7. Stockholders’ Deficit

2023 events

The Company entered into an At-the-Market Sales Agreement with BTIG, LLC (“BTIG”) on August 15, 2022 (the “2022 Sales Agreement”). Pursuant to the 2022 Sales Agreement, the Company could offer and sell, from time to time, through BTIG, as sales agent and/or principal, shares of its common stock having an aggregate offering price of up to $25.0 million, subject to certain limitations on the amount of common stock that may be offered and sold by the Company set forth in the 2022 Sales Agreement. Due to the offering limitations applicable to the Company, the Company filed prospectus supplements for the sale of shares of its common stock for an aggregate offering price of up to $7.8 million pursuant to the 2022 Sales Agreement. During the year ended September 30, 2023, the Company sold an aggregate of 136,702 shares of common stock pursuant to the 2022 Sales Agreement with BTIG for gross proceeds of $5.7 million and net proceeds of $5.5 million. There are no registered shares remaining to be sold under the 2022 Sales Agreement.

On February 10, 2023, the Company closed a public offering of common stock and certain warrants through Chardan Capital Markets, LLC and EF Hutton, division of Benchmark Investments LLC as underwriters, for gross proceeds of $15.0 million and net proceeds of $13.6 million through the issuance and sale of 530,222 shares of its common stock and, to certain investors, pre-funded warrants to purchase 101,090 shares of common stock, and accompanying common warrants to purchase up to an aggregate of 1,262,618 shares of its common stock (the “February Offering”). Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a common warrant to purchase two shares of common stock. The public offering price of each share of common stock and accompanying common warrant was $23.76 and the public offering price of each pre-funded warrant and accompanying common warrant was $23.7578.

The common stock warrants are immediately exercisable at a price of $23.76 per share of common stock, expire five years from the date of issuance and contain an alternative cashless exercise provision whereby, subject to certain conditions, a warrant may be exercised in a cashless transaction for shares of common stock at the rate of half a share of common stock per full share otherwise issuable upon a cash exercise. The pre-funded warrants are immediately exercisable at any time, until exercised in full, at a price of $0.0022 per share of common stock.

In addition, warrants to purchase 44,190 shares of common stock were issued to the underwriters as compensation for their services related to the offering. These common stock warrants have an exercise price of $29.70 per share and expire five years from the date of issuance.

On June 30, 2023, the Company closed a registered direct offering of common stock (and common stock equivalents in lieu thereof) and a concurrent private placement of certain common stock warrants through Chardan Capital Markets, LLC as placement agent, for gross proceeds of $2.3 million and net proceeds of $1.9 million through the issuance and sale of 166,363 shares of its common stock and, to certain investors, pre-funded warrants to purchase 60,909 shares of common stock, and accompanying common warrants to purchase up to an aggregate of 227,272 shares of its common stock (the “June Offering”). Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a common warrant to purchase one share of common stock. The public offering price of each share of common stock and accompanying common warrant was $9.90.

Sonnet BioTherapeutics Holdings, Inc.

Notes to Consolidated Financial Statements

The common stock warrants are exercisable beginning December 30, 2023 at a price of $14.8478 per share of common stock, expire three and half years from the date of issuance and contain an alternative cashless exercise provision. The pre-funded warrants are immediately exercisable at any time, until exercised in full, at a price of $0.0022 per share of common stock. All of the pre-funded warrants have been exercised.

In addition, warrants to purchase 6,818 shares of common stock were issued to the placement agent as compensation for its services related to the offering. These common stock warrants have an exercise price of $14.8478 per share and expire three and a half years from the date of issuance.

2022 events

In August 2022, the Company entered into a securities purchase agreement (the “Preferred SPA”) with several accredited investors for the issuance and sale of (i) an aggregate of 22,275 shares of its Series 3 Convertible Preferred Stock, stated value $100 per share, (ii) 225 shares of its Series 4 Convertible Preferred Stock, stated value $100 per share, and (iii) Series 3 warrants to purchase up to 12,548 shares of its common stock in a private placement for aggregate gross proceeds of $2.3 million, with $0.1 million of issuance costs for net proceeds of $2.1 million. The shares of Series 3 Convertible Preferred Stock were convertible into an aggregate of 24,850 shares of common stock of the Company and the shares of Series 4 Convertible Preferred Stock were convertible into an aggregate of 251 shares of common stock of the Company, in each case, at a conversion price of $89.628 per share. The Series 3 Warrants have an exercise price of $89.628 per share, are exercisable commencing six months after issuance, and will expire five years from the issuance date. The net proceeds from the private placement were allocated to the Series 3 Convertible Preferred Stock, Series 4 Convertible Preferred Stock and Series 3 warrants based on their relative fair values.

The shares of the Series 3 and Series 4 Convertible Preferred Stock had no voting rights other than the right to vote with common stockholders, as a single class, on a proposed amendment to the Company’s Certificate of Incorporation, as amended, to effect a reverse split of the outstanding shares of common stock. Each share of Series 3 Convertible Preferred Stock was entitled to vote on an as-converted basis, and each share of Series 4 Convertible Preferred Stock was entitled to 811,688 votes per share, provided that the Series 4 Convertible Preferred Stock be automatically voted in the same proportions as the shares of common stock and Series 3 Convertible Preferred Stock on the reverse split proposal. The shares of the Series 3 and Series 4 Convertible Preferred Stock were convertible at the option of the holder at any time following the effective date of a reverse split of the Company’s outstanding common stock. In addition, the Company could elect mandatory conversion on the date of the reverse stock split or the Company could force conversion of all or a part of the Series 3 and Series 4 Convertible Preferred Stock at any time after 120 days following the issuance of the preferred stock, in either case provided certain equity conditions were met.

The private placement closed on August 15, 2022, and the stockholders voted to approve a 1-for-14 reverse stock split on September 15, 2022. The Series 3 and Series 4 Convertible Preferred Stock were converted to 25,101 shares of common stock on September 30, 2022. As of September 30, 2023 and 2022, there were no shares of preferred stock issued and outstanding.

During the year ended September 30, 2022, the Company sold an aggregate of 30,206 shares of common stock pursuant to the 2022 Sales Agreement with BTIG for gross proceeds of $2.0 million and net proceeds of $1.9 million.

Also during the year ended September 30, 2022, the Company issued 1,087 shares of common stock upon the vesting of restricted stock units.

Sonnet BioTherapeutics Holdings, Inc.

Notes to Consolidated Financial Statements

Common stock warrants

As of September 30, 2023, the following equity-classified warrants and related terms were outstanding:

Schedule of Warrants Outstanding  

During the year ended September 30, 2023, 1,014,872 warrants were net share settled, resulting in the issuance of 519,492 shares of common stock.

During the year ended September 30, 2023, 137,999 warrants were exercised on a cash basis. The Company received de minimus proceeds in exchange for the issuance of 137,998 shares of common stock.

During the year ended September 30, 2023, 332 of private warrants expired.