Common Stock Warrants

9 Months Ended

Sep. 30, 2022

COMMON STOCK AND COMMON STOCK WARRANTS

As of December 31, 2021, the Company’s Restated Certificate of Incorporation authorized the Company to issue 125 million shares of common stock, par value $0.001 per share. On September 1, 2022, the Company’s shareholders approved an increase in the Company’s authorized shares to 500 million. The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of the holders of any preferred stock that may be issued. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any. No cash dividends have been declared or paid to date.

Q2 2022 Private Placement

On June 30, 2022, the Company entered into a securities purchase agreement with several institutional and accredited investors (the “Investors”) pursuant to which the Company agreed to issue to the Investors in a private placement (the “Q2 2022 PIPE”) an aggregate of 37,649,086 shares of common stock and, to certain Investors, in lieu of common stock, pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 13,276,279 shares of common stock at a price of $1.095 per share of common stock (or $1.094 per Pre-Funded Warrant) and 50,925,365 warrants (the “Warrants”) for the purchase of shares of common stock. The price per Pre-Funded Warrant represents the price of $1.095 per share sold in the Q2 2022 PIPE, minus the $0.001 per share exercise price of each such Pre-Funded Warrant. The Pre-Funded Warrants are exercisable, subject to certain beneficial ownership restrictions, at any time after their original issuance and will not expire. The Q2 2022 PIPE closed on July 6, 2022. The Company received gross proceeds of $55.7 million, before deducting offering expenses paid by the Company.

Each Warrant has an exercise price equal to $1.095 per share. The Warrants will expire on the date that is 60 months from their original issue date. The exercise of any Warrant was conditioned upon the Company increasing its authorized shares. The Company convened a special meeting of its stockholders on September 1, 2022, during which the stockholders approved an increase in the number of authorized shares of common stock from 125 million to 500 million pursuant to an amendment to the Company’s Certificate of Incorporation. As of July 6, 2022, due to the shortfall in authorized and available common shares, the Warrants did not meet the criteria required for permanent equity accounting. As a result, the Company allocated $41.2 million of the gross proceeds from the offering to the fair value of the Warrants, which was recorded as a warrant liability, and the remaining $13.5 million was allocated to the common shares and Pre-Funded Warrants and recorded as permanent equity. The

fair value of the warrant liability was calculated using the Black-Scholes option valuation model. The Company also allocated a portion of the transaction fees, including commissions and legal fees, to the warrant liability and expensed within other expense, net, approximately $2.9 million of these fees upon the closing of the Q2 2022 PIPE. Upon shareholder approval of the increase to the Company’s authorized shares, the Warrants met all criteria required for permanent equity accounting and, accordingly, the Company remeasured the fair value of the warrant liability through earnings, which resulted in approximately $2.5 million of income included within other expense, net, and reclassified the fair value of the warrant liability to additional paid-in capital.

Also on June 30, 2022, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investors, pursuant to which the Company agreed to register for resale the common shares issued in the Q2 2022 PIPE and the issuance of the shares of common stock underlying the Pre-Funded Warrants and the Warrants held by the Investors. Such registration statement was filed on July 29, 2022 and was declared effective by the SEC on August 5, 2022.

Q1 2022 Private Placement

On March 3, 2022, the Company entered into a securities purchase agreement pursuant to which it agreed to issue and sell to an investor (the “Investor”), in a private placement (the “Q1 2022 PIPE”), 900,000 shares of common stock at a price of $1.80 per share, which represents the volume weighted average price per share of the Company’s common stock as quoted on the Nasdaq Stock Market for the thirty (30) consecutive-day trading day period ending on March 2, 2022, and pre-funded warrants to purchase 766,666 shares of common stock at a purchase price of $1.79 per pre-funded warrant (representing the price of $1.80 per share minus the $0.01 per share exercise price of each such prefunded warrant). The pre-funded warrants are exercisable at any time after their original issuance date and will have no expiration date. The Q1 2022 PIPE closed on March 7, 2022 and the Company received gross proceeds of $3.0 million, before deducting offering expenses payable by the Company.

Also, on March 3, 2022, the Company entered into a registration rights agreement with the Investor, pursuant to which the Company filed a registration statement covering the resale of these securities in April 2022.

Class B Warrants

In connection with its issuance of common stock in a public offering that closed on November 29, 2019, the Company issued 5,416,667 Class B warrants, which are exercisable for shares of the Company’s common stock or pre-funded warrants to purchase shares of the Company's common stock. The Class B warrants were immediately exercisable upon issuance, had an initial exercise price of $15.00 per share and expire on a date that is the earlier of (a) the date that is 30 calendar days from the date on which the Company issues a press release announcing top-line data from its Phase 3 clinical trial of mavorixafor for the treatment of patients with WHIM syndrome (or, if such date is not a business day, the next business day) and (b) November 28, 2024. The Class B warrants have a contingent price adjustment feature pursuant to which the exercise price of the Class B warrants is adjusted to the lowest weighted average offering price at which the Company sells its common stock or certain securities convertible into or exercisable for the Company's common stock in one or more subsequent offerings, if the weighted average offering price for such offering is below $15.00. The exercise price of the Class B warrants was adjusted to $1.80 on March 3, 2022 as a result of the Q1 2022 PIPE and was further adjusted to $1.50 on July 6, 2022 as a result of the Q2 2022 PIPE.

Prefunded Warrants

In connection with previous equity offerings, the Company has issued pre-funded warrants, which are exercisable into one share of the Company's common stock, are immediately exercisable upon issuance, and for which the remaining exercise price is equal to or less than $0.01 per share.

The following table provides a roll forward of outstanding warrants for the nine month period ended September 30, 2022:


	Number of warrants	Weighted Average Exercise Price	Weighted Average Contractual Term (Years)
Outstanding and exercisable warrants to purchase common shares as of December 31, 2021	13,257,160	$7.96	2.72
Issued	64,968,310	$1.10
Exercised	(100)

Outstanding and exercisable warrants to purchase common shares as of September 30, 2022	78,225,370	$2.12	4.32

As of September 30, 2022, the Company’s outstanding warrants to purchase shares of common stock consisted of the following:


Issuance Date	Number of Shares of Common Stock Issuable	Exercise Price			Expiration Date
October 25, 2016	5,155	$	19.78		October 24, 2026
December 28, 2017	115,916	$	19.78		December 28, 2027
September 12, 2018	20,220	$	19.78		September 12, 2028
October 19, 2018	20,016	$	19.78		October 19, 2028
March 13, 2019	5,000	$	19.78		March 12, 2029
April 16, 2019	3,866,154	$	13.20		April 15, 2024
November 29, 2019	5,416,567	$	1.50		November 28, 2024
November 29, 2019	1,750,000	$	12.00	(a)	n/a
March 23, 2021	50,000	$	8.70	(b)	n/a
November 9, 2021	2,008,032	$	4.98	(c)	n/a
March 3, 2022	766,666	$	1.80	(d)	n/a
July 6, 2022	13,276,279	$	1.094	(e)	n/a
July 6, 2022	50,925,365	$	1.095		July 6, 2027
	78,225,370

(a) In November 2019, the Company received $11.999 per pre-funded warrant, or $21.0 million in aggregate proceeds. Each pre-funded

warrant may be exercised for an additional $0.001 per pre-funded warrant.

(b) In March 2021, the Company received $8.69 per pre-funded warrant, or $435 thousand in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.01 per pre-funded warrant.

(c) In November 2021, the Company received $4.97 per pre-funded warrant, or $10.0 million in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.01 per pre-funded warrant.

(d) In March 2022, the Company received $1.79 per pre-funded warrant, or $1.4 million in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.01 per pre-funded warrant.

(e) In July 2022, the Company received $1.094 per pre-funded warrant, or $14.5 million in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.001 per pre-funded warrant.