Note 9 — Subsequent Events

January 2023 Registered Offering and Private Placement

On January 27, 2023, the Company entered into a Registered Direct and Private Placement agreement with a single institutional investor for the sale of 448,000 shares of common stock at a price per share of $1.55, and pre-funded warrants to purchase 1,492,299 shares of common stock, at a price per pre-funded warrant of $1.549. The pre-funded warrants have an exercise price of $0.001 per share and became exercisable upon issuance and remain exercisable until exercised in full. In a concurrent Private Placement, the Company also agreed to issue to the same investor warrants to purchase 1,940,299 shares of common stock (“PIPE Warrants”). The PIPE Warrants had an offering price of $0.125 per PIPE Warrant to purchase one share of common stock. The PIPE Warrants have an exercise price of $1.55 per share and are exercisable six months after issuance and will expire three years from the date on which the PIPE Warrants become exercisable. The Company received gross proceeds of $3.25 million total from both offerings.

AnnJi License Agreement

On February 28, 2023, the Company entered into a license agreement with AnnJi Pharmaceutical Co. Ltd., whereby the Company obtained an exclusive license (the “License Agreement”) from AnnJi to intellectual property rights pertaining to the molecule known as JM17, which activates Nrf1 and Nrf2, enhances androgen receptor degradation and underlies AJ201, a clinical product candidate currently in a Phase 1b/2a clinical trial in the U.S. for the treatment of spinal and bulbar muscular atrophy (“SBMA”), also known as Kennedy’s Disease. Under the License Agreement, in exchange for exclusive rights to the intellectual property underlying the AJ201 product candidate, the Company will pay an initial cash license fee of $3.0 million, of which $2.0 million is payable within 60 days and $1 million is payable within 180 days after the effective date of the License Agreement.

The license provided under the License Agreement is exclusive as to all oral forms of AJ201 for use in all indications (other than androgenetic alopecia and Alzheimer’s disease) in the United States, Canada, the European Union, the United Kingdom and Israel. The License Agreement also contains customary representations and warranties and provisions related to confidentiality, diligence, indemnification and intellectual property protection. The Company will initially be obligated to obtain both clinical and commercial supply of AJ201 exclusively through AnnJi.

The Company is also obligated to issue shares of its common stock under the Subscription Agreement and make additional payments over the course of the License Agreement including: reimbursement payments of up to $10.8 million in connection with the product’s Phase 1b/2a clinical trial, up to $14.5 million in connection with certain development milestones pertaining to the first indication in the U.S., up to $27.5 million in connection with certain drug development milestones pertaining to additional indications and development outside the U.S., up to $165 million upon the achievement of certain net sales milestones ranging from $75 million to $750 million in annual net sales, and royalty payments based on a percentage of net sales ranging from mid-single digits (on annual net sales at or below $50 million) to the low double digits (on annual net sales equal to or greater than $300 million), which are subject to potential diminution in certain circumstances.

In connection with the signing of the License Agreement, the Company will issue 831,618 shares of its common stock to AnnJi (“First Tranche Shares”) and then will issue an additional 276,652 shares of common stock upon enrollment of the eighth patient in the ongoing Phase 1b/2a SBMA clinical trial (“Second Tranche Shares”). The Company and AnnJi entered into a subscription agreement, dated as of February 28, 2023, that provides for the issuance of First Tranche Shares, which contains customary representations and warranties of the Company and AnnJi, respectively, and is subject to customary closing conditions. The Company and AnnJi will enter into a subsequent subscription agreement, in substantially the same form as the Subscription Agreement, with respect to the issuance of the Second Tranche Shares. Also in connection with execution of the License Agreement, the Company entered into a registration rights agreement with AnnJi. Pursuant to the Registration Rights Agreement, the Company will be required to file, on or prior to August 28, 2023, a registration statement with the U.S. Securities and Exchange Commission to register the resale of the Consideration Shares.