aibioDogwood Therapeutics exchanges $19.5 million Conjoint loan for preferred stock
Tickers DWTX
Dogwood will cancel its loans from Conjoint Inc., a subsidiary of its largest shareholder, for 284.2638 shares of Series A-1 preferred stock convertible into 10,000 common shares each.
Key facts
- Company
- Dogwood Therapeutics, Inc. (NASDAQ: DWTX)
- News type
- Financings
- Primary source
- Dogwood Therapeutics, Inc. Form 8-K filed March 12, 2025 (SEC EDGAR)
Dogwood Therapeutics, Inc. (Nasdaq: DWTX), formerly Virios Therapeutics, Inc., agreed on March 12, 2025 to cancel all of its loans from Conjoint Inc. in exchange for preferred stock. Under a Debt Exchange and Cancellation Agreement, the principal and accrued interest, an aggregate of $19,926,891 through March 12, 2025, will be deemed repaid for 284.2638 shares of Series A-1 Non-Voting Convertible Preferred Stock. The company described the debt-to-equity exchange in a Form 8-K filed with the SEC.
The debt that is being exchanged
Dogwood and Conjoint signed a Loan Agreement on October 7, 2024 under which Conjoint agreed to make loans in the aggregate principal amount of $19,500,000. According to the exchange agreement, Conjoint lent $16,500,000 on October 7, 2024 and a further $3,000,000 on February 18, 2025.
The company's press release says its largest shareholder, CK Life Sciences Int'l., (Holdings) Inc., agreed to the exchange through its wholly owned subsidiary, Conjoint. The release says the exchange removes all existing debt from Dogwood's balance sheet.
The new preferred stock
The shares of Series A-1 preferred stock carry a par value of $0.0001. The exchange is based on a price of $7.01 per underlying share of common stock. That price was set by reference to the average Nasdaq Official Closing Price of the common stock for the five trading days before the agreement was signed.
Each preferred share is convertible into 10,000 shares of common stock, subject to conditions in the Certificate of Designation. Conversion depends on stockholder approval and Nasdaq rules. The press release says the terms are substantially the same as Dogwood's existing Series A preferred stock, except that the A-1 shares have no cash settlement or dividend rights.
The Certificate of Designation, filed with the Delaware Secretary of State on March 12, 2025, says holders are not entitled to dividends and generally have no voting rights. The shares rank equally with common stock on liquidation. A beneficial ownership limit caps conversions that would give a holder and its affiliates more than a specified percentage of the common stock. The limit does not apply after stockholder approval of a change of control under Nasdaq Listing Rules 5110 and 5635(b).
Dogwood issued the shares without registering them, relying on Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act of 1933.
Registration rights and support agreements
Dogwood also signed a Joinder and Amendment No. 1 to its Registration Rights Agreement with Sealbond Limited, a British Virgin Islands corporation, and Conjoint. It adds Conjoint as a party and covers the common shares Conjoint would receive on conversion.
The members of Tungsten Advisors LLC, the company's financial advisor, signed support agreements. They agreed to vote their common shares for the conversion proposal and, if needed, for a charter amendment authorizing a reverse stock split to help maintain compliance with Nasdaq listing standards.
Why the company did it
Chief Executive Officer Greg Duncan said in the release: "This agreement enables us to remove all existing debt from our balance sheet." The company says the financing from October 2024 ensures it has sufficient capital to recruit patients through a planned interim assessment of its ongoing Phase 2b trial of Halneuron in chemotherapy-induced neuropathic pain in the fourth quarter of this year, without the burden of making debt payments as originally structured. The trial is called HALT-CINP, and Dogwood expects to dose its first patient in the near term.
About Dogwood
Dogwood describes itself as a development-stage biopharmaceutical company working on non-opioid pain treatments and antiviral programs. In its annual report filed March 1, 2024, when it was named Virios Therapeutics, it said its lead candidates IMC-1 and IMC-2 combine anti-herpes antivirals with celecoxib. Chief Financial Officer, Corporate Secretary and Treasurer Angela Walsh signed the 8-K.