aibioEterna (now Ernexa) closes $1.1 million placement at $0.75 after stockholder vote
Tickers ERNA
Stockholders approved the share issuances at the annual meeting on October 29, 2024, the same day the placement closed. The company also agreed to register the new shares for resale, and its equity had been below Nasdaq's $2.5 million minimum.
Key facts
- Company
- Ernexa Therapeutics Inc. (NASDAQ: ERNA)
- News type
- Financings
- Primary source
- Ernexa Therapeutics Inc. 8-K (2024-10-29)
Eterna Therapeutics Inc. (Nasdaq: ERNA) closed a private placement of common stock on October 29, 2024, the day its stockholders approved the share issuances at the annual meeting. The company disclosed the closing in a Form 8-K filed the same day.
The placement and the vote
Under a securities purchase agreement signed on September 24, 2024, accredited investors agreed to buy 1,516,994 shares of common stock, or pre-funded warrants in their place, at $0.75 per share. The closing was conditioned on stockholder approval. At closing the company issued 1,401,994 shares and a pre-funded warrant for 115,000 shares, with an exercise price of $0.005 per share. The company received approximately $1.1 million in gross proceeds and says it will use the net proceeds for general working capital.
Nasdaq listing rules required a vote on Proposal 3, which covered shares under the purchase agreement, shares issued in exchange for outstanding convertible notes and warrants, and shares issued on conversion of 12% senior convertible notes. It passed with 2,851,941 votes for and 44,124 against. The 8-K names no placement agent or underwriter for the private placement.
Eterna agreed to file a registration statement by November 5, 2024 to register the new shares for resale. It must have that statement declared effective within 45 days after filing, or within 60 days if the SEC subjects the filing to a full review.
The exchange transactions
The same September 24 agreements covered an exchange of debt and warrants. The holders of warrants issued in December 2022 for about 4.4 million shares, at $1.43 per share, agreed to exchange them. So did the holders of $8.7 million of convertible notes issued in July 2023, with warrants for about 6.1 million shares at $1.43, and the holders of $9.2 million of convertible notes issued in December 2023, with warrants for about 9.6 million shares at $1.43.
Under the terms, warrant holders received 0.5 of a share for each share issuable under their warrants, rounded up. Noteholders received shares based on principal and interest, divided by $1.00. The company issued 38,302,029 shares at the closing of the exchange. The 8-K says the exchange reclassifies the notes from debt to equity.
The company also sold about $3.9 million of 12.0% senior convertible bridge notes in a note purchase agreement. Once stockholders approved, about $3.0 million of those notes plus interest converted at $0.50 into 6,244,237 shares. About $0.9 million converted at $0.50 into pre-funded warrants for 1,764,000 shares.
Dilution and control
After the closings, the 8-K says about 51.4 million common shares are outstanding, along with pre-funded warrants for about 1.9 million shares and warrants for about 0.4 million shares. The filing also says Charles Cherington, a former director, owns about 16.6 million shares, or about 32% of the outstanding common stock.
Pre-funded warrants issued in the placement may not be exercised to the extent that the holder would then own more than 9.99% of the outstanding common stock.
Nasdaq compliance
Nasdaq notified the company on March 19, 2024 that it was out of compliance with the minimum stockholders' equity rule, Listing Rule 5550(b)(1), because it reported equity below $2.5 million as of December 31, 2023. The company submitted a plan in May 2024, and Nasdaq granted a 180-day extension through September 16, 2024.
On September 17, 2024 Nasdaq staff said the company had not met the terms of that extension. The company requested a hearing before the Nasdaq Hearings Panel. The hearing is scheduled for November 12, 2024. The request stayed the suspension of trading and the filing of Form 25-NSE pending the Panel's decision.
The company says that after the debt reclassifications, the net proceeds from the purchase agreement and the conversion of the bridge notes, it believes stockholders' equity now exceeds $2.5 million. It says it will present a plan at the hearing to show long-term compliance.
Auditor and listing
Stockholders also ratified the appointment of Grant Thornton LLP as the independent registered public accounting firm for 2024. The company's common stock has a par value of $0.005 per share and trades on The Nasdaq Stock Market LLC under the symbol ERNA.