Item 8.01. Other Events.
On November 17, 2022, Aravive, Inc. (the "Company") filed with the U.S.
Securities and Exchange Commission (the "SEC") a preliminary proxy statement on
Schedule 14A relating to the special meeting of the Company's stockholders to be
held on January 13, 2023 to, among other things, vote on a proposal to approve
an amendment to the Company's Amended and Restated Certificate of Incorporation,
as amended, to increase the number of authorized shares of common stock, par
value $0.0001 per share (the "Common Stock"), from 100,000,000 to 250,000,000
(the "Increase in Number of Authorized Shares of Common Stock Proposal"). The
Company subsequently filed, on November 30, 2022, a definitive Proxy Statement
(the "Definitive Proxy Statement") with respect to, among other things, the
Increase in Number of Authorized Shares of Common Stock Proposal.
On November 10, 2022, the Company received a letter from a purported shareholder
of the Company seeking to inspect the Company's books and records pursuant to
Section 220 of the Delaware General Corporation Law concerning the private
placement transaction (the "Private Placement") which closed on October 27,
2022, pursuant to which the Company entered into a securities purchase agreement
with several institutional accredited investors, Eshelman Ventures, LLC, an
entity wholly owned by Dr. Fredric N. Eshelman, the Executive Chairman of the
Company's Board of Directors and certain directors and officers of the Company,
whereby the Company issued and sold (i) an aggregate of 29,308,612 shares (the
"Shares") of its Common Stock, (ii) with respect to certain Investors, in lieu
of the Shares, pre-funded warrants to purchase up to an aggregate of 15,870,199
shares of Common Stock, and (iii) accompanying Series A warrants and Series B
warrants to purchase up to an aggregate of 45,178,811 shares of Common Stock or
Pre-Funded Warrants.
Subsequently, on December 2, 2022, the Company received a letter from a second
purported shareholder of the Company seeking to inspect the Company's books and
records pursuant to Section 220 of the Delaware General Corporation Law
concerning the Private Placement.
In discussions with counsel to the purported shareholders, counsel expressed
their clients' belief that the Company's Proxy Statement omits material
information with respect to the Increase in Number of Authorized Shares of
Common Stock Proposal and demanding that the Company make additional and
supplemental disclosures regarding the Private Placement.
The Company believes that the claims asserted by counsel to the purported
shareholders are entirely without merit and that no further disclosure is
required by applicable rule, statute, regulation or law beyond that already
contained in the Definitive Proxy Statement. However, to preclude and avoid the
cost and distraction of a potential lawsuit regarding the sufficiency of the
disclosures in the Definitive Proxy Statement that may delay or otherwise
adversely affect the approval of the Increase in Number of Authorized Shares of
Common Stock Proposal, the Company has determined that it will voluntarily make
certain supplemental disclosures to the Definitive Proxy Statement related to
the Increase in Number of Authorized Shares of Common Stock Proposal set forth
below (the "Supplemental Disclosures"). Nothing in this Current Report on
Form 8-K shall be deemed an admission of the legal necessity or materiality
under applicable laws of any of the Supplemental Disclosures set forth herein.
To the contrary, the Company specifically denies that any additional disclosure
was or is required.
SUPPLEMENTAL DISCLOSURES TO DEFINITIVE PROXY STATEMENT
The Supplemental Disclosures should be read in conjunction with the Definitive
Proxy, which should be read in its entirety and is available free of charge on
the SEC's website at www.sec.gov. Page number references below are to
page numbers in the Definitive Proxy Statement, and capitalized terms used but
not defined herein have the meanings set forth in the Definitive Proxy
Statement. To the extent the information in the Supplemental Disclosures differs
from or conflicts with the information contained in the Definitive Proxy
Statement, the information set forth in the Supplemental Disclosures shall be
deemed to supersede the respective information in the Definitive Proxy
Statement. Bolded text shows text being added to a referenced disclosure in the
Definitive Proxy Statement. Bolded strikethrough text shows text being deleted
from a referenced disclosure in the Definitive Proxy Statement.
The disclosure on page 9 of the Definitive Proxy Statement is hereby
supplemented by amending and restating the first paragraph of the section "The
Private Placement" as follows:
The Private Placement
On October 27, 2022, we closed a private placement priced at-the-market
consistent with the rules of the Nasdaq Stock Market LLC (the "Private
Placement") pursuant to which we entered into a securities purchase agreement
(the "Purchase Agreement") on October 24, 2022 with several institutional
accredited investors (the "Investors"), Eshelman Ventures, LLC, an entity wholly
owned by Dr. Fredric N. Eshelman, the Executive Chairman of the Company's Board
of Directors ("Eshelman Ventures") and certain directors and officers of the
Company (collectively, the "Purchasers"), whereby we issued and sold (i) an
aggregate of 29,308,612 shares (the "Shares") of our Common Stock, (ii) with
respect to certain Investors, in lieu of the Shares, pre-funded warrants to
purchase up to an aggregate of 15,870,199 shares of Common Stock (the
"Pre-Funded Warrants"), and (iii) accompanying Series A warrants (the "Series A
Warrants") and Series B warrants (the "Series B Warrants", together with the
Series A Warrants, the "Warrants") to purchase up to an aggregate of 45,178,811
shares of Common Stock or Pre-Funded Warrants. The combined purchase price of
each Share and accompanying Warrants was $0.9199. The combined purchase price of
each Pre-Funded Warrant and accompanying Warrants was $0.9198, which is equal to
the Investor's combined purchase price per Share and accompanying Warrants,
minus the per share exercise price of each Pre-Funded Warrant of $0.0001. The
Company's stock price closed at $0.795 per share on October 24, 2022. The
Pre-Funded Warrants were offered only to the Investors. The per share exercise
price of the Warrants is $0.7949.
The disclosure on pages 11-12 of the Definitive Proxy Statement is hereby
supplemented by amending and restating the section "Background" as follows:
Background
To date, we have not generated any revenue from commercial sales of any of our
product candidates. Since our inception, we have financed our operations through
private placements of our equity securities, public offerings of our common
stock, debt financing, grant proceeds, sales of common stock through our at the
market offering facility as well as payments received from license agreements.
Since inception, we have incurred net losses and negative cash flows from
operations. At June 30, 2022, we had an accumulated deficit of approximately
$571.3 million and working capital of $29.8 million and at September 30, 2022,
we had an accumulated deficit of approximately $587.0 million and working
capital of $14.1 million. We expect to continue to incur losses from costs
related to the development of batiraxcept and related administrative activities
for the foreseeable future. These factors raised substantial doubt about our
ability to continue as a going concern. As of June 30, 2022, we had a cash and
cash equivalents balance of $46.8 million which decreased to $27.9 million as of
September 30, 2022 consisting of cash and investments in highly liquid U.S.
money market funds, which was not sufficient to sustain our operations into the
first quarter of 2023. We state in our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2022 that we will need to obtain additional financing in
order to advance our clinical development program to later stages of
development, build out our pipeline and fund operations for the foreseeable
future and we will continue to seek funds through equity or debt financings,
collaborative or other arrangements with corporate sources, or through other
sources of financing.
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On July 5, 2022, the Board held an in person meeting and discussed its financing
needs and various financing alternatives that were provided during preliminary
discussions with investment bankers and also discussed recent expressed interest
by Investor A, one of the Investors, in a potential investment in the
corporation. Because it was anticipated that an investment by Dr. Eshelman may
be necessary to meet financing needs and be required by a third party investor,
the Board formed a special committee of the Board (the "Special Committee"). The
Special Committee was comprised of independent directors, who at the time of
formation of the Special Committee, did not have an interest in the potential
financing of the Company, Amato Giaccia, Sigurd Kirk and Michael Rogers, and was
delegated authority to negotiate terms of a financing transaction and to
recommend to the full Board any financing transaction approved by the Special
Committee. The Board was further prohibited from entering in a transaction not
recommended by the Special Committee.
On July 20, 2022, the Special Committee met to discuss financing needs,
including the recent interest in an investment by Investor A as well as the
potential retention of MTS Securities, LLC ("MTS") as a financial advisor. In
response to Investors A's request to provide terms, the Special Committee
determined, following a recommendation from Dr. McIntyre and Mr. Howard, to
approach Investor A with proposed financing terms that included a PIPE or an
above market registered direct offering and no warrant coverage. The Special
Committee further determined, following a recommendation from Dr. McIntyre and
Mr. Howard, that if such financing terms were not agreed by Investor A that the
corporation would engage MTS, on behalf of the Special Committee, as financial
advisor to assist in negotiating a potential financing.
On July 28, 2022, MTS was retained to act as an exclusive financial advisor with
respect to the potential financing. Following the retention of MTS, management
and MTS engaged in conversations with Investor A.
On August 10, 2022, the Special Committee met with Dr. McIntyre and Mr. Howard
who provided an update regarding discussions with MTS and Investor A, noting
that MTS did not believe that Investor A would be interested in a financing
without 100% warrant coverage.
On August 23, 2022, MTS reviewed with the Special Committee its recent
conversations with Investor A and its requirement that there be a specified
minimum amount raised in the offering (which would require an investment by Dr.
Eshelman) -in order for Investor A to invest and its requirements as to warrant
coverage. MTS discussed recent PIPE transactions and registered direct offerings
as well as market conditions noting that few financings were being consummated
and that almost all financings involved at least 100% warrant coverage. The
Special Committee directed MTS to propose an above market financing to Investor
A with 40% warrant coverage.
On September 1, 2022, the Special Committee met and received an update from Mr.
Howard on recent discussions between MTS, management and Investor A, including
the terms being required by Investor A, which included 100% warrant coverage,
with a warrant for 50% coverage having a term of 18-months exercisable at 125%
of the purchase price or a 25% premium to market and a warrant for 50% coverage
having a term of 30-months with both warrants having an exercise price
exercisable at a 100% premium to the market purchase price, and the requirement
that Investor A be entitled to appoint a director to the board. In addition,
Investor A required a minimum offering size of which Investor A would only
finance up to a maximum of 33.3%, and would require participation in the
financing by Dr. Eshelman. MTS provided a warrant analysis that reflected
feedback received from Investor A on August 31, 2022. The Special Committee
discussed the benefits of having additional fundamental investors such as
Investor A. The Special Committee directed MTS and Company management Mr. Howard
to continue to negotiate with Investor A to obtain more favorable terms for the
Company.
On September 12, 2022, MTS forwarded a term sheet provided by Investor A
together with certain deal documents. On September 15, 2022, MTS forwarded a
revised term sheet that had been provided by Investor A together with certain
deal documents. The Special Committee met again on September 15, 2022 and. At
the meeting, Mr. Howard updated the Committee regarding the recent revisions to
the term sheet with Investor A. The Special Committee asked questions of Mr.
Howard, discussed proposed terms by Investor A, and approved of the execution of
a non-binding term sheet with Investor A which included the sale of common stock
or a pre-funded warrant together with 100% warrant coverage (50% coverage for a
short term warrant exercisable at market price and 50% coverage for a longer
term warrant exercisable at a 50% premium to market) priced at market based upon
the Nasdaq rules, Investor A and Eshelman Ventures each investing approximately
one third of the financing amount and other investors investing one third of the
financing amount, preemptive rights for Investor A, a board observer right for
Investor A and board seat for Investor A. On September 23, 2022, at its planned
quarterly meeting, management reviewed with the Board the proposed deal terms
and our cash needs. On September 23, 2022, the Special Committee met again and
discussed in further detail the terms of the proposed financing.
Commencing September 21, 2022 until October 14, 2022, management had meetings
with approximately ten potential investors that had been wall crossed, two of
whom became Investors.
On the morning of October 13, 2022, the Special Committee met to discuss
proposed terms of the financing presented by Investor A and indications of
interest from other investors, which were based upon the expectation that
Investor A would be a large investor in the financing. The Special Committee
approved the terms of the financing and recommended that the Board approve the
transaction which included a (i) a minimum financing amount of $40 million; (ii)
shares of common stock to be issued at market price or pre-funded warrants and
100% warrant coverage; and (iii) 50% of warrants to expire the later of 15
months after issuance or one (1) month after public announcement by or on behalf
of the Company of the publication of top line data from the Company's Phase 3
trial of batiraxcept in platinum-resistant ovarian cancer to be issued at market
price (exercise price to be market price with no premium) and 50% of warrants to
be expire 30 months after issuance at market price (exercise price to be market
price with no premium). At the October 13, 2022 meeting, after hearing the final
terms of the financing, Dr. Giaccia indicated an interest in investing on these
terms.
Later in the day on October 13, 2022, Dr. McIntyre sent an email to the members
of the Board inquiring if any of the members of the Board was interested in
investing in the financing. It was the belief of the Board members that insider
participation would show confidence in the corporation. On October 13, 2022, Dr.
Ho informed Dr. McIntyre of his interest in participating. On October 14, 2022,
each of Dr. Giaccia and Mr. Zhang informed Dr. McIntyre of their intent to
participate in the offering. On October 17, 2022, the Board, with met to review
the terms of the financing. Among other things, Mr. Howard described the
negotiation that he and MTS had with Investor A, and noted that he believed,
after extensive negotiation with Investor A, that the terms presented were the
best terms available in light of the difficult market conditions and the
Company's financing needs. With Dr. Eshelman abstaining from voting, the Board
approved the terms of a financing with Investor A upon recommendation of the
Special Committee.
Negotiations regarding the transaction documents continued from October 13, 2022
until October 24, 2022.
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On October 24, 2022, the Board met again to discuss Investor A's demand for
extensions to the expiration dates of the warrants which were tied to effecting
an increase in the number of authorized shares of common stock. The Board, with
the concurrence of the members of the Special Committee, with Dr. Eshelman
abstaining from the vote, approved the financing terms.
The Special Committee and Board of Directors determined that the financing was
in the best interests of the Company and its stockholders. In making this
determination, the Special Committee and the Board of Directors considered
certain factors including, without limitation, our need for capital, the cost of
capital and the Company's short-term and long-term goals.
Important Information About the Increase in Number of Authorized Shares of
Common Stock Proposal and Where to Find It
A full description of the terms of the Increase in Number of Authorized Shares
of Common Stock Proposal is provided in the Definitive Proxy Statement. The
Company urges its investors, stockholders and other interested persons to read
the Definitive Proxy Statement as well as other documents filed with the SEC
because these documents will contain important information about the Company and
the Increase in Number of Authorized Shares of Common Stock Proposal. The
Definitive Proxy Statement was mailed on or about December 9, 2022 to Company
stockholders of record as of the close of business on November 15, 2022.
Stockholders are also able to obtain a copy of the Definitive Proxy Statement,
and other documents filed with the SEC without charge, by directing a request
to: Corporate Secretary, Aravive, Inc., 3730 Kirby Drive, Suite 1200, Houston,
Texas 77098. The Definitive Proxy Statement can also be obtained, without
charge, at the SEC's website (www.sec.gov).
Participants in the Solicitation
The Company and its directors and executive officers may be considered
participants in the solicitation of proxies with respect to the Increase in
Number of Authorized Shares of Common Stock Proposal under the rules of the SEC.
Information about the directors and executive officers of the Company is set
forth in the Company's Definitive Proxy Statement, and is available free of
charge at the SEC's website at www.sec.gov or by directing a request to:
Corporate Secretary, Aravive, Inc., 3730 Kirby Drive, Suite 1200, Houston, Texas
77098.
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