NOTE 12 — SUBSEQUENT EVENTS

Fiscal 2021 Financing

On September 15, 2020, the Company entered into financial advisory agreements to undertake a private placement of equity or equity equivalent securities (the “Fiscal 2021 Financing”). Pursuant to the financial advisory agreements, the Company agreed to pay transaction fees to the financial advisors for an aggregate of 6.0% of the gross proceeds plus out-of-pocket expenses. In addition, for any financing completed within 60 days of the closing of the Fiscal 2021 Financing, the financial advisors are entitled to additional transaction fees equal to 6.0% of the gross proceeds.

On October 9, 2020, the Company completed the Fiscal 2021 Financing through the sale of units (the “Units”) consisting of (i) approximately 2.5 million shares of Common stock, and (ii) warrants entitling the holders to purchase approximately 0.8 million shares of Common Stock (the “Warrants”). The Warrants are exercisable at $19.50 per share for a period of seven years and may be exercised on a cash or cashless basis at the election of the holders.

The Units were issued for a purchase price of $16.50 per Unit, resulting in gross proceeds of $41.0 million. Pursuant to the financial advisory agreements, the Company paid transaction fees of $2.5 million, and costs for professional fees and other offering costs are estimated at approximately $1.0 million. After deducting the financial advisory fees and other offering costs, the estimated net proceeds amounted to approximately $37.5 million. Pursuant to the terms of the Fiscal 2021 Financing, the Company executed the Reverse Stock Split of one share for 50 shares as discussed in Note 1, and agreed to enable trading of its Common Stock on the Nasdaq Capital Market, whereby the Company’s listing application was approved by Nasdaq on November 3, 2020. The Company also entered into a registration rights agreement (“RRA”), pursuant to which the Company agreed to use commercially reasonable efforts to register (i) the shares of Common Stock included in the Units, and (ii) the shares of Common Stock issuable upon exercise of the warrants. If the Company fails to register the shares pursuant to the terms of the RRA, liquidated damages up to a maximum of 6.0% of the gross proceeds of the Fiscal 2021 Financing may be assessed.

Early Payments to Xoma

Upon completion of a qualified financing of $20.0 million or more, the Company was obligated to repay the remaining outstanding balance due to Xoma within 15 days as discussed in Note 4. The completion of the Fiscal 2021 Financing resulted in acceleration of the remaining balance due to Xoma and the Company paid the outstanding balance of $1.4 million on October 23, 2020.

Reverse Stock Split

As discussed in Note 1, the Company effected a one share for 50 shares Reverse Stock Split on October 9, 2020. All references in the accompanying consolidated financial statements to the number of shares of Common Stock and per share amounts have been retroactively adjusted to give effect to the Reverse Stock Split.

Bonuses for Certain Officers and Employees

In October 2020, the Company’s Board of Directors approved bonus payments for an aggregate of approximately $0.4 million to certain officers and employees upon completion of the Fiscal 2021 Financing discussed above. Accordingly, the Company paid these bonuses in October 2020 and will recognize the related bonus expense for the fiscal quarter ending December 31, 2020.

ActiveSite Milestone Payment

Pursuant to the license agreement with ActiveSite discussed in Note 4, the first milestone payment for $1.0 million is due upon effectiveness of an IND. On October 28, 2020, the Company submitted an IND to the FDA that is expected to trigger the first milestone payment upon completion of review and acceptance by the FDA.

Operating Lease

On October 28, 2020, the Company entered into an assignment, assumption and amendment of lease agreement for ancillary office space in Bend, Oregon. The lease space consists of approximately 5,000 square feet and provides for average monthly rent of approximately $8,700 through the expiration date in February 2024. The lease provides one option to renew the lease for an additional three years at market rates. The Company has not yet determined the amount of the ROU asset and the related operating lease liabilities that will be recognized at inception of this lease.

Unaudited Pro Forma Disclosure

Presented below is an unaudited pro forma balance sheet that gives effect to the Fiscal 2021 Financing and the Early Payments to Xoma, as if these events had occurred on September 30, 2020 (in thousands, except per share amount):

(1)Gives effect to the receipt of gross proceeds of $41.0 million on October 9, 2020, as a result of the private placement of units at an issuance price of $16.50 per unit. The units consisted of an aggregate of approximately 2.5 million shares of Common Stock and warrants for the purchase of an additional 0.8 million shares of Common Stock.

(2)Gives effect to the financial advisory fees of 6.0% of the gross proceeds and other estimated offering costs of approximately $1.0 million related to the Fiscal 2021 Financing, of which $0.1 million was incurred but unpaid as of September 30, 2020.

(3)Gives effect to the requirement discussed in Note 4 to repay the remaining obligations due to Xoma, since the Fiscal 2021 Financing met the definition of a qualified financing.