Klotho Neurosciences, Inc., a biotech firm specializing in biological products with a current market capitalization of $9.35 million, has entered into a securities purchase agreement securing $2 million through convertible promissory notes and warrants. According to InvestingPro data, the company's overall financial health score is currently rated as WEAK, with significant challenges in profitability as evidenced by a net loss of $4.21 million in the last twelve months.
The agreement with an institutional investor involves the issuance of two senior convertible promissory notes totaling $2,173,914 and two warrants allowing the purchase of up to 4 million shares of the company's common stock.
On the closing date, January 23, 2025, the first tranche consisting of a $1,086,957 note and a warrant for 2 million shares was completed for $1 million. The notes, bearing a 7% annual interest rate and an 8% original issuance discount, will mature one year from issuance unless earlier default occurs. They are unsecured and rank equally with existing debt, and senior to any future obligations until repaid. This financing comes at a crucial time, as InvestingPro analysis shows the company's current ratio stands at 0.16, indicating short-term obligations significantly exceed liquid assets.
The conversion price for the notes is set at $0.25 per share, with a stipulation preventing conversions that would result in the investor owning more than 4.99% or 9.99% of outstanding common stock. Additionally, conversions are barred if they would contravene Nasdaq Stock Market rules without prior shareholder approval. The exercise price for the warrants is $0.50 per share, subject to adjustments and similar ownership limitations.
Klotho Neurosciences has committed to seeking shareholder approval within 90 days to authorize share issuances beyond the 19.99% threshold of currently outstanding shares. If approval is not achieved, the company will reconvene stockholder meetings every three months until consent is granted. A voting agreement has also been established with certain company officers, directors, and common stockholders to support this initiative.
In accordance with the registration rights agreement, Klotho Neurosciences will file a registration statement with the SEC for the shares underlying the notes and warrants within 15 days post-closing. Upon SEC approval, the investor has agreed to purchase the second note and warrant for an additional $1 million.
This information is based on a press release statement. The financing agreement comes amid challenging market conditions for Klotho, with the stock having declined 95.89% over the past year and 9.36% year-to-date. Discover more comprehensive financial insights and 8 additional key ProTips for Klotho Neurosciences with an InvestingPro subscription.
In other recent news, Klotho Neurosciences has secured a $1.2 million convertible promissory note with Austria Capital LLC, set to mature in a year with a zero-interest rate. The company has also issued 2 million shares of common stock to Austria Capital as an inducement to enter the agreement. In financial developments, Klotho Neurosciences terminated its relationship with its former accounting firm, Yusufali & Associates, due to the firm's disqualification by the Public Company Accounting Oversight Board, and BCRG Group has been appointed as the new independent registered public accounting firm.
In governance developments, Riad El-Dada has been appointed to Klotho Neurosciences' Board of Directors. El-Dada, who has held various senior positions within the pharmaceutical industry, will serve until the next Annual Meeting of Stockholders. The company has yet to determine which Board committees El-Dada will join.
On the executive front, the company has entered into a new three-year contract with its CEO, Dr. Joseph Sinkule, who will receive an annual base salary of $360,000 and an equity award of 1,000,000 stock options under the company’s 2023 Incentive Plan. Additionally, Jeffrey LeBlanc and Peter Moriarty have been welcomed as the new Chief Financial Officer and Chief Operating Officer, respectively.
In other significant changes, Klotho Neurosciences reported a major shift in its share composition following a merger with a subsidiary of 03 Life Sciences, resulting in 15,130,393 issued and outstanding shares of common stock. The company is also facing potential delisting from the Nasdaq Stock Market due to non-compliance with the minimum bid price requirement, with a deadline set for April 14, 2025.
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