised.

Aegis Capital Corp. (the "Placement Agent") served as placement agent in the financings and received a cash commission in the amount of 10% of the gross proceeds, or $15,000.