IVF 8-K/A
INVO Fertility, Inc. (IVF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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EXPLANATORY NOTE
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| Item 1.01 | Entry into a Material Definitive Agreement. |
Amended and Restated Merger Agreement
On October 11, 2024 (the “Effective Time”), NAYA, Merger Sub, and Legacy NAYA, entered into the Merger Agreement and consummated and the transactions contemplated thereby. Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into Legacy NAYA, with Legacy NAYA continuing as the surviving corporation and a wholly owned subsidiary of the Company.
At the Effective Time and as a result of the consummation of the Merger:
| ● | Each share of Class A common stock, par value $0.000001 per share, and Class B common stock, par value $0.000001 per share, of Legacy NAYA (“Legacy NAYA common stock”) outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by Legacy NAYA as treasury stock or owned by the Company or Merger Sub, automatically converted into the right to receive 118,148 shares of the Company’s common stock and 30,375 shares of the Company’s newly-designated Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred”). The Series C-1 Preferred is not redeemable, has no voting rights, and may not be converted into shares of the Company’s Common Stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred. If the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred, such Series C-1 Preferred will automatically convert into approximately 29,515,315 shares of the Company’s common stock, subject to adjustment if, as a result of such conversion if, after giving effect to the conversion or issuance, any single holder, together with its affiliates, would beneficially own in excess of 19.99% of the Company’s outstanding common stock. A description of the rights, preferences, and privileges of the Series C-1 Preferred are set forth in Item 5.03 below. | |
| ● | Certain outstanding debt obligations of Legacy NAYA, including a portion of an amended and restated senior secured convertible debenture issued to Five Narrow Lane LP (“FNL”), with a combined principal balance of $8,575,833 converted into the right to receive 669,508 shares of the Company’s common stock and 8,576 shares of the Company’s newly-designated Series C-2 Convertible Preferred Stock (the “Series C-2 Preferred”). The Company and FNL have agreed that the Company shall issue to FNL a pre-funded common stock purchase warrant to purchase up to 459,508 shares of the Company’s common stock in leiu of 459,508 shares of the aforementioned common stock. The Series C-2 Preferred is only redeemable upon a “Bankruptcy Triggering Event” or a “Change of Control” that occurs 210 days after the closing date of the Merger. The Series C-2 Preferred may not be converted into shares of the Company’s Common Stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred. If the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred, such Series C-2 Preferred will be convertible at the option of the holders into approximately 12,441,607 shares of the Company’s common stock, subject to limitations on beneficial ownership by the holders thereof. A description of the rights, preferences, and privileges of the Series C-2 Preferred are set forth in Item 5.03 below. | |
| ● | The remaining balance of the amended and restated senior secured convertible debenture issued to FNL in the amount of $3,934,146 was exchanged for a 7.0% Senior Secured Convertible Debenture in the principal balance of $3,934,146 due December 11, 2025 (the “Debenture”). A description of the rights, preferences, and privileges of the Debenture are set forth below. | |
| ● | Legacy NAYA has been renamed to “NAYA Therapeutics Inc.” |
In addition, Legacy NAYA stock options shall be converted into Company options to acquire a number of shares of the Company’s common stock equal to the number of shares of Legacy NAYA common stock subject to such Legacy NAYA options multiplied by 8.9108 (the “Exchange Ratio”) (rounded up to the nearest whole share) at an exercise price per share of such Legacy NAYA stock option divided by the Exchange Ratio, and Legacy NAYA restricted stock units shall be converted into Company restricted stock units representing the right to receive a number of shares of the Company’s common stock equal to the number of shares of Legacy NAYA common stock subject to such Legacy NAYA restricted stock unit multiplied by the Exchange Ratio. However, such options may not be exercised for shares of the Company’s common stock and such restricted stock units may not be settled for shares of the Company’s common stock unless and until the Company’s stockholders approve the issuance of common stock upon exercise of such options and settlement of such restricted stock units.
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In connection with the Merger, Dr. Daniel Teper, Legacy NAYA’s current Chairman and Chief Executive Officer, was appointed President of the Company, and Dr. Teper will remain as Legacy NAYA’s Chief Executive Officer. The combined company will be led by NAYA Chief Executive Officer Steven Shum, NAYA Chief Financial Officer Andrea Goren, and Dr. Teper. In addition, Dr. Teper and Ms. Lyn Falconio have been appointed to the Company’s board of directors.
Pursuant to the Merger Agreement, the Company is required to hold a meeting of its stockholders to, among other things, (i) ratify the Merger Agreement and the transactions contemplated thereby, including the Merger, (ii) approve the increase in the amount of authorized shares under the Company’s Second Amended and Restated 2019 Stock Incentive Plan, (iii) approve the issuance of the Company’s common stock issuable upon conversion of the Series C-1 Preferred and Series C-2 Preferred, and (iv) approve an amendment to the Company’s articles of incorporation to (1) increase the number of shares of the Company’s authorized common stock to 100,000,000 shares, and (2) effectuate a reverse stock split of the Company’s common stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20, as determined by the Company’s board of directors in its discretion. The Company also agreed to take all action necessary to hold the aforementioned stockholder meeting as soon as reasonably practicable.
Pursuant to both the Merger Agreement and the Assignment Agreement described below, the Company has agreed to file a registration statement with the SEC to register for resale the shares of the Company’s common stock issued pursuant to the Merger and the shares of common stock issuable upon exercise or conversion of the Series C-1
Preferred, the Series C-2 Preferred, and the Debenture, as applicable, as soon as practicable but in no event later than 30 days after the Closing Date.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
The Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about the Company, Merger Sub, or Legacy NAYA. The representations, warranties, and covenants contained in the Merger Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Merger Sub or Legacy NAYA or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s or Legacy NAYA’s public disclosures.
7.0% Senior Secured Convertible Debenture
In connection with the Merger, on October 11, 2024, the Company issued the Debenture to FNL in an exchange of an outstanding note of Legacy NAYA held by FNL. The Debenture carries an interest rate of seven percent (7%) per annum, payable on the first business day of each calendar month commencing November 1, 2024. The maturity date of the Debenture is December 11, 2025 (the “Maturity Date”), at which point the outstanding principal amount, together with any accrued and unpaid interest and other fees, shall be due and payable to the holder of the Debenture.
Conversion. At any time after the Company’s stockholders approve the issuance of any Company common stock upon conversion of the Debenture, the holder of the Debenture will be entitled to convert any portion of the outstanding and unpaid principal amount and accrued interest into shares of Company common stock at a conversion price of $0.93055 per share, subject to adjustment as described therein. The Debenture may not be converted and shares of Company common stock may not be issued upon conversion of the Debenture if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding common stock of the Company.
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Prepayment. The Company may not prepay the Debenture without the prior written consent of FNL.
Monthly Redemption. Commencing March 14, 2025 and on the 14th of each month thereafter until the Maturity Date, the Company shall redeem $437,127.24, plus accrued but unpaid interest and other fees, of the principal amount of the Debenture.
Mandatory Redemption. While any portion of the Debenture is outstanding, if the Company receives gross proceeds of more than $3,000,000 from any equity or debt financings (other than a public offering as described herein), the Company shall, at the option of the holder, apply one-third (1/3) of such gross proceeds to the redemption of the principal amount of the Debenture, except that if such equity or debt financing is a public offering of the Company’s securities pursuant to a registration statement on Form S-1, the Company shall, at the option of the holder, apply one hundred percent (100%) of such gross proceeds, not to exceed $500,000, to the redemption of the principal amount of the Debenture. The Company has also agreed that, if it received gross proceeds of more than $2,000,000 from any equity or debt financing, it shall, at the option of the holder, apply $500,000 of such gross proceeds to the redemption of the principal amount of the Debenture.
The Debenture contains events representations, warranties, covenants, and events of default that are customary for similar transactions. Upon an event of default, the Debenture becomes immediately due and payable, and the Borrower is subject to a default rate of interest of 15% per annum and a default sum as stipulated.
The foregoing description of the Debenture does not purport to be complete and is qualified in its entirety by reference to the Debenture, which is attached hereto as Exhibit 4.1 and is incorporated herein by reference.
Joinder Agreement
In connection with the Merger, the Company entered in a joinder agreement (the “Joinder Agreement”) with FNL dated as of October 11, 2024 to a certain securities purchase agreement dated as of January 3, 2024 by and between Legacy NAYA and FNL (the “FNL SPA”) pursuant to which the Company agreed to become a party to the FNL SPA.
The foregoing description of the Joinder Agreement does not purport to be complete and is qualified in its entirety by reference to the Joinder Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Assignment and Assumption Agreement
In connection with the Merger, on October 11, 2024, the Company entered in an assignment and assumption agreement (the “Assignment Agreement”), pursuant to which the Company agreed to assume the rights, duties, and liabilities of Legacy NAYA under a certain registration rights agreement dated as of September 12, 2024 by and between Legacy NAYA and FNL, pursuant to which the Company agreed to register FNL’s resale of shares of Company common stock issuable upon conversion of the Debenture and the Series C-2 Preferred as well as certain commitment shares issued to FNL in connection with the transactions.
The foregoing description of the Assignment Agreement does not purport to be complete and is qualified in its entirety by reference to the Assignment Agreement, which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.
Second Amendment to Revenue Loan and Security Agreement
On October 11, 2024, the Company entered into a second amendment to Revenue Loan and Security Agreement (the “Second Amendment”) with Decathlon Alpha V, L.P. (“Decathlon”), Steven Shum, and certain subsidiaries of the Company (the “Guarantors”), pursuant to which Decathlon consented to the Merger and Legacy NAYA becoming a subsidiary of the Company. Pursuant to the Second Amendment, Legacy NAYA joined the Revenue Loan and Security Agreement as a Guarantor. The Company agreed to pay down its loan by at least $500,000 and increase its monthly payments by up to $30,000 if the Company closes a private offering of its securities. The Company also agreed to retain an investment banker to pursue a financing or a sale if it fails to meet certain liquidity covenants. The Company also agreed to enter into an intercreditor agreement with Decathlon and Five Narrow Lane LP within 5 business days of the Merger.
The foregoing description of the Second Amendment does not purport to be complete and is qualified in its entirety by reference to the Second Agreement, which is attached hereto as Exhibit 10.3 and is incorporated herein by reference.
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| Item 9.01 | Financial Statements and Exhibits |
| (a) | Financial Statements of Business Acquired. |
The following financial statements of NAYA Therapeutics, Inc. (“Legacy NAYA”) are being filed as exhibits to this Current Report on Form 8-K:
(i) The audited financial statements of Legacy NAYA as of and for the years ended December 31, 2022 and 2023 and related notes, attached as Exhibit 99.1.
(ii) The unaudited financial statements of Legacy NAYA as of September 30, 2024 and for the nine months ended September 30, 2024 and 2023 and related notes, attached as Exhibit 99.2.
| (b) | Pro Forma Financial Information* |
(i) The unaudited pro forma Balance Sheet and Statement of Operations of the Company and Legacy NAYA for the nine month period ended September 30, 2024; and
(ii) The unaudited pro forma Statement of Operations of the Company and Legacy NAYA for the fiscal years ended December 31, 2023 and of Wisconsin Fertility Institute for the period January 1, 2023 through August 9, 2023.
*Attached as Exhibit 99.4
(d) Exhibits.
*Previously filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: December 12, 2024 | NAYA BIOSCIENCES, INC. |
| /s/ Steven Shum | |
| Steven Shum | |
| Chief Executive Officer |
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Exhibit 99.2
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
TABLE OF CONTENTS
| 1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Naya Therapeutics, Inc. (former name Naya Biosciences, Inc.)
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Naya Therapeutics, Inc. (former name Naya Biosciences, Inc.) (the Company) as of December 31, 2023 and 2022, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.
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Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Going Concern
As discussed in Note 2 to the financial statements, the Company had a going concern due to a negative working capital and losses from operations.
Auditing management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates on future revenues and expenses which are not able to be substantiated.
To evaluate the appropriateness of the going concern, we examined and evaluate the financial information that was the initial cause along with managements’ plans to mitigate the going concern and managements’ disclosure on going concern.
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2023
The Woodlands, TX
July 15, 2024
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NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 89,302 | - | |||||
| Security deposit | 10,539 | - | ||||||
| Related party advance | 12,000 | - | ||||||
| Total current assets | 111,841 | - | ||||||
| Total Assets | $ | 111,841 | - | |||||
| LIABILITES AND STOCKHOLDER’S DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | 4,563,289 | 2,296,034 | ||||||
| Note payable - related party | 6,085,000 | 6,000,000 | ||||||
| SAFE loans | 275,000 | - | ||||||
| Total current liabilities | 10,923,289 | 8,296,034 | ||||||
| Total Liabilities | $ | 10,923,289 | $ | 8,296,034 | ||||
| Commitment and Contingencies (Note 7) | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock A, par value $0.000001 per share; 50,000,000 shares authorized; 1,363,642 Common A shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively | 1 | 1 | ||||||
| Common stock B, par value $0.000001 per share; 8,000,000 shares authorized; 1,200,000 Common B Shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively | 1 | 1 | ||||||
| Additional paid-in capital | 8,207,409 | 7,444,049 | ||||||
| Accumulated deficit | (19,018,859 | ) | (15,740,085 | ) | ||||
| Total stockholders’ deficit | (10,811,448 | ) | (8,296,034 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 111,841 | - | |||||
The accompanying notes are an integral part of these financial statements.
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NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | |||||||
| Revenue: | ||||||||
| Total revenue | - | - | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative expenses | $ | 2,159,626 | $ | 1,249,313 | ||||
| Research and development expenses | 975,148 | $ | 8,250,835 | |||||
| Total operating expenses | 3,134,774 | $ | 9,500,148 | |||||
| Loss from operations | (3,134,774 | ) | $ | (9,500,148 | ) | |||
| Other income (expense) | ||||||||
| Interest expense - related party | (144,000 | ) | - | |||||
| Total other income (expense) | (144,000 | ) | - | |||||
| Net loss before income taxes | (3,278,774 | ) | $ | (9,500,148 | ) | |||
| Income taxes | - | - | ||||||
| Net loss | $ | (3,278,774 | ) | $ | (9,500,148 | ) | ||
| Net loss per common share: | ||||||||
| Basic and diluted | $ | (1.28 | ) | $ | (3.71 | ) | ||
| Weighted average number of common shares outstanding: | ||||||||
| Basic and diluted | 2,563,642 | 2,563,642 | ||||||
The accompanying notes are an integral part of these financial statements.
| 5 |
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
STATEMENT OF STOCKHOLDERS’ DEFICIT
| Common Stock A | Common Stock B | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances, December 31, 2021 | 1,363,642 | $ | 1 | 1,200,000 | $ | 1 | $ | (2) | $ | (6,239,937 | ) | $ | (6,239,937 | ) | ||||||||||||||
| Contribution by parent company for liabilities assumed | - | - | - | - | 7,444,051 | - | 7,444,051 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (9,500,148 | ) | (9,500,148 | ) | |||||||||||||||||||
| Balances, December 31, 2022 | 1,363,642 | $ | 1 | 1,200,000 | $ | 1 | $ | 7,444,049 | (15,740,085 | ) | $ | (8,296,034 | ) | |||||||||||||||
| Imputed interest - related party | - | - | - | - | 144,000 | - | 144,000 | |||||||||||||||||||||
| Contribution by parent company for liabilities assumed | - | - | - | - | 619,360 | - | 619,360 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (3,278,774 | ) | (3,278,774 | ) | |||||||||||||||||||
| Balances, December 31, 2023 | 1,363,642 | $ | 1 | 1,200,000 | $ | 1 | $ | 8,207,409 | $ | (19,018,859 | ) | $ | (10,811,448 | ) | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
| 6 |
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
| Years Ended December 31, 2023 | Year Ended December 31, 2022 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (3,278,774 | ) | $ | (9,500,148 | ) | ||
| Adjustments to reconcile net loss to net cash used in in operations: | ||||||||
| Imputed interest - related party | 144,000 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Related party advance | (12,000 | ) | - | |||||
| Security deposits | (10,539 | ) | - | |||||
| Accounts payable and accrued liabilities | 2,886,615 | 9,500,148 | ||||||
| Net cash used in operating activities | $ | (270,698 | ) | - | ||||
| Financing activities: | ||||||||
| Proceeds from SAFE loans | 275,000 | - | ||||||
| Proceeds from note payable - related party | 85,000 | - | ||||||
| Net cash provided by financing activities | 360,000 | - | ||||||
| Net increase in cash | 89,302 | - | ||||||
| Cash at beginning of period | - | - | ||||||
| Cash at end of period | $ | 89,302 | - | |||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non-cash activities: | ||||||||
| Cash paid for interest | - | - | ||||||
| Cash paid for taxes | - | - | ||||||
| Non-cash financing activities: | ||||||||
| Accounts payable and accrued expenses paid by parent company as contributions | 619,360 | 7,444,051 | ||||||
| Accounts payable converted to payable to parent | - | $ | 465,267 | |||||
The accompanying notes are an integral part of these financial statements.
| 7 |
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
December 31, 2023 and 2022
Note 1 - Description of Business
Naya Therapeutics, Inc. (former name Naya Biosciences Inc.), or NAYA, (“LEGACY NAYA” or the “Company”) is a Delaware corporation formed June 8, 2023, aiming to develop and build a group of agile, disruptive, high-growth business segments dedicated to increasing patient access to life-transforming treatments in the areas of oncology, fertility, and regenerative medicine.
LEGACY NAYA’s unique capabilities in biology, cell and gene therapy, and artificial intelligence (AI) provide a synergistic platform for the accelerated clinical development and commercialization of these breakthrough treatments.
LEGACY NAYA Oncology aims to achieve clinical proof-of-concept for its two bispecific antibodies acquired from Cytovia Therapeutics, LLC (“Cytovia”), advancing towards breakthrough outcomes for liver & ovarian cancer and multiple myeloma patients. Clinical trials are expected to start in 2024.
LEGACY NAYA Fertility is evaluating the acquisition of product device as well as network of fertility business care.
Note 2- Accounting Policies
Basis of Presentation
On October 18, 2023, LEGACY NAYA acquired two assets from Cytovia. Both companies operate under common control and are accounted for as such. The acquisition did not include any other intellectual properties from Cytovia. As such, the Company has prepared the accompanying financial statements under common control as of and for the years ended December 31, 2023, and December 31, 2022. These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods (see Note 4).
In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments, for a fair presentation of the Company’s financial position and results of operations for the periods presented.
Certain reclassifications have been made to prior periods’ data to conform to the current period presentation. These reclassifications had no effect on income (losses) or cash flows.
| 8 |
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP required management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates.
Cash and Cash Equivalents
For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At times, cash and cash equivalents balances exceed amounts insured by the Federal Deposit Insurance Corporation.
Income Taxes
The Company is subject to income taxes in the United States and its domestic tax liabilities are subject to the allocation of expenses in multiple state jurisdictions. The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more-likely-than-not that a deferred tax asset will be recovered, a valuation allowance is established.
Net Loss Per Common Share
Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per common share is computed using the treasury stock method on the basis of the weighted-average number of shares of common stock plus the dilutive effect of potential shares of common stock outstanding during the period. Dilutive potential shares of common stock include outstanding stock options and restricted shares. The computation of diluted loss per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.
Research and Development
Research and development costs are expensed when incurred.
Financial Instruments
The carrying values of current assets and other current liabilities approximate their fair values due to their short-term nature.
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New Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”). ASU2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. The Company will adopt the provisions of ASU 2020-06 on January 1, 2024, which are not expected to have a material impact on the Company’s financial statements.
In December 2023, the FASB issued ASU No. 2023-09 entitled “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This ASU provides guidance related to additional disclosures that will be required related to income taxes. The updated guidance is effective for public entities for fiscal years beginning after December 15, 2024. This ASU is expected to result in additional disclosures in the Company’s financial statements beginning in the year ended December 31, 2025.
Note 3 – Liquidity and Going Concern
Although the Company’s audited financial statements for the years ended December 31, 2023 and December 31, 2022 were prepared under the assumption that it would continue its operations as a going concern, the report of our independent registered public accounting firm that accompanies the financial statements for the years ended December 31, 2023 and December 31, 2022 contains a going concern qualification in which such firm expressed substantial doubt in the Company’s ability to continue as a going concern without additional capital from becoming available, based on the financial statements at that time. Specifically, as noted above, the Company has incurred operating losses since its inception, and the Company expects to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses have had, and will continue to have, an adverse effect on the Company’s financial condition and negatively impact its ability to fund continued operations, obtain additional financing in the future and continue as a going concern. There are no assurances that such financing, if necessary, will be available at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through licensing of the assets, creating revenue streams through upfront and milestone payments, royalties, and commercial milestone payments or funding the Company through equity financing, the Company will be unable to continue operations.
Note 4- Carve-out Accounting
These financial statements are being prepared based on the acquisition of assets as disclosed in note 5. These are the historical results based on common control accounting.
Indirect research & development costs were allocated based on research and development full-time equivalent approach. The full-time employees, who worked on the projects have been assigned on a weekly basis to work a defined percentage of their time per project. The assigned time per week per project then was summarized on a monthly basis. The monthly assigned time per employee per project finally defined the average allocation per project CYT303 and CYT338 for salaries and indirect research & development expenses. The allocated expenses related to CYT303 and CYT338 represent 32% and 36% of Cytovia’s expenses for the years 2022 and 2023 respectively.
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Selling, general and administrative expenses were allocated based on percentage of full-time equivalent approach of general and administrative personnel. Allocated percentages are 12% and 10% for the years 2022 and 2023 respectively.
The cost for the rent for the research & development lab has been allocated with the same principle as described above to the two projects CYT303 and CYT338.
Management believes the assumptions underlying the carve-out combined financial statements, including the assumptions regarding allocation of expenses, are reasonable.
For the portion of the year ended December 31, 2023 following the date LEGACY NAYA was established in June 2023, the financial statements reflect LEGACY NAYA as a stand-alone entity.
Note 5 - Asset Purchase Agreement
On October 18, 2023 LEGACY NAYA, Cytovia Therapeutics Holdings, Inc., a Delaware corporation (“Holdings”) and Cytovia (“Cytovia”; and together with Holdings, the “Sellers”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”). The aggregate purchase price for the purchased assets shall be comprised of the (A) closing payments (as provided below), (B) assumption of the certain liabilities totaling $2,688,745
Closing payments will comprise $50,000,000 in common shares of LEGACY NAYA at the closing of the Merger (as such term is defined in note 7) with each share of common stock of LEGACY NAYA to be valued at $36.6665 per share resulting in the issuance of 1,363,642 shares of common stock of LEGACY NAYA which is expected to be converted into shares of common stock of the combined company at the closing of the Merger (as such term is defined in Note 7) (the “Combined Company”) reflecting a value of $5.00 per share of the Combined Company, equaling to 10,000,000 shares: a. $37,500,000 for CYT303 equaling to 7,500,000 shares of the Combined Company; b. $12,500,000 for CYT338 equaling to 2,500,000 shares of the Combined Company.
In addition, on October 20, 2023 LEGACY NAYA issued a Promissory Note to Cytovia (the “Note”) in the principal amount of $6,000,000 for CYT303 of which $750,000 will be paid at the closing of any financing, and $750,000 per month for 5 months and for CYT338: $250,000 will be paid at the will be paid at the closing of any financing and $250,000 per month for 5 months. If LEGACY NAYA or the Combined Company raises more than $30,000,000 in the financing, the full amount of $6,000,000 will be due at the final closing of the financing.
As of March 31, 2024, the outstanding amount per the Note is $4,300,000, as the first payments of $1,000,000, $500,000 and $200,000 were made on January 3, 2024, January 4, 2024, and January 11, 2024 respectively totaling $1,700,000.
See note 11 for amendment of the Asset Purchase Agreement.
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Note 6 -Stockholders Equity
Common Stock
On October 18, 2023, the Company issued 1,363,642 shares of Common A Shares par value 0.000001 to Cytovia, a related party, pursuant to the Asset Purchase Agreement (see Note 5)
On October 13, 2023, the Company issued 1,200,000 of Common B Shares par value 0.000001. These are classified as founders’ shares issued and are shown from the start of the presentation due to common control accounting.
Class A Common Stock and Class B Common Stock shall at all times vote together as one class on all matters (including the election of directors) submitted to a vote or for the consent of the stockholders of the Company. Each holder of shares of Class A Common Stock shall be entitled to one (1) vote for each share of Class A Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Company. Each holder of shares of Class B Common Stock shall be entitled to ten (10) votes for each share of Class B Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Company. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of shares of capital stock of the Company representing a majority of the votes represented by all outstanding shares of capital stock of the Company entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.
Note 7 - Commitment and Contingencies
LEGACY NAYA Merger Agreement
On October 22, 2023, LEGACY NAYA and INVO Merger Sub. Inc., a Nevada corporation (“Merger Sub”), a wholly owned subsidiary of Naya Biosciences, Inc. (former name INVO Bioscience, Inc.), or “LEGACY INVO”, entered into an agreement and plan of merger, as amended on October 25, 2023 (the “Merger Agreement”).
Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge (the “Merger”) with and into LEGACY NAYA, with LEGACY NAYA continuing as the surviving corporation and a wholly owned subsidiary of the Company.
At the effective time and as a result of the Merger, each share of Class A common stock, par value $0.000001 per share, of LEGACY NAYA (the “LEGACY NAYA common stock”) outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by LEGACY NAYA as treasury stock or owned by the Company or LEGACY INVO, will be converted into the right to receive 7.33333 (subject to adjustment as set forth in the Merger Agreement) shares of a newly designated series of common stock, par value $0.000001 per share, of the Company which shall be entitled to ten (10) votes per each share (“Company Class B common stock”) for a total of approximately 8,150,000 shares of the Company.
Immediately following the effective time of the Merger, Dr. Daniel Teper, LEGACY NAYA’s current chairman and chief executive officer, will be named chairman and chief executive officer of the Combined Company, and the board of directors will be comprised of up to nine (9) directors, of which (i) one shall be Steven Shum, LEGACY INVO’s current chief executive officer, and (ii) eight shall be identified by LEGACY NAYA, of which seven (7) shall be independent directors.
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Pursuant to the original Merger Agreement, the completion of the Merger is subject to satisfaction or waiver of certain customary mutual closing conditions, including (1) the adoption of the Merger Agreement by the stockholders of the Company and LEGACY INVO, (2) the absence of any injunction or other order issued by a court of competent jurisdiction or applicable law or legal prohibition prohibiting or making illegal the consummation of the Merger, (3) the completion of due diligence, (4) the completion of an interim private offering of shares of LEGACY INVO common stock at a price that is a premium to the market price of the LEGACY INVO common stock in an estimated amount of $5,000,000 or more of gross proceeds (the “Interim PIPE”), (5) the completion of a sale of shares of common stock at a target price of $5.00 per share in a private offering resulting in sufficient cash available for Parent for one year of operations, as estimated by LEGACY INVO (6) the aggregate of the liabilities of LEGACY INVO, excluding certain specified liabilities, shall not exceed $5,000,000, (7) the receipt of waivers from any and all holders of warrants (and any other similar instruments) to securities of LEGACY INVO, with respect to any fundamental transaction rights such warrant holders may have under any such warrants, (8) the continued listing of LEGACY INVO common stock on NASDAQ through the effective time of the Merger and the approval for listing on NASDAQ of the shares of LEGACY INVO common stock to be issued in connection with the Merger, the interim private offering, and a private offering of shares of LEGACY INVO common stock at a target price of $5.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Company common stock) resulting in sufficient cash available for LEGACY INVO for one year of operations, as estimated by LEGACY NAYA, (9) the effectiveness of a registration statement on Form S-4 to be filed by LEGACY INVO pursuant to which the shares of LEGACY INVO’s common stock to be issued in connection with the Merger will be registered with the SEC, and the absence of any stop order suspending such effectiveness or proceeding for the purpose of suspending such effectiveness being pending before or threatened by the SEC, and (10) LEGACY INVO shall have received customary lock-up Agreement from certain of its stockholders. The obligation of each party to consummate the Merger is also conditioned upon (1) the other party having performed in all material respects its obligations under the Merger Agreement and (2) the other party’s representations and warranties in the Merger Agreement being true and correct (subject to certain materiality qualifiers); provided, however, that these conditions, other than with respects to certain representations and warranties, will be deemed waived by LEGACY INVO upon the closing of the interim private offering.
The Merger Agreement contains termination rights for LEGACY INVO and LEGACY NAYA, including, among others: (1) if the consummation of the Merger does not occur on or before December 31, 2023 (the “End Date”) (which has since been extended to April 30, 2024 in a second amendment and then to June 30, 2024 in the third amendment), except that any party whose material breach of the Merger Agreement caused or was the primary contributing factor that resulted in the failure of the Merger to be consummated on or before the End Date, (2) if any governmental authority has enacted any law or order making illegal, permanently enjoining, or otherwise permanently prohibiting the consummation of the Merger, and (3) if the required vote of the stockholders of either the Company or LEGACY NAYA has not been obtained. The Merger Agreement contains additional termination rights for LEGACY NAYA, including, among others: (1) if LEGACY INVO materially breaches its non-solicitation obligations or fails to take all action necessary to hold a stockholder meeting to approve the transactions contemplated by the Merger Agreement, (2) if the aggregate of the liabilities of LEGACY INVO, excluding certain specified liabilities, exceed $5,000,000, (3) if LEGACY NAYA determines that the due diligence contingency will not be satisfied by October 26, 2023, (4) if LEGACY NAYA determines that the Company has experienced a material adverse effect, or (5) LEGACY INVO material breaches any representation, warranty, covenant, or agreement such that the conditions to closing would not be satisfied and such breach is incapable of being cured, unless such breach is caused by LEGACY NAYA’s failure to perform or comply with any of the covenants, agreements, or conditions hereof to be performed or complied with by it prior to the closing.
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If all of LEGACY NAYA’s conditions to closing are satisfied or waived and LEGACY NAYA fails to consummate the Merger, LEGACY NAYA would be required to pay the LEGACY INVO a termination fee of $1,000,000. If all of the Company’s conditions to closing conditions are satisfied or waived and the LEGACY INVO fails to consummate the Merger, LEGACY INVO would be required to pay LEGACY NAYA a termination fee of $1,000,000.
On December 27, 2023, LEGACY NAYA entered into second amendment (“Second Amendment”) to the Merger Agreement. Pursuant to the Second Amendment, the parties agreed to extend the End Date to April 30, 2024. The parties further agreed to modify the closing condition for the Interim PIPE from a private offering of shares of LEGACY INVO common stock at a price that is a premium to the market price of the LEGACY INVO common stock in an estimated amount of $5,000,000 or more of gross proceeds to a private offering of the LEGACY INVO’s preferred stock at a price per share of $5.00 per share in an amount equal to at least $2,000,000 to the LEGACY INVO, plus an additional amount as may be required prior to closing of the Merger to be determined in good faith by the parties to adequately support the LEGACY INVO’s fertility business activities per an agreed forecast, as well as for a period of twelve (12) months post- closing including a catch-up on the LEGACY INVO’s past due accrued payables still outstanding. The parties further agreed to the following schedule (the “Minimum Interim Pipe Schedule”) for the initial $2,000,000: (1) $500,000 no later than December 29, 2023, (2) $500,000 no later than January 19, 2024, (3) $500,000 no later than February 2, 2024, and (4) $500,000 no later than February 16, 2024. The parties also further agreed to modify the covenant of the parties regarding the Interim PIPE to require LEGACY NAYA to consummate the Interim PIPE before the closing of the Merger; provided, however, if the LEGACY INVO does not receive the initial gross proceeds pursuant to the Minimum Interim Pipe Schedule, the LEGACY INVO shall be free to secure funding from third parties to make up for short falls on reasonable terms under SEC and Nasdaq regulations. See Note 11.
Lease
On October 4, 2023, and November 16, 2023, the Company entered into a lease for its corporate headquarters for a twelve-month term as a result they were deemed to be short-term leases. The leases did not include a renewal or purchase option, and thus considered as short-term lease in accordance with ASC 842. The Company elected not to apply the recognition requirements of ASC 842 to short-term leases. Accordingly, the Company instead recognizes lease payments on short-term leases in the period in which the obligation for those payments is incurred. The monthly payments are $6,266.25 and $4,008.75 respectively.
Litigation
LEGACY NAYA is not currently subject to any material legal proceedings; however, it could be subject to legal proceedings and claims from time to time in the ordinary course of its business, or legal proceedings it considered immaterial may in the future become material. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and can divert management resources.
Stock Payable
During the fourth quarter of 2023, the Company entered into a media advertising agreement under which the consultant is being paid cash of $250,000 and shares worth $600,000. At December 31, 2023, the shares had not yet been issued and are included in accounts payable and accrued liabilities. See Note 11.
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Note 8 - Related Party
As discussed in Note 4, LEGACY NAYA is, a carve out of Cytovia that remain under common control.
As discussed in Note 5, $6,000,000 of accounts payable that was converted to debt for past expenses incurred by Cytovia is included in the consideration for the two assets purchased from Cytovia: CYT303 and CY338. No gain or loss associated with the conversion of Accounts payable to debt was recorded.
LEGACY NAYA and Cytovia, entered into a loan agreement on August 1, 2023, according to which Cytovia, shall make available to LEGACY NAYA, a term loan of up to $1,000,000 bearing interest rate of 5% per annum. As of December 31, 2023, included in the notes payable – related party is $85,000 due to Cytovia. See Note 9..
An advance to an officer of the Company was made for $12,000 to cover business and travel expenses owed.
Note 9- Debt
Simple Agreement for Future Equity (SAFE)
As of December 31, 2023, LEGACY NAYA has a total of $275,000, simple agreements for equity (“SAFE”) issued to investors giving the right to certain shares of the LEGACY NAYA’s capital stock, subject to the terms as follows: (a) an equity financing before the termination of the SAFE, on the initial closing of such equity financing, the SAFE will automatically convert into the number of shares of safe preferred stock equal to the purchase amount of the SAFE divided by the discount price. The SAFE agreements convert as follows: 1) $80,000 of the SAFE agreement converts into the number of shares of safe preferred stock equal to the purchase amount divided by the lowest price per share of the standard preferred stock sold in the equity financing multiplied by 40% and 2) $195,000 of the SAFE agreement converts into the number of shares of SAFE preferred stock equal to the purchase amount divided by the lowest price per share of the standard preferred stock sold in the equity financing multiplied by 30%.
If there is a liquidity event before the termination of the SAFE, the investor of the SAFE will automatically be entitled to receive a portion of proceeds, due and payable to the investor of the SAFE immediately prior to, or concurrent with, the consummation of such liquidity event, equal to the greater of (i) the purchase amount or (ii) the amount payable on the number of shares of common stock equal to the purchase amount divided by the liquidity price. If any of the Company’s securityholders are given a choice as to the form and amount of proceeds to be received in a liquidity event, the investor will be given the same choice, provided that the investor may not choose to receive a form of consideration that the investor would be ineligible to receive as a result of the investor’s failure to satisfy any requirement or limitation generally applicable to the Company’s securityholders, or under any applicable laws.
Cytovia Notes
LEGACY NAYA and Cytovia, entered into a loan agreement on August 1, 2023, where the Cytovia, shall make available to LEGACY NAYA, a term loan up to $1,000,000 bearing interest rate of 5% per annum. As of December 31, 2023, the outstanding amount for this loan due to Cytovia included in the short-term loan on the balance sheet is $85,000.
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In addition, a Note of $6,000,000 was outstanding as of December 31, 2023 and 2022 see further details disclosed in Note 5. Due to the note having no stated interest rate, interest has been imputed at 12% and is included in additional paid-in capital as a contribution to equity.
NOTE 10 – Income Tax
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. The Company used the separate return method for the preparation of the income tax provision.
For the years ended December 31, 2023 and 2022, there was no income tax provision recorded. The tax benefit was added to the net operating loss to which a full valuation allowance was applied.
The Company has a net operating loss from formation till December 31, 2023 was approximately $1.6 million and the deferred tax asset associated with it was approximately $0.3 million and is fully allowed.
Utilization of NOL and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code (the “Code”), as amended, as well as similar state provisions. In general, an “ownership change” as defined by the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain stockholders or public groups.
Note 11 - Subsequent Events
SPA and Debenture Agreement with Five Narrow Lane
On January 3, 2024, LEGACY NAYA entered into a Securities Purchase Agreement (“SPA”), pursuant to which it sold a senior secured debenture (the “Debenture”) in the principal amount of $3,000,000 (the “Principal Amount”), to an accredited investor (the “Investor”). The Debenture accrues interest at 7% per annum on the outstanding principal amount, throughout the term of the Debenture, which has a maturity date of the earlier of (i) April 30, 2024, and (ii) the date of the completion of the Merger under the Merger Agreement. Interest on the Debenture is due monthly on the first business day of every month. LEGACY NAYA may redeem the Debenture upon 10 days’ notice to the Investor. Upon any repayment, LEGACY NAYA will also pay an exit fee equal to 100% of the principal amount of the Debenture.
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In addition, the Investor will receive 42,618 shares of common stock (subject to adjustment for any stock split, stock dividend, reverse stock split or similar event after the date hereof) to be issued to the Investor, upon consummation of the Merger, will be exchanged into such number of shares of LEGACY INVO common stock representing 1.5% of the fully diluted outstanding capital of LEGACY INVO, after giving effect to the consummation of the Merger, but prior to the issuance of shares in the pre-financing capital. In the event of default, 100% of the outstanding principal amount is due as well as 200% of the outstanding principal amount of the Debenture for a total of $9,000,000.
On May 13, 2024, LEGACY NAYA amended the SPA. LEGACY NAYA promised to pay to Five Narrow Lane LP or its registered assigns (the “Holder”), or shall have paid pursuant to the terms thereunder, the principal sum of $9,075,833 on the earlier to occur of the Merger and June 28, 2024 (such earlier date, the “Maturity Date”) or such earlier date as the Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of the Debenture in accordance with the provisions hereof. Upon the occurrence of an event of default, the outstanding principal amount of the debenture, plus accrued but unpaid interest, and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash. In addition, the interest on the debenture shall accrue at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted under applicable law.
In addition, on May 13, 2024, LEGACY NAYA entered into an additional debenture agreement (“May 2024 Debenture”) with Five Narrow Lane LP. LEGACY NAYA promised to pay to the Holder, or shall have paid pursuant to the terms thereunder, the principal sum of $1,000,000 (or, if lower, the outstanding principal amount of this Debenture as such amount may be modified pursuant to the terms hereof) on Maturity Date or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this May 2024 Debenture in accordance with the provisions hereof. As of the filing, $700,000 has been received from the debenture. Upon any repayment or redemption by the Company of all or any of the principal amount of the May 2024 Debenture (whether on or prior to the Maturity Date, pursuant to an Optional Redemption, upon acceleration or otherwise), the Company shall pay to the Holder concurrently such repayment or redemption an exit fee in an amount equal to 100% of principal amount of this Debenture being repaid or redeemed. In the event of default, 200% of the outstanding principal is due in addition to the principal.
Simple Agreement for Future Equity (SAFE)
On January 1, 2024, $18,000 of additional SAFE loans were issued by the Company.
GreenBlock Promissory Note
On April 4, 2024, LEGACY NAYA entered into a promissory note (the “GB Note”) of $250,000. LEGACY NAYA promised to pay to the order of GreenBlock Capital, LLC, or its registered assigns, upon the terms set forth below, the principal sum of $500,000. The full amount of principal (including the original issue discount) under the GB Note shall be due on the earlier of: (i) closing of the Merger; or (ii) the six-month anniversary of the date of the GB Note or (iii) the occurrence of an event of default. Commencing five calendar days after the occurrence of any event of default that results in the acceleration of the GB Note, interest on the GB Note shall accrue at the rate of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law.
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GreenBlock Consulting Agreement
On April 5, 2024, LEGACY NAYA engaged GreenBlock Capital, LLC, (“Consultant”) to serve as strategic advisor to the Company with respect to the following services: a) advise and assist management throughout the reverse merger process and beyond, including working with the Company’s bankers, lawyers, accounting team, advisors and auditors which make up the deal team, b) advise and assist management on proper corporate governance and other public company “best practices” post-closing of any merger transaction along with other deal team functions as reasonably requested by the Company’s CEO or Board.
For the services provided above over the following 12 months, the Consultant shall receive an issuance of 125,000 shares of Class B common stock of the Company. The shares are issuable within two days of signing.
LEGACY NAYA Merger Agreement, Securities Purchase Agreement
On December 29, 2023, the Company entered into a securities purchase agreement (the “Series A Preferred SPA”) with LEGACY INVO for LEGACY NAYA’s purchase of 1,000,000 shares of the Company’s Series A Preferred Stock at a purchase price of $5.00 per share. The parties agreed that LEGACY NAYA’s purchases will be made in tranches in accordance with the Minimum Interim Pipe Schedule. The Series A Preferred SPA contains customary representations, warranties and covenants of the Company and LEGACY INVO. On January 4, 2024, the Company and LEGACY INVO closed on 100,000 shares of Series A Preferred Stock in the first tranche of this private offering for gross proceeds of $500,000. In addition, the Company and LEGACY NAYA agreed that an additional amount of $96,704 comprised of expenses paid by LEGACY NAYA on behalf of LEGACY INVO would result in an additional 19,340 shares issued.
From April 1, 2024, to April 30, 2024, LEGACY NAYA acquired 25,000 shares of LEGACY INVO Series A preferred stock for gross proceeds of $125,000 per the merger agreement. In addition, expenses totaling $84,700 were paid on behalf of LEGACY INVO and added to the investment for which 16,940 additional shares were issued.
Effective as of May 1, 2024, the Company entered into third amendment (“Third Amendment”) to the Merger Agreement. Pursuant to the Third Amendment, the parties agreed to extend the end date (the date by which either party may terminate the merger agreement) to June 30, 2024. The parties further agreed to modify the definition of an “Interim PIPE”.
Effective as of May 1, 2024, the Company and LEGACY INVO also entered into an Amendment (the “SPA Amendment”) to the Series A Preferred SPA. Pursuant to the SPA Amendment, the parties agreed to an updated closing schedule for LEGACY NAYA’s purchases of LEGACY INVO’s Series A preferred stock at a purchase price of $5.00 per share.
From May 1, 2024, to June 24, 2024, LEGACY NAYA acquired 140,000 shares of LEGACY INVO Series A preferred stock for gross proceeds of $700,000. As of the date of this filing, LEGACY NAYA has purchased a total of 301,280 Series A preferred shares of LEGACY INVO at a cost of $1,506,400.
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Loan Agreement with Cytovia
On May 15, 2024, LEGACY NAYA entered into a loan agreement with Cytovia, under which LEGACY NAYA will make available to Cytovia a term loan of up to $8,000,000 (the “Loan”). Principal amounts outstanding under the Loan shall bear interest at the rate of 7% per annum. Cytovia shall make quarterly payments of accrued interest on the outstanding principal balance of the Loan on the last day of each quarter (the “Interest Payment Date”) starting January 1, 2025, until the Loan is repaid in full. Each payment shall be in the amount of the accrued, but unpaid, interest through the date immediately preceding the date such payment is due.
In addition to quarterly payments of interest, commencing as of June 30, 2026, Cytovia shall make quarterly principal payments on each interest payment date based upon a five year amortization schedule.
On June 17, 2024, LEGACY NAYA Loan Agreement with Cytovia dated August 1, 2023, was amended to state that all principal and interest outstanding under the Loan shall be due and payable in full on the date LEGACY NAYA receives its next funding.
As of the filing date, there were no amounts outstanding under the Loan.
Amendment of Asset Purchase Agreement with Cytovia
On May 17, 2024, LEGACY NAYA amended the Asset Purchase Agreement with Cytovia as follows:
The aggregate purchase price for the purchased assets shall be an amount up to US $60,700,000 (the “Purchase Price”).
Closing payments to Cytovia are comprised of the following:
(a) $59,000,000 (the “Common Stock Consideration”) in common shares of LEGACY NAYA and with each share of common stock of LEGACY NAYA to be valued at $36.6665 per share resulting in the issuance of 1,609,098 shares of common stock of LEGACY NAYA. Each share of LEGACY NAYA is expected to be converted into 7.33333 shares of the Combined Company at the closing of the Merger reflecting a value of $5.00 per share of the Combined Company, to be adjusted for reverse split and/or other merger adjustments
(b) A payment of $1,700,000, which was made by LEGACY NAYA in January 2024.
The amended agreement also provides for sublicense fees to Cytovia at 10% of any gross consideration actually received by LEGACY NAYA (i) as a fee for sublicensing or selling CYT303 or CYT338 in any indications to any third party or (ii) as payments for development milestones, commercial milestones, or royalties or any other payments under the terms of any such sublicense or asset purchase agreement.
Stock Payable
During the fourth quarter of 2023, the Company entered into a media advertising agreement under which the consultant was paid cash of $200,000 and promised shares worth $600,000. On June 24, 2024, the agreement was amended to suspend the last cash payment of $50,000 and to replace the shares with 25,000 restricted stock units of the Company.
| 19 |
Exhibit 99.3
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
| BALANCE SHEETS | 2 |
| STATEMENTS OF OPERATIONS | 3 |
| STATEMENTS OF STOCKHOLDERS’ DEFICIT | 4 |
| STATEMENTS OF CASH FLOWS | 5 |
| NOTES TO FINANCIAL STATEMENTS | 6 |
| 1 |
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
BALANCE SHEETS
| September 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 756,461 | $ | 89,302 | ||||
| Investments | 778,113 | - | ||||||
| Prepaid expenses | 33,247 | - | ||||||
| Advance - related party | - | 12,000 | ||||||
| Security deposit | - | 10,539 | ||||||
| Total current assets | 1,567,821 | 111,841 | ||||||
| Total Assets | $ | 1,567,821 | $ | 111,841 | ||||
| LIABILITIES AND STOCKHOLDER’S DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 1,631,318 | $ | 3,498,724 | ||||
| Accrued payroll | 1,213,242 | 274,246 | ||||||
| Other accrued liabilities | 383,118 | 790,318 | ||||||
| Notes payable - related party | 290,000 | 6,085,000 | ||||||
| SAFE notes | 38,000 | 275,000 | ||||||
| Notes payable, net of debt discount | 12,523,074 | - | ||||||
| Total current liabilities | 16,078,752 | 10,923,289 | ||||||
| Total Liabilities | $ | 16,078,752 | $ | 10,923,289 | ||||
| Commitment and Contingencies | ||||||||
| Stockholders’ Deficit | ||||||||
| Series A Preferred Stock, par value $0.000001 per share; 50,000 shares authorized; 0 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | - | - | ||||||
| Class A Common Stock, par value $0.000001 per share; 50,000,000 shares authorized; 1,756,432 and 1,363,642 shares issued and outstanding as of September 30, 2024, and December 31, 2023, respectively | 1 | 1 | ||||||
| Class B Common Stock, par value $0.000001 per share; 8,000,000 shares authorized; 1,367,618 and 1,200,000 shares issued and outstanding as of September 30, 2024, and December 31, 2023, respectively | 1 | 1 | ||||||
| Preferred stock payable | 750,000 | - | ||||||
| Additional paid-in capital | 16,052,218 | 8,207,409 | ||||||
| Accumulated deficit | (31,313,151 | ) | (19,018,859 | ) | ||||
| Total Stockholders’ Deficit | (14,510,931 | ) | (10,811,448 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 1,567,821 | $ | 111,841 | ||||
The accompanying notes are an integral part of these financial statements.
| 2 |
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2023 | |||||||
| Revenue: | ||||||||
| Total revenue | - | - | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative expenses | $ | 2,976,074 | $ | 407,790 | ||||
| Research and development expenses | 176,104 | 939,519 | ||||||
| Total operating expenses | 3,152,078 | 1,347,309 | ||||||
| Loss from operations | (3,152,178 | ) | (1,347,309 | ) | ||||
| Other income (expense) | ||||||||
| Other income | 600,000 | - | ||||||
| Loss on debt extinguishment and penalty | (3,750,000 | ) | - | |||||
| Change in fair value of investment | (865,791 | ) | - | |||||
| Interest income (expense) – related party | (211,270 | ) | 1,035 | |||||
| Interest expense – other | (4,915,053 | ) | - | |||||
| Other income (expense), net | (9,142,114 | ) | - | |||||
| Net loss before income taxes | (12,294,292 | ) | (1,346,274 | ) | ||||
| Income taxes | - | - | ||||||
| Net loss | $ | (12,294,292 | ) | $ | (1,346,274 | ) | ||
| Net loss per common share: | ||||||||
| Basic and diluted | $ | (4.33 | ) | $ | (0.53 | ) | ||
| Weighted average number of common shares outstanding: | ||||||||
| Basic and diluted | 2,841,359 | 2,563,642 | ||||||
The accompanying notes are an integral part of these financial statements.
| 3 |
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
STATEMENT OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
| Series A Preferred Stock | Common Stock A | Common Stock B | Preferred Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Payable | Capital | Deficit | Total | |||||||||||||||||||||||||||||||
| Balances, December 31, 2022 | - | - | 1,363,642 | 1 | 1,200,000 | 1 | $ | 7,444,049 | $ | (15,740,085 | ) | $ | (8,296,034 | ) | ||||||||||||||||||||||||||
| Contribution by parent company for liabilities assumed | (392,711 | ) | (392,711 | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | 1,012,070 | (1,346,274 | ) | (334,204 | ) | |||||||||||||||||||||||||||||||||||
| Balances, September 30, 2023 | - | - | 1,363,642 | 1 | 1,200,000 | 1 | $ | 8,063,408 | $ | (17,086,359 | ) | $ | (9,022,949 | ) | ||||||||||||||||||||||||||
| Balances, December 31, 2023 | - | - | 1,363,642 | 1 | 1,200,000 | 1 | $ | 8,207,409 | $ | (19,018,859 | ) | $ | (10,811,448 | ) | ||||||||||||||||||||||||||
| Imputed interest - related party | 200,200 | 200,200 | ||||||||||||||||||||||||||||||||||||||
| Common stock issued with debenture | 42,618 | 64,353 | 64,353 | |||||||||||||||||||||||||||||||||||||
| Stock based compensation | 25,000 | 125,000 | 324,511 | 324,511 | ||||||||||||||||||||||||||||||||||||
| Amendment of related party | ||||||||||||||||||||||||||||||||||||||||
| Asset Purchase Agreement | 245,456 | 6,988,745 | 6,988,745 | |||||||||||||||||||||||||||||||||||||
| Preferred stock payable | 750,000 | 750,000 | ||||||||||||||||||||||||||||||||||||||
| Conversion of SAFE notes | 122,334 | 267,000 | 267,000 | |||||||||||||||||||||||||||||||||||||
| Net loss | (12,294,292 | ) | (12,294,292 | ) | ||||||||||||||||||||||||||||||||||||
| Balances, September 30, 2024 | - | - | 1,756,432 | 1 | 1,367,618 | 1 | 750,000 | $ | 16,052,218 | $ | (31,313,151 | ) | (14,510,931 | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| 4 |
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2023 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (12,294,292 | ) | $ | (1,346,274 | ) | ||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Imputed interest - related party | 200,200 | - | ||||||
| Stock based compensation | 324,511 | - | ||||||
| Amortization of debt discount | 4,353,797 | - | ||||||
| Loss on extinguishment of debt and penalty | 3,750,000 | - | ||||||
| Change in fair value of investment | 865,791 | - | ||||||
| Other income | (600,000 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and deposits | (22,708 | ) | - | |||||
| Advance – related party | 12,000 | (174,531 | ) | |||||
| Accounts payable and accrued liabilities | 2,500,664 | 1,333,917 | ||||||
| Net cash used in operating activities | (910,037 | ) | (186,888 | ) | ||||
| Investing activities: | ||||||||
| Investment in shares | (1,643,904 | ) | - | |||||
| Net cash used in investing activities | (1,643,904 | ) | - | |||||
| Financing activities: | ||||||||
| Net proceeds from loans | 3,936,100 | - | ||||||
| Proceeds - related party loans | 205,000 | - | ||||||
| Proceeds –preferred shares | 750,000 | |||||||
| Note repayment - related party | (1,700,000 | ) | - | |||||
| Proceeds from SAFE notes | 30,000 | 195,000 | ||||||
| Net cash provided from financing activities | 3,221,100 | 195,000 | ||||||
| Net increase in cash | 667,159 | 8,112 | ||||||
| Cash at beginning of period | 89,302 | - | ||||||
| Cash at end of period | $ | 756,451 | $ | 8,112 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non-cash activities: | ||||||||
| Cash paid for interest | - | |||||||
| Cash paid for taxes | - | - | ||||||
| Non-cash financing activities: | ||||||||
| Accounts payable and accrued expenses paid by parent company as contributions | - | $ | 619,360 | |||||
| Amendment of Asset Purchase Agreement with related party – reduction of accounts payable and accrued liabilities | $ | 6,988,745 | - | |||||
| Commitment shares on loan | $ | 64,353 | - | |||||
| Conversion of SAFE notes to equity | $ | 267,000 | - | |||||
The accompanying notes are an integral part of these financial statements.
| 5 |
NAYA THERAPEUTICS, INC. (FORMER NAME NAYA BIOSCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 2024
| 1. | Description of Business |
Naya Therapeutics, Inc. (former name Naya Biosciences, Inc.) (“LEGACY NAYA” or the “Company”) is a Delaware corporation formed on June 8, 2023, aiming to develop and build a group of agile, disruptive, high-growth companies dedicated to increasing patient access to life-transforming treatments in oncology and fertility.
LEGACY NAYA’s unique capabilities in biology, cell and gene therapy, and artificial intelligence (AI) provide a synergistic platform for the accelerated clinical development and commercialization of these breakthrough treatments.
LEGACY NAYA Oncology aims to achieve clinical proof-of-concept for its two bispecific antibodies acquired from Cytovia Therapeutics, LLC (“Cytovia”), advancing towards breakthrough outcomes for liver and ovarian cancer and multiple myeloma patients. Clinical trials are expected to start by 2025.
LEGACY NAYA Fertility is evaluating the acquisition of products, devices as well as a network of fertility care businesses.
| 2. | Accounting policies |
Basis of Presentation
On October 18, 2023, LEGACY NAYA acquired two assets from Cytovia. Both companies operate under common control and are accounted for as such. The acquisition did not include any other intellectual properties from Cytovia. As such, the Company has prepared the accompanying financial statements under common control as of and for the nine months ended September 30, 2024 and 2023. The interim financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). See Note 4.
In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments, for a fair presentation of the Company’s financial position and results of operations for the interim periods presented. Certain information and disclosures normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The results for the nine months ended September 30, 2024 and 2023, are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.
| 6 |
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP required management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates.
Cash and Cash Equivalents
For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. At times, cash and cash equivalents balances exceed amounts insured by the Federal Deposit Insurance Corporation.
Investments
Investments include an investment in the Series A preferred shares of NAYA Biosciences, Inc. (former name INVO Bioscience, Inc.) (“LEGACY INVO”) pursuant to a securities purchase agreement. The preferred shares will be marketable upon conversion into publicly traded common shares and therefore are being accounted for as marketable securities at the closing market price on the balance sheet date. See Notes 8 and 10.
Income Taxes
The Company is subject to income taxes in the United States and its domestic tax liabilities are subject to the allocation of expenses in multiple state jurisdictions. The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more-likely-than-not that a deferred tax asset will be recovered, a valuation allowance is established.
Commitment Shares
The Company accounts for commitment shares as either equity-classified or liability-classified instruments based on an assessment of the commitment shares specific terms and applicable authoritative guidance in ASC 480 “Distinguishing Liabilities From Equity” (“ASC 480”) and ASC 815 “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the commitment shares are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the commitment shares meet all of the requirements for equity classification under ASC 815, including whether the shares are indexed to the Company’s own ordinary shares and whether the commitment share holder could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of share issuance and as of each subsequent quarterly period end date.
As the commitment shares issued upon the closing of the Company’s January 3, 2024 debenture meet the criteria for equity classification under ASC 815, the commitment shares are classified as equity.
| 7 |
Research and Development
Research and development costs are expensed when incurred.
Financial Instruments
The carrying values of current assets and current liabilities approximate their fair values due to their short-term nature.
Net Loss Per Common Share
Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed using the treasury stock method on the basis of the weighted-average number of shares of common stock plus the dilutive effect of potential common shares outstanding during the period. Dilutive potential common shares include 40,926 outstanding stock options and 190,926 unvested restricted share units as of September 30, 2024 and 0 at September 30, 2023. The computation of diluted loss per share does not assume conversion, exercise or contingent exercise of securities as the effect would have been anti-dilutive on earnings.
Stock Based Compensation
The Company accounts for stock-based compensation under the provisions of Accounting Standards Codification (“ASC”) subtopic 718-10, Compensation (“ASC 718-10”). This statement requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service or based on performance goals in exchange for the award, which is usually the vesting period. Under these accounting standards, the fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. Forfeitures are recorded in the period in which they occur.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”). ASU2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. The Company adopted the provisions of ASU 2020-06 on January 1, 2024. This did not have a material impact on the Company’s financial statements.
In December 2023, the FASB issued ASU No. 2023-09 entitled “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This ASU provides guidance related to additional disclosures that will be required related to income taxes. The updated guidance is effective for public entities for fiscal years beginning after December 15, 2024. This ASU is expected to result in additional disclosures in the Company’s financial statements related to income taxes in 2025.
| 8 |
| 3. | Liquidity and Going Concern |
Historically, the Company has funded its cash and liquidity needs primarily through debt and equity financings. For the nine months ended September 30, 2024, the Company incurred a net loss of approximately $12.3 million and has an accumulated deficit of approximately $31.3 million as of September 30, 2024. The prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern. There are no assurances that such financing, if necessary, will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through licensing of the assets, creating revenue streams through upfront and milestone payments, royalties, and commercial milestone payments: or funding the Company through equity financing, the Company will be unable to continue operations.
Although the Company’s audited financial statements for the year ended December 31, 2023 were prepared under the assumption that it would continue operations as a going concern, the report of the Company’s independent registered public accounting firm that accompanies the Company’s financial statements for the year ended December 31, 2023 contains a going concern qualification in which such firm expressed substantial doubt about the Company’s ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, the Company has incurred significant operating losses, and the Company expects to continue to incur significant expenses and operating losses.
| 4. | Carve-out Accounting |
These financial statements are being prepared based on the acquisition of assets as disclosed in Note 5. These are the historical results based on common control accounting.
The results reflect that LEGACY NAYA was a stand-alone entity starting in July 2023, separate from the original common control entity for which the carve out accounting was required.
Indirect research & development costs were allocated based on percentage of research and development full-time equivalent approach. The full-time employees, who worked on the projects have been assigned on a weekly basis to work a defined percentage of their time per project. The assigned time per week per project then was summarized on a monthly basis. The monthly assigned time per employee per project finally defined the average allocation per project CYT303 and CYT338 for salaries and indirect research & development expenses. The allocated expenses related to CYT303 and CYT338 represent 0% and 36% of Cytovia’s expenses for the six months ended June 30, 2024 and 2023, respectively, after which LEGACY NAYA was a stand-alone entity.
Selling, general and administrative expenses were allocated based on percentage of full-time equivalent approach. Allocated percentage is 0% and 10% for the six months ended June 30, 2024 and 2023, respectively, after which LEGACY NAYA was a stand-alone entity.
The cost for the rent for the research & development lab has been allocated with the same principle as described above to the two projects CYT303 and CYT338.
| 9 |
| 5. | Asset Purchase Agreement |
On October 18, 2023, LEGACY NAYA, Cytovia Therapeutics Holdings, Inc., a Delaware corporation (“Holdings”) and Cytovia entered into and closed an Asset Purchase Agreement (the “Asset Purchase Agreement”) for projects CYT303 and the CYT338. The aggregate purchase price was comprised of closing payments and the assumption of the certain liabilities totaling $2,688,745.
Closing payments were comprised of the issuance of 1,363,642 shares of common stock of LEGACY NAYA to Cytovia and a promissory note to Cytovia in the principal amount of $6,000,000, of which $1,000,000 will be paid at the closing of any financing, and $1,000,000 per month for 5 months; also if LEGACY NAYA or the Combined Company (as defined) raises more than $30,000,000 in a financing, the full amount of $6,000,000 will be due at the closing of the financing.
Payments totaling $1,700,000 were made to Cytovia in January 2024. On May 17, 2024, LEGACY NAYA and Cytovia amended the Asset Purchase Agreement. The amended aggregate purchase price was comprised of the following:
(a) The issuance of 1,609,098 shares of common stock of LEGACY NAYA.
(b) A payment of $1,700,000, which was made by LEGACY NAYA in January 2024.
The amended agreement also provides for sublicense fees to be paid to Cytovia at 10% of any gross consideration actually received by LEGACY NAYA (i) as a fee for sublicensing or selling CYT303 or CYT338 in any indications to any third party or (ii) as payments for development milestones, commercial milestones, or royalties or any other payments under the terms of any such sublicense or asset purchase agreement. The acquisition agreement also includes for no further consideration a sublicense agreement between LEGACY NAYA and Cytovia, under which Cytovia granted LEGACY NAYA a non-exclusive sublicense under Cytovia rights in PCT/IB2012/053482 (P-627002-PC) (the “Licensed Technology”), or certain technology jointly owned by Dr. Jean Kadouche and CNRS (The French Center for National Scientific Research) and co-exclusively licensed to Cytovia, for the development and commercialization of CYT303 (now NY303) and CYT338 (now NY338). LEGACY NAYA has extended the non-exclusive license to the development of additional multi-functional antibodies for which LEGACY NAYA will make payments upon achievement of certain milestones. The agreement terminates upon the expiration of the patent rights to the Licensed Technology.
These financial statements are being prepared with historical results based on common control accounting. As a result of the amendment to the Asset Purchase Agreement, the remaining note payable of $4,300,000 and accrued liabilities of $2,688,745 were reclassified to additional paid-in capital and the number of shares issued to Cytovia was increased to 1,609,098 shares of Class A Common Stock.
| 6. | Debt |
Debt consisted of the following:
| September 30, 2024 | December 31, 2023 | |||||||
| Related party note payable | $ | 290,000 | $ | 6,085,000 | ||||
| Simple Agreement for Future Equity (SAFE) | 38,000 | 275,000 | ||||||
| Five Narrow Lane debentures | 11,997,530 | - | ||||||
| Accredited investor note | 500,000 | - | ||||||
| Other | 31,100 | - | ||||||
| Less debt discount, accredited investor note | (5,556 | ) | - | |||||
| Total, net of discount | $ | 12,851,074 | $ | 6,360,000 | ||||
| 10 |
Accrued interest of $547,530 on the Five Narrow Lane debentures was capitalized and is included in the above loan balance at September 30, 2024. Accrued interest of $11,070 for the related party and $13,726 for Five Narrow Lane, respectively, are included in accounts payable and accrued liabilities at September 30, 2024.
Simple Agreement for Future Equity (SAFE Notes)
During 2023, the Company received funding from five investors under simple agreements for future equity (“SAFE notes”) for a total of $275,000, giving the investors the right upon conversion to shares of LEGACY NAYA’s common stock at discounts ranging from 30%-40% from the price of an equity financing or a liquidity event. The SAFE notes provide the investor certain rights upon an equity financing, liquidity event, change in control or dissolution. The SAFE notes have no interest rate or maturity date.
During the nine months ended September 30, 2024, the Company entered into two new SAFE notes for a total of $30,000. During the same period, the Company converted SAFE notes with a value of $267,000 into 122,333 shares of common stock. As of September 30, 2024, SAFE notes with a value of $38,000 remained outstanding.
The SAFE notes were classified as a liability based on an evaluation of the characteristics of the instrument pursuant to ASC 480 as certain redemptions are based upon the occurrence of events that are outside of the control of the Company. The SAFE notes are stated at their fair value which approximates cost.
See Note 10 for subsequent conversions.
Five Narrow Lane LP Securities Purchase Agreement and Debentures
On January 3, 2024, LEGACY NAYA entered into a Securities Purchase Agreement (“SPA”), pursuant to which it sold a senior secured debenture (the “Debenture”) in the principal amount of $3,000,000 to Five Narrow Lane, LP (the “Investor”). The Debenture accrued interest at 7% per annum on the outstanding principal amount throughout the term of the Debenture, which had a maturity date of the earlier of (i) April 30, 2024, and (ii) the date of the completion of the Merger under the Merger Agreement. Interest on the Debenture is due monthly on the first business day of every month. LEGACY NAYA may redeem the Debenture upon 10 days’ notice to the Investor. Upon any repayment, LEGACY NAYA will also pay an exit fee equal to 100% of the principal amount of the Debenture, which has been recorded as an additional $3,000,000 of principal and accounted for as an original issue discount. In the event of default, 100% of the outstanding principal amount is due as well as 200% of the outstanding principal amount of the Debenture for a total of $9,000,000.
In addition, the Investor received 42,618 commitment shares of common stock, which upon consummation of the Merger, will be exchanged into such number of shares of LEGACY INVO common stock representing 1.5% of the fully diluted outstanding capital of LEGACY INVO, after giving effect to the consummation of the Merger, but prior to the issuance of shares in the pre-Merger financing. The commitment shares were issued in January 2024 and were recorded at $1.51 per share fair value based on a valuation of LEGACY NAYA as of December 31, 2023.
| 11 |
On May 13, 2024, LEGACY NAYA amended the SPA and promised to pay the Investor the principal sum of $9,075,833 (including $75,833 of capitalized interest) on the earlier to occur of the Merger and June 28, 2024. Upon the occurrence of an event of default, the outstanding principal amount of the debenture, plus accrued but unpaid interest, and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash. In addition, the late interest on the Debenture shall accrue at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted under applicable law. On the date of modification, the Company determined that the present value of the cash flows of the modified debt instrument was greater than 10% different from the present value of the remaining cash flows under the original debt instrument and therefore the Company recorded a loss on extinguishment of $3,000,000, representing the default penalty on the original note.
On May 13, 2024, LEGACY NAYA entered into an additional debenture agreement with the Investor for the principal sum of up to $1,000,000 with a maturity date of the earlier of June 28, 2024 or the Trigger Date, as defined, and interest payable at 7%. In May and June 2024, a total of $700,000 was received under the debenture. Upon any repayment or redemption by the Company of all or any of the principal amount of this debenture (whether on or prior to the maturity date, pursuant to an optional redemption, upon acceleration or otherwise), the Company shall pay to the Investor an exit fee in an amount equal to 100% of the principal amount of the debenture, which has been recorded as an additional $700,000 of principal and accounted for as an original issue discount. In the event of default, 200% of the outstanding principal is due in addition to the principal. The Company was in default as of the June 28, 2024 maturity date and therefore incurred a default penalty of $700,000.
Effective September 12, 2024, the Company entered into the following agreements with Five Narrow Lane (“Investor”): an Omnibus Amendment and Agreement, a Senior Secured Convertible Debenture and a Registration Rights Agreement. The Company and the Investor agreed to, among other things:
| ● | Exchange the May 2024 Debentures for a Senior Secured Convertible Debenture due the earlier of the Trigger Date (as defined) and October 14, 2024 in the aggregate principal amount of $11,734,979.48. Following the consummation of the Merger, the portion of the debenture constituting $3,659,146.15 would be exchanged for a Senior Secured Convertible Debenture issued by LEGACY INVO (“LEGACY INVO Debenture”). The portion of this debenture constituting $8,075,833.33 would be converted into shares of Series C Convertible Preferred Stock of LEGACY INVO (the “LEGACY INVO Preferred Stock”). | |
| ● | If any event of default occurs, the outstanding principal amount of this debenture, plus accrued but unpaid interest, and other amounts owing in respect thereof through the date of acceleration, shall become, at the Investor’s election, immediately due and payable in cash. Upon the occurrence of an event of default, the interest rate on this debenture shall accrue at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted under applicable law. | |
| ● | The Company and the Investor agreed to enter into a registration rights agreement pursuant to which the Company agreed to file a resale registration statement with the Securities and Exchange Commission which shall cover the shares of common stock of LEGACY INVO issuable upon the conversion of (i) the LEGACY INVO Debenture and (ii) the shares of LEGACY INVO Preferred Stock. | |
| ● | Following the consummation of the Merger, the Investor would invest $500,000, which shall be repaid using the gross proceeds of a public offering and such principal amount of the LEGACY INVO Debenture shall be increased accordingly. | |
| ● | As consideration for the Investor entering into this agreement, the Investor agreed to fund the $275,000 remaining from the May Debenture. |
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| ● | Provided that the total amount of proceeds raised in a public offering equals or exceeds $5,000,000, the Investor shall purchase $4,000,000, subject to certain terms. | |
| ● | 150,000 shares of the Company’s Common Stock are to be issued to the Investor, representing approximately 5.0% of the fully diluted outstanding capital of LEGACY INVO, after giving effect to the consummation of the Merger, but prior to the issuance of shares in a financing. | |
| ● | Extend the maturity date to the earlier of (a) October 14, 2024, and (b) the date of the consummation of the Merger or the date of termination of the Merger Agreement. |
See Note 10 for subsequent loan amendment.
Cytovia Notes
LEGACY NAYA and Cytovia, entered into a loan agreement on August 1, 2023, pursuant to which Cytovia shall make available to LEGACY NAYA a term loan for up to $1,000,000, bearing interest at a rate of 5% per annum. On June 17, 2024, the loan agreement was amended to state that all principal and interest outstanding under the Loan shall be due and payable in full on the date LEGACY NAYA receives its next funding. As of September 30, 2024, the outstanding amount due to Cytovia was $290,000.
Per the Asset Purchase Agreement, a closing payment of $6,000,000 was part of the consideration for the two assets purchased from Cytovia. A total of $1,700,000 was paid during January 2024. In May 2024, the Asset Purchase Agreement was amended – see Note 5. Due to the note having no stated interest rate, interest on the balance of the note has been imputed at 12% and $200,200 was included in additional paid-in capital as a contribution to equity.
On May 15, 2024, LEGACY NAYA entered into a loan agreement with Cytovia, under which LEGACY NAYA will make available to Cytovia a term loan of up to $8,000,000. Principal amounts outstanding shall bear interest at the rate of 7% per annum. Cytovia shall make quarterly payments of accrued interest starting January 1, 2025, until the loan is repaid in full. In addition to quarterly payments of interest, commencing as of June 30, 2026, Cytovia shall make quarterly principal payments on each interest payment date based upon a five year amortization schedule. As of September 30, 2024, there were no amounts outstanding under this loan.
Accredited Investor Note
On April 4, 2024, the Company received proceeds of $250,000 and entered into a promissory note with an accredited investor for the principal sum of $500,000. The full amount of principal (including the original issue discount) under the note shall be due on the earlier of: (i) closing of the Merger; or (ii) the six-month anniversary of the date of the note or (iii) the occurrence of an event of default. Commencing five calendar days after the occurrence of any event of default that results in the acceleration of the note, interest shall accrue at the rate of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law. See Note 10.
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| 7. | Stockholder’s Equity |
Pursuant to the Amended and Restated Certificate of Incorporation of the Company filed on December 14, 2023, the total number of shares of all classes of capital stock which the Company shall have authority to issue is 58,500,000 shares, consisting of: (i) 50,000,000 shares of Class A Common Stock, $0.000001 par value per share (“Class A Common Stock”), (ii) 8,000,000 shares of Class B Common Stock, $0.000001 par value per share (“Class B Common Stock”), and (iii) 500,000 shares of Preferred Stock, $0.000001 par value per share (“Preferred Stock”), of which 50,000 of the authorized shares of Preferred Stock of the Company are designated Series A Preferred Stock.
Preferred Stock
The Board is expressly authorized, subject to any limitations prescribed by the laws of the State of Delaware, by resolution or resolutions adopted from time to time, to provide for the issuance of shares of Preferred Stock in one or more series and by filing a certificate of designation pursuant to the applicable laws of the State of Delaware to establish from time to time the number of shares of Preferred Stock to be included in each such series, to fix the designation, vesting, powers (including voting powers), preferences and relative, participating, optional or other special rights (and the qualifications, limitations or restrictions thereof) of the shares of Preferred Stock of each such series and to increase (but not above the total number of authorized shares of Preferred Stock) or decrease (but not below the number of shares of Preferred Stock of such series then outstanding) the number of shares of Preferred Stock of any such series.
On September 20, 2024, the Company entered into a Securities Purchase Agreement (SPA) and Preferred Stock Purchase Warrant with an accredited investor (“Investor”) under which the Investor intended to purchase preferred shares and warrants for an aggregate purchase price of $750,000. On September 30, 2024, an advance payment of $750,000 was received toward the purchase of the preferred shares and warrants pursuant to the SPA, and is included as Preferred Stock Payable in the accompanying balance sheet.
Common Stock
On October 13, 2023, the Company issued 1,200,000 shares of Class B Common Stock. These shares are considered founders’ shares.
On October 17, 2023, the Company entered into a media advertising agreement under which the consultant was being paid cash of $250,000 and shares worth $600,000 to be settled in cash or shares at a later date with the share price not yet determined. On June 24, 2024, the agreement was amended to suspend the last cash payment of $50,000 and to replace the shares with 25,000 fully vested RSUs of the Company. The shares payable liability that had been recorded in the fourth quarter of 2023 for $600,000 was reversed and the amount is included in Other Income. The $37,750 fair value the 25,000 RSUs is included in Selling, General and Administrative expenses.
On October 18, 2023, the Company issued 1,363,642 shares of Class A Common Stock to Cytovia, a related party, pursuant to the Asset Purchase Agreement. On May 17, 2024, the Asset Purchase Agreement was amended and the number of shares issued to Cytovia was increased to 1,609,098 shares of Class A Common Stock. See Note 5.
On February 8, 2024, the Company issued 42,618 shares of Class B Common Stock to Five Narrow Lane LP. See Note 6.
On April 5, 2024, the Company engaged a consultant to serve as strategic advisor. For the services to be provided over the following 12 months, the consultant received 125,000 shares of Class B Common Stock. The fair value of $188,750 on the date of the consulting agreement is included in Selling, General and Administrative expenses.
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During August 2024, a total of 122,334 shares of Class A common stock were issued upon conversion of SAFE notes. See note 6.
Class A Common Stock and Class B Common Stock shall at all times vote together as one class on all matters (including the election of directors) submitted to a vote or for the consent of the stockholders of the Company. Each holder of shares of Class A Common Stock shall be entitled to one vote and each holder of shares of Class B Common Stock shall be entitled to ten votes for each share held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Company. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of shares of capital stock of the Company representing a majority of the votes represented by all outstanding shares of capital stock of the Company entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law. Except as otherwise provided in the Certificate of Incorporation or required by applicable law, shares of Class A Common Stock and Class B Common Stock shall have the same rights and powers, rank equally (including as to dividends and distributions, and upon any liquidation, dissolution or winding up of the corporation), share ratably and be identical in all respects and as to all matters.
Stock-based Compensation
Pursuant to the Company’s Global Equity Incentive Plan (2024) effective January 1, 2024, the Company is authorized to issue 618,692 restricted stock units, stock options or shares to employees, directors, advisory board members and consultants.
Stock option activity for the nine months ended September 30, 2024 is as follows:
| Number of | Weighted Average | |||||||
| Options | Exercise Price | |||||||
| Outstanding, December 31, 2023 | - | - | ||||||
| Granted | 40,926 | $ | 2.00 | |||||
| Exercised | - | - | ||||||
| Forfeited | - | - | ||||||
| Outstanding, September 30, 2024 | 40,926 | 2.00 | ||||||
| Exercisable, September 30, 2024 | 40,926 | $ | 2.00 | |||||
On January 1, 2024, a total of 40,926 options with a term of 10 years were granted to certain Directors of the Company to purchase 40,926 shares of common stock with a vesting schedule of 100% on the first anniversary. Immediately after the Merger (as such term is defined in Note 7) all options convert with the factor 7.33333, subject to adjustment set forth in the Amended and Restated Merger Agreement (see Notes 8 and 10). The amount recorded as the fair value of these options to purchase shares was based on the Black-Scholes model with a fair value of $1.08 per option totaling $44,200 compensation expense. An expense of $21,919 was recorded for the nine months ended September 30, 2024. The fair value of each stock option was estimated using the Black Scholes pricing model, which takes into account as of the grant date: the exercise price ($2.00), the expected life of the stock option (5.5 years), the current value per share $1.51 of the underlying stock, the expected volatility (91.5%), expected dividends (0%) and the risk-free interest rate (5%).
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Restricted stock unit (RSU) activity for the nine months ended September 30, 2024 is as follows:
| Number of | Weighted Average Grant | |||||||
| Unvested Shares | Date Fair Value | |||||||
| Balance as of December 31, 2023 | - | $ | - | |||||
| Granted | 245,496 | 1.51 | ||||||
| Vested | - | - | ||||||
| Forfeited | (54,570 | ) | 1.51 | |||||
| Balance as of September 30, 2024 | 190,926 | $ | 1.51 | |||||
On January 1, 2024, 40,926 Restricted Stock Units (“RSUs”) were granted to certain Directors of the Company, with 100% vesting one year following the grant date. Immediately after the Merger, all RSUs will convert with the factor 7.33333, subject to adjustment set forth in the Amended and Restated Merger Agreement. The fair value of these RSUs was determined based on a valuation as of December 31, 2023, with a fair value of $1.51 per share totaling $61,798 compensation expense, with $30,647 recorded for the nine months ended September 30, 2024.
On January 1, 2024, 40,928 RSUs were granted to an officer of the Company with a vesting schedule of 25% after one year from the grant date, and the remaining 75% of the shares shall continue to vest monthly for a period of two years thereafter. In addition, 13,642 RSUs were granted to the officer of the Company on January 1, 2024, with 100% vesting a year from the grant date. Immediately after the Merger all RSUs convert with the factor 7.33333, subject to adjustment set forth in the Amended and Restated Merger Agreement. The officer left the Company on June 27, 2024 and all of the RSUs were forfeited. Therefore, no compensation expense has been recorded for this grant for the nine months ended September 30, 2024.
During the period July to September 2024, a total of 125,000 RSUs were granted to consultants with vesting periods ranging from 6 to 18 months. Total compensation expense is $188,750, of which $18,875 has been recognized.
Stock compensation expense totaling $324,511 and $0 for the nine months ended September 30, 2024, respectively, is included in the statements of operations within selling, general and administrative expenses. Forfeitures are recognized as they occur. Total unrecognized stock compensation as of September 30, 2024 is $185,535 for RSUs and $11,201 for stock options.
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| 8. | Commitment and Contingencies |
LEGACY NAYA Merger Agreement
On October 22, 2023, LEGACY NAYA and INVO Merger Sub. Inc., a Nevada corporation (“Merger Sub”), a wholly owned subsidiary of LEGACY INVO, entered into an agreement and plan of merger, as amended on October 25, 2023 (the “Merger Agreement”).
Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub would merge (the “Merger”) with and into LEGACY NAYA, with LEGACY NAYA continuing as the surviving corporation and a wholly owned subsidiary of the Company. At the effective time and as a result of the Merger, each share of Class A common stock, par value $0.000001 per share, of LEGACY NAYA outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by LEGACY NAYA as treasury stock or owned by the Company or LEGACY INVO, would be converted into the right to receive 7.33333 (subject to adjustment as set forth in the Merger Agreement) shares of a newly designated series of common stock, par value $0.000001 per share, of the Company would shall be entitled to ten votes per each share. Immediately following the effective time of the Merger, Dr. Daniel Teper, LEGACY NAYA’s current chairman and chief executive officer, would be named chairman and chief executive officer of the combined company, and the board of directors will be comprised of up to nine directors, of which (i) one would be Steven Shum, LEGACY INVO’s current chief executive officer, and (ii) eight would be identified by LEGACY NAYA, of which seven would be independent directors.
Pursuant to the original Merger Agreement, the completion of the Merger was subject to satisfaction or waiver of certain customary and other mutual closing conditions, including (1) the adoption of the Merger Agreement by the stockholders of the Company and LEGACY INVO, (2) the absence of any injunction or other order issued by a court of competent jurisdiction or applicable law or legal prohibition prohibiting or making illegal the consummation of the Merger, (3) the completion of due diligence, (4) the completion of an interim private offering of shares of LEGACY INVO common stock at a price that is a premium to the market price of the LEGACY INVO common stock in an estimated amount of $5,000,000 or more of gross proceeds (the “Interim PIPE”), (5) the completion of a sale of shares of common stock at a target price of $5.00 per share in a private offering resulting in sufficient cash available for LEGACY INVO for one year of operations, as estimated by LEGACY INVO (6) the aggregate of the liabilities of LEGACY INVO, excluding certain specified liabilities, shall not exceed $5,000,000, (7) the receipt of waivers from any and all holders of warrants (and any other similar instruments) to securities of LEGACY INVO, with respect to any fundamental transaction rights such warrant holders may have under any such warrants, (8) the continued listing of LEGACY INVO common stock on NASDAQ through the effective time of the Merger and the approval for listing on NASDAQ of the shares of LEGACY INVO common stock to be issued in connection with the Merger, the interim private offering, and a private offering of shares of LEGACY INVO common stock at a target price of $5.00 per share resulting in sufficient cash available for LEGACY INVO for one year of operations, as estimated by LEGACY NAYA, (9) the effectiveness of a registration statement on Form S-4 to be filed by LEGACY INVO pursuant to which the shares of LEGACY INVO’s common stock to be issued in connection with the Merger will be registered with the SEC, and the absence of any stop order suspending such effectiveness or proceeding for the purpose of suspending such effectiveness being pending before or threatened by the SEC, and (10) LEGACY INVO shall have received customary lock-up Agreement from certain of its stockholders.
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The Merger Agreement contained termination rights for LEGACY INVO and LEGACY NAYA, including, among others: (1) if the consummation of the Merger does not occur on or before December 31, 2023 (the “End Date”) (which was since been extended to April 30, 2024 in a second amendment, then to June 30, 2024 in the third amendment, and then to October 14, 2024 in the fourth amendment), except that any party whose material breach of the Merger Agreement caused or was the primary contributing factor that resulted in the failure of the Merger to be consummated on or before the End Date, (2) if any governmental authority has enacted any law or order making illegal, permanently enjoining, or otherwise permanently prohibiting the consummation of the Merger, and (3) if the required vote of the stockholders of either the Company or LEGACY NAYA has not been obtained. The Merger Agreement contains additional termination rights for LEGACY NAYA, including, among others: (1) if LEGACY INVO materially breaches its non-solicitation obligations or fails to take all action necessary to hold a stockholder meeting to approve the transactions contemplated by the Merger Agreement, (2) if the aggregate of the liabilities of LEGACY INVO, excluding certain specified liabilities, exceed $5,000,000, (3) if LEGACY NAYA determines that the due diligence contingency will not be satisfied by October 26, 2023, (4) if LEGACY NAYA determines that the Company has experienced a material adverse effect, or (5) LEGACY INVO material breaches any representation, warranty, covenant, or agreement such that the conditions to closing would not be satisfied and such breach is incapable of being cured, unless such breach is caused by LEGACY NAYA’s failure to perform or comply with any of the covenants, agreements, or conditions hereof to be performed or complied with by it prior to the closing.
If all of LEGACY NAYA’s conditions to closing were satisfied or waived and LEGACY NAYA fails to consummate the Merger, LEGACY NAYA would be required to pay the LEGACY INVO a termination fee of $1,000,000. If all of LEGACY NAYA’s conditions to closing were satisfied or waived and LEGACY INVO fails to consummate the Merger, LEGACY INVO would be required to pay LEGACY NAYA a termination fee of $1,000,000.
On December 27, 2023, LEGACY NAYA entered into second amendment (“Second Amendment”) to the Merger Agreement. Pursuant to the Second Amendment, the parties agreed to extend the End Date to April 30, 2024. The parties further agreed to modify the closing condition for the Interim PIPE from a private offering of shares of LEGACY INVO common stock at a price that is a premium to the market price of the LEGACY INVO common stock in an estimated amount of $5,000,000 or more of gross proceeds to a private offering of LEGACY INVO’s preferred stock at a price per share of $5.00 per share in an amount equal to at least $2,000,000 to LEGACY INVO, plus an additional amount as may be required prior to closing of the Merger to be determined in good faith by the parties to adequately support the LEGACY INVO’s fertility business activities per an agreed forecast, as well as for a period of 12 months post- closing including a catch-up on the LEGACY INVO’s past due accrued payables still outstanding. The parties further agreed to the following schedule (the “Minimum Interim Pipe Schedule”) for the initial $2,000,000: (1) $500,000 no later than December 29, 2023, (2) $500,000 no later than January 19, 2024, (3) $500,000 no later than February 2, 2024, and (4) $500,000 no later than February 16, 2024. The parties also further agreed to modify the covenant of the parties regarding the Interim PIPE to require LEGACY NAYA to consummate the Interim PIPE before the closing of the Merger; provided, however, if the LEGACY INVO does not receive the initial gross proceeds pursuant to the Minimum Interim Pipe Schedule, then LEGACY INVO shall be free to secure funding from third parties to make up for short falls on reasonable terms under SEC and Nasdaq regulations.
Effective as of May 1, 2024, the Company entered into third amendment (“Third Amendment”) to the Merger Agreement. Pursuant to the Third Amendment, the parties agreed to extend the End Date to June 30, 2024. The parties further agreed to modify the definition of an “Interim PIPE” to mean (a) a sale of shares of the Company’s Series A Preferred Stock pursuant to the Series A Preferred SPA, as amended (“Phase 1”), plus (b) a sale of shares of the Company’s preferred stock at a price per share of $5.00 per share in a private offering, to be consummated prior to the closing of the Merger, resulting in an amount as may be required, to be determined in good faith by the parties to the Merger Agreement, to adequately support LEGACY INVO’s fertility business activities per an agreed forecast of LEGACY INVO as well as for a period of 12 months following the closing, including a catch-up on LEGACY INVO’s past due accrued payables still outstanding (“Phase 2”). The parties agreed that Phase I must be consummated pursuant to the terms of the Series A Preferred SPA and that Phase II must be consummated prior to the closing of the Merger. The parties also confirmed that LEGACY INVO remains free to secure any amount of funding from third parties on any terms LEGACY INVO deems reasonably acceptable under SEC and Nasdaq regulations without the prior written consent of LEGACY NAYA. Under the Third Amendment, LEGACY INVO may terminate the Merger Agreement if LEGACY NAYA breaches or fails to perform any of its covenants and agreements set forth in the Series A Preferred SPA, as amended.
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Effective as of September 12, 2024, the Company entered into a fourth amendment (“Fourth Amendment”) to the previously announced agreement and plan of merger (the “Merger Agreement”) by and among LEGACY INVO, INVO Merger Sub, Inc. (“Merger Sub”) and the Company.
Pursuant to the Fourth Amendment, the parties agreed to extend the end date (the date by which either the Company or LEGACY INVO may terminate the Merger Agreement, subject to certain exceptions) of the merger contemplated by the Merger Agreement (the “Merger”) to October 14, 2024. The parties further agreed that the Company would purchase 27,500 shares of LEGACY INVO’s Series A Preferred Stock for $137,500 pursuant to that certain Securities Purchase Agreement dated as of December 29, 2023, as amended pursuant to an Amendment to Securities Purchase Agreement dated as of May 1, 2024 (as amended, the “Securities Purchase Agreement”) and could purchase up to an additional 72,500 shares of Series A Preferred Stock for an aggregate of $362,500 pursuant to the Securities Purchase Agreement prior to or concurrently with the closing of the Merger. Each party waived prior breaches of the Merger Agreement.
Each party also agreed to use its best efforts to consummate the transactions contemplated by the Fourth Amendment, including to negotiate in good faith to amend and restate the Merger Agreement (the “A&R Merger Agreement”) to, among other things, (1) provide that the closing of the Merger shall occur simultaneously or shortly after the execution and delivery of the A&R Merger Agreement, and that the parties shall commit to use its respective best efforts to cause the closing to occur on or about October 1, 2024, but, in any case, no later than October 14, 2024, (2) ensure that the revised structure of the Merger shall be in compliance in all material respects with the applicable current listing and governance rules and regulations of the Nasdaq Stock Market, (3) provide that the aggregate merger consideration to be paid by LEGACY INVO for all of the outstanding shares of the Company’s capital stock shall consist of (a) such number of shares of LEGACY INVO’s common stock as shall represent a number of shares equal to no more than 19.9% of the outstanding shares of the LEGACY INVO’s common stock as of immediately before the effective time of the Merger (the “Common Stock Payment Shares”) and (b) shares of a newly designated Series C Convertible Preferred Stock of LEGACY INVO (the “Parent Preferred Stock Payment Shares”), (4) include an acknowledgment by the parties that the Company shall transfer 85% of the Common Stock Payment Shares to Five Narrow Lane LP, as a secured lender of the Company, (5) provide that LEGACY INVO shall take all action necessary under applicable law to (i) call, give notice of, and hold a meeting of its stockholders as soon as possible after the closing of the Merger, but in any case, no later than 120 days thereafter (the “Stockholder Meeting Deadline”; provided, that, LEGACY INVO acknowledges that, if it receives comments from the Securities and Exchange Commission (“SEC”) on the proxy statement filed in connection with such stockholder meeting and it uses its best efforts to revise and refile the proxy statement to address such comments, the date of such stockholder meeting may be after the Stockholder Meeting Deadline), for the purpose of, among other things, seeking stockholder approval (the “Stockholder Approval”) of the issuance of all shares of the Company’s common stock issuable upon conversion (the “Series C Conversion Shares”) of the Preferred Stock Payment Shares in accordance with the terms of the Certificate of Designations of Series C Convertible Preferred Stock (the “Series C Certificate of Designations”), and (ii) to file with the SEC a proxy statement for the purpose of obtaining the Stockholder Approval, no later than 35 days after the closing of the Merger, (6) provide that, upon receipt of the Stockholder Approval, the Preferred Stock Payment Shares shall be automatically converted into the Series C Conversion Shares at the conversion price in effect as set forth in the Series C Certificate of Designations; provided that, following such conversion, the Series C Conversion Shares shall represent approximately 60.1% of the outstanding shares of LEGACY INVO’s common stock; and (7) provide that, as soon as possible after the closing of the Merger, LEGACY INVO shall file a resale registration statement with the SEC to register the Common Stock Payment Shares and the Series C Conversion Shares in accordance with the terms of a registration rights agreement to be entered into between the parties.
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Securities Purchase Agreement
On December 29, 2023, the Company entered into a securities purchase agreement (the “Series A Preferred SPA”) with LEGACY INVO for LEGACY NAYA’s purchase of up to 1,000,000 shares of LEGACY INVO’s Series A Preferred Stock at a purchase price of $5.00 per share. The parties agreed that LEGACY NAYA’s purchases will be made in tranches in accordance with the Minimum Interim Pipe Schedule. The Series A Preferred SPA contains customary representations, warranties and covenants of the Company and LEGACY INVO. On January 4, 2024, the Company and LEGACY INVO closed on 100,000 shares of Series A Preferred Stock in the first tranche of this private offering for gross proceeds of $500,000. In addition, the Company and LEGACY INVO agreed that an additional amount of $96,704 comprised of expenses paid by LEGACY NAYA on behalf of LEGACY INVO would result in an additional 19,340 shares issued.
From April 1, 2024, to April 30, 2024, LEGACY NAYA acquired 25,000 shares of LEGACY INVO Series A preferred stock for gross proceeds of $125,000 per the merger agreement. In addition, expenses totaling $84,700 were paid on behalf of LEGACY INVO and added to the investment for which 16,940 additional shares were issued.
Effective as of May 1, 2024, the Company and LEGACY INVO entered into an Amendment (the “SPA Amendment”) to the Series A Preferred SPA. Pursuant to the SPA Amendment, the parties agreed to an updated closing schedule for LEGACY NAYA’s purchases of LEGACY INVO’s Series A preferred stock at a purchase price of $5.00 per share. From May 1, 2024, to June 24, 2024, LEGACY NAYA acquired 140,000 shares of LEGACY INVO Series A preferred stock for gross proceeds of $700,000 and pursuant to the fourth amendment to the Merger Agreement an additional 27,500 shares were purchased for $137,500. As of September 30, 2024, LEGACY NAYA has purchased a total of 328,780 Series A preferred shares of LEGACY INVO at a cost of $1,643,900. The market value of those shares at September 30, 2024 was $778,113 and a reduction in fair value of $865,791 was recorded for the nine months ended September 30, 2024.
Each share of Series A Preferred has a stated value of $5.00, which is convertible into shares of LEGACY INVO common stock at a fixed conversion price equal to $1.50 per share, subject to adjustment. LEGACY INVO may not effect the conversion of any shares of Series A Preferred if, after giving effect to the conversion or issuance, the holder, together with its affiliates, would beneficially own more than 9.99% of the Company’s outstanding common stock. Moreover, LEGACY INVO may not effect the conversion of any shares of Series A Preferred if, after giving effect to the conversion or issuance, the holder, together with its affiliates, would beneficially own more than 19.99% of the Company’s outstanding common stock unless and until LEGACY INVO receives the approval required by the applicable rules and regulations of The Nasdaq Stock Market LLC (or any subsequent trading market). Each share of Series A Preferred stock shall automatically convert into common stock upon the closing of the Merger. The conversion of the Series A Preferred Stock is contingent on the closing of the Merger.
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The Company as holder of Series A Preferred shall be entitled to receive a pro-rata portion, on an as-if converted basis, of any dividends payable on common stock. In the event of any voluntary or involuntary liquidation, dissolution, or winding up, or sale of LEGACY INVO (other than the Merger), the Company as holder of Series A Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to (i) $5.00, multiplied by (ii) the total number of shares of Series A Preferred Stock issued under the Series A Certificate of Designation. Other than those rights provided by law, the holders of Series A Preferred shall not have any voting rights.
Leases
In October and November 2023, the Company entered into leases for its corporate headquarters for a twelve-month term. The leases did not include a renewal or purchase option, and therefore are considered short-term in accordance with ASC 842. The Company elected not to apply the recognition requirements of ASC 842 to short-term leases. Accordingly, the Company instead recognizes lease payments on short-term leases in the period in which the obligation for those payments is incurred. The office lease was terminated in September 2024 and an early termination expense of approximately $31,000 was recorded. Rent expense was approximately $117,000 for the nine months ended September 30, 2024.
Licenses
Pursuant to a License Agreement between LEGACY NAYA and Inserm Transfert SA, dated December 19, 2023 (the “Inserm Agreement”), LEGACY NAYA was granted an exclusive worldwide royalty-bearing license under certain patents/patent applications co-owned by Inserm and Université de Paris (now Université Paris Cité), and a non-exclusive transferable, royalty-bearing license, with the right to sublicense under certain know how owned by Inserm for the development and commercialization of CYT338 (now NY338) in a defined field. The Inserm Agreement can be terminated early either upon the material breach upon one of the parties of the Inserm Agreement, upon either party to the Inserm Agreement being subject to bankruptcy, or upon LEGACY NAYA failing to meet one of the developmental milestones as described in the Inserm Agreement. Unless terminated earlier, the term of the Inserm Agreement will continue until the last to occur of (i) with respect to a given country – the last valid patent claim covering the product in such country expires or is invalidated; (ii) with respect to a given country – the lapse of ten years from the first commercial sale in such country of a product using intellectual property licensed pursuant to the Inserm Agreement (the “Inserm IP”), or (iii) such time when LEGACY NAYA no longer continues to generate revenues from the sale of products based on Inserm IP. Under the Inserm Agreement, LEGACY NAYA is to pay Inserm (a) a sublicense fee of 12% on revenues generated by sub-licensing of Inserm IP; (b) royalties of 2.5% on net sales from the Inserm IP during the term of the Inserm Agreement; and (c) lump sum payments of up to an aggregate of €5.15 million in development and commercial milestones.
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Under a License Agreement between LEGACY NAYA, the University of Rijeka Faculty of Medicine (“Rijeka”), and Yissum (together with Yissum, the “Licensors”) dated December 20, 2023, LEGACY NAYA was granted an exclusive, worldwide manufacturing, marketing, developing royalty bearing license to make commercial use of certain patents and patent applications covering two specific anti¬ NKp46 antibodies denoted hNKp46.09 (09) and hNKp46.12 (12) and know how needed in order to develop, manufacture, market, distribute and sell CYT338 (now NY338) and CYT303 (now NY303) and or incorporating products known as CYT338 (now NY338) or CYT303 (now NY303) in the specified field (the “Yissum License”). The Licensors retain rights to use the licensed technology for their own research and education. LEGACY NAYA may sublicense only after obtaining Licensors’ written approval of the sublicensee’s identity and key terms, with approval not unreasonably withheld or delayed They also have the right to license it to other academic and non-profit research organizations for non-commercial research. The Yissum License expires upon the last to occur of: (i) with respect to a given country – the date of expiration in such country of the last patent licensed under the Yissum License; (ii) with respect to a given country – the date of expiration of any exclusivity on the Product granted by a regulatory or government body in such country; or (iii) the lapse of twenty years from the date of the first sale by LEGACY NAYA of a product incorporating the intellectual property licensed to it under the Yissum License (the “Products”). Under the Yissum License, LEGACY NAYA is to pay Yissum (a) a royalty fee of two percent on net sales of Products; (b) a one-time payment of $1,000,000 upon achieving annual net sales of Products of $100,000,000; (c) a sublicense fee of 10% on revenues generated by LEGACY NAYA from sublicensing Intellectual Property covered by the Yissum License; (d) an exit fee of $1,000,000; and (e) certain additional payments upon reaching various development milestones up to US$2.25 million.
The agreement with CytoLynx Therapeutics (“CytoLynx”) for NY-303 in Greater China was assigned to LEGACY NAYA in the Cytovia Acquisition. Under the CytoLynx agreement, Cytovia granted to CytoLynx the rights for the for the development and manufacturing of NY-303 in Mainland China, Hong Kong, Taiwan and Macau. As compensation. Under the agreement, LEGACY NAYA will be eligible to receive up to $12 million in payments from CytoLynx upon achieving certain developmental milestones, as well as up to $145 million upon CytoLynx reaching certain commercial milestones. Additionally, under the agreement, LEGACY NAYA will receive royalty fees from CytoLynx based on net sales of the licensed products in the licensed territories (Mainland China, Hong Kong, Taiwan and Macau). The term of the agreement is indefinite until terminated by either party according to the terms of the agreement.
Litigation
On October 7, 2024, a former employee that had resigned filed a complaint against the Company alleging that she is entitled to severance and other benefits pursuant to a good reason paragraph in her employment agreement. The Company denies the allegations of wrongdoing in the complaint and intends to vigorously defend the matter. Since this case is in an early stage, the Company is unable to predict the ultimate outcome of the matter and cannot reasonably estimate the potential loss or range of loss the Company may incur.
LEGACY NAYA is not currently subject to any other material legal proceedings; however, it could be subject to legal proceedings and claims from time to time in the ordinary course of its business, or legal proceedings it considered immaterial may in the future become material. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and can divert management resources.
Stock Payable
During the first quarter of 2024, the Company entered into a public relations consulting service agreement that included $60,000 worth of common stock to be settled in cash or stock on a date that is mutually agreed upon by both parties. This amount is included in Other Accrued Liabilities.
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| 9. | Related Party Transactions |
As of December 31, 2023, the Company had two outstanding loans with Cytovia: $6,000,000 note related to the purchase of two assets from Cytovia and a short-term loan of $285,500. As of September 30, 2024, there was an outstanding loan of $290,000. See Notes 4, 5 and 6.
| 10. | Subsequent events |
SAFE Notes
On October 10, 2024, SAFE notes totaling $38,000 were converted into 12,667 shares of the Company’s common stock.
Amended and Restated Merger Agreement
On October 11, 2024 (the “Effective Time”), LEGACY INVO, Merger Sub, and LEGACY NAYA, entered into the Merger Agreement and consummated the transactions contemplated thereby. Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into LEGACY NAYA, with LEGACY NAYA continuing as the surviving corporation and a wholly owned subsidiary of LEGACY INVO. References hereafter to the Company refer to the merged entity.
At the Effective Time and as a result of the consummation of the Merger:
| ● | Each share of Class A common stock, par value $0.000001 per share, and Class B common stock, par value $0.000001 per share, of LEGACY NAYA (“LEGACY NAYA common stock”) outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by LEGACY NAYA as treasury stock or owned by the Company or Merger Sub, automatically converted into the right to receive 118,148 shares of the Company’s common stock and 30,375 shares of the Company’s newly-designated Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred”). The Series C-1 Preferred is not redeemable, has no voting rights, and may not be converted into shares of the Company’s Common Stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred. If the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred, such Series C-1 Preferred will automatically convert into approximately 29,515,315 shares of the Company’s common stock, subject to adjustment if, as a result of such conversion if, after giving effect to the conversion or issuance, any single holder, together with its affiliates, would beneficially own in excess of 19.99% of the Company’s outstanding common stock. A description of the rights, preferences, and privileges of the Series C-1 Preferred are set forth in Item 5.03 below. | |
| ● | Certain outstanding debt obligations of LEGACY NAYA, including a portion of an amended and restated senior secured convertible debenture issued to Five Narrow Lane LP (“FNL”), with a combined principal balance of $8,575,833 converted into the right to receive 669,508 shares of the Company’s common stock and 8,576 shares of the Company’s newly-designated Series C-2 Convertible Preferred Stock (the “Series C-2 Preferred”). LEGACY NAYA and FNL have agreed that LEGACY NAYA shall issue to FNL a pre-funded common stock purchase warrant to purchase up to 459,508 shares of the Company’s common stock in leiu of 459,508 shares of the aforementioned common stock. The Series C-2 Preferred is only redeemable upon a “Bankruptcy Triggering Event” or a “Change of Control” that occurs 210 days after the closing date of the Merger. The Series C-2 Preferred may not be converted into shares of the Company’s Common Stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred. If the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred, such Series C-2 Preferred will be convertible at the option of the holders into approximately 12,441,607 shares of the Company’s common stock, subject to limitations on beneficial ownership by the holders thereof. A description of the rights, preferences, and privileges of the Series C-2 Preferred are set forth below. |
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| ● | The remaining balance of the amended and restated senior secured convertible debenture issued to FNL in the amount of $3,934,146 was exchanged for a 7.0% Senior Secured Convertible Debenture in the principal balance of $3,934,146 due December 11, 2025 (the “Debenture”). A description of the rights, preferences, and privileges of the Debenture are set forth below. | |
| ● | The accredited investor note for $500,000 was converted to 500 Series C-2 Convertible Preferred shares. See Note 6. | |
| ● | LEGACY NAYA has been renamed to “NAYA Therapeutics Inc.” |
In addition, LEGACY NAYA stock options shall be converted into Company options to acquire a number of shares of the Company’s common stock equal to the number of shares of LEGACY NAYA common stock subject to such LEGACY NAYA options multiplied by 8.9108 (the “Exchange Ratio”) (rounded up to the nearest whole share) at an exercise price per share of such LEGACY NAYA stock option divided by the Exchange Ratio, and LEGACY NAYA restricted stock units shall be converted into Company restricted stock units representing the right to receive a number of shares of the Company’s common stock equal to the number of shares of LEGACY NAYA common stock subject to such LEGACY NAYA restricted stock unit multiplied by the Exchange Ratio. However, such options may not be exercised for shares of the Company’s common stock and such restricted stock units may not be settled for shares of the Company’s common stock unless and until the Company’s stockholders approve the issuance of common stock upon exercise of such options and settlement of such restricted stock units.
In connection with the Merger, Dr. Daniel Teper, LEGACY NAYA’s current Chairman and Chief Executive Officer, was appointed President of the Company, and Dr. Teper will remain as LEGACY NAYA’s Chief Executive Officer. The combined company will be led by LEGACY INVO Chief Executive Officer Steven Shum, LEGACY INVO Chief Financial Officer Andrea Goren, and Dr. Teper. In addition, Dr. Teper and Ms. Lyn Falconio have been appointed to the Company’s board of directors.
Pursuant to the Merger Agreement, the Company is required to hold a meeting of its stockholders to, among other things, (i) ratify the Merger Agreement and the transactions contemplated thereby, including the Merger, (ii) approve the increase in the amount of authorized shares under the Company’s Second Amended and Restated 2019 Stock Incentive Plan, (iii) approve the issuance of the Company’s common stock issuable upon conversion of the Series C-1 Preferred and Series C-2 Preferred, and (iv) approve an amendment to the Company’s articles of incorporation to (1) increase the number of shares of the Company’s authorized common stock to 100,000,000 shares, and (2) effectuate a reverse stock split of the Company’s common stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20, as determined by the Company’s board of directors in its discretion. The Company also agreed to take all action necessary to hold the aforementioned stockholder meeting as soon as reasonably practicable.
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Pursuant to both the Merger Agreement and the Assignment Agreement described below, the Company has agreed to file a registration statement with the SEC to register for resale the shares of the Company’s common stock issued pursuant to the Merger and the shares of common stock issuable upon exercise or conversion of the Series C-1 Preferred, the Series C-2 Preferred, and the Debenture, as applicable, as soon as practicable but in no event later than 30 days after the Closing Date.
7.0% Senior Secured Convertible Debenture
In connection with the Merger, on October 11, 2024, the Company issued the Debenture to FNL in an exchange of an outstanding note of LEGACY NAYA held by FNL. The Debenture carries an interest rate of seven percent (7%) per annum, payable on the first business day of each calendar month commencing November 1, 2024. The maturity date of the Debenture is December 11, 2025 (the “Maturity Date”), at which point the outstanding principal amount, together with any accrued and unpaid interest and other fees, shall be due and payable to the holder of the Debenture.
Conversion. At any time after the Company’s stockholders approve the issuance of any Company common stock upon conversion of the Debenture, the holder of the Debenture will be entitled to convert any portion of the outstanding and unpaid principal amount and accrued interest into shares of Company common stock at a conversion price of $0.93055 per share, subject to adjustment as described therein. The Debenture may not be converted and shares of Company common stock may not be issued upon conversion of the Debenture if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding common stock of the Company.
Prepayment. The Company may not prepay the Debenture without the prior written consent of FNL
Monthly Redemption. Commencing March 14, 2025 and on the 14th of each month thereafter until the Maturity Date, the Company shall redeem $437,127.24, plus accrued but unpaid interest and other fees, of the principal amount of the Debenture.
Mandatory Redemption. While any portion of the Debenture is outstanding, if the Company receives gross proceeds of more than $3,000,000 from any equity or debt financings (other than a public offering as described herein), the Company shall, at the option of the holder, apply one-third (1/3) of such gross proceeds to the redemption of the principal amount of the Debenture, except that if such equity or debt financing is a public offering of the Company’s securities pursuant to a registration statement on Form S-1, the Company shall, at the option of the holder, apply one hundred percent (100%) of such gross proceeds, not to exceed $500,000, to the redemption of the principal amount of the Debenture. The Company has also agreed that, if it received gross proceeds of more than $2,000,000 from any equity or debt financing, it shall, at the option of the holder, apply $500,000 of such gross proceeds to the redemption of the principal amount of the Debenture.
The Debenture contains events representations, warranties, covenants, and events of default that are customary for similar transactions. Upon an event of default, the Debenture becomes immediately due and payable, and the Borrower is subject to a default rate of interest of 15% per annum and a default sum as stipulated.
Joinder Agreement
In connection with the Merger, the Company entered in a joinder agreement (the “Joinder Agreement”) with FNL dated as of October 11, 2024 to a certain securities purchase agreement dated as of January 3, 2024 by and between LEGACY NAYA and FNL (the “FNL SPA”) pursuant to which the Company agreed to become a party to the FNL SPA.
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Assignment and Assumption Agreement
In connection with the Merger, on October 11, 2024, the Company entered in an assignment and assumption agreement (the “Assignment Agreement”), pursuant to which the Company agreed to assume the rights, duties, and liabilities of LEGACY NAYA under a certain registration rights agreement dated as of September 12, 2024 by and between LEGACY NAYA and FNL, pursuant to which the Company agreed to register FNL’s resale of shares of Company common stock issuable upon conversion of the Debenture and the Series C-2 Preferred as well as certain commitment shares issued to FNL in connection with the transactions.
Second Amendment to Revenue Loan and Security Agreement
On October 11, 2024, the Company entered into a second amendment to Revenue Loan and Security Agreement (the “Second Amendment”) with Decathlon Alpha V, L.P. (“Decathlon”), Steven Shum, and certain subsidiaries of the Company (the “Guarantors”), pursuant to which Decathlon consented to the Merger and LEGACY NAYA becoming a subsidiary of the Company. Pursuant to the Second Amendment, LEGACY NAYA joined the Revenue Loan and Security Agreement as a Guarantor. The Company agreed to pay down its loan by at least $500,000 and increase its monthly payments by up to $30,000 if the Company closes a private offering of its securities. The Company also agreed to retain an investment banker to pursue a financing or a sale if it fails to meet certain liquidity covenants. The Company also agreed to enter into an intercreditor agreement with Decathlon and Five Narrow Lane LP within 5 business days of the Merger.
Name Change and Application for Symbol Change
On October 15, 2024, LEGACY INVO changed its corporate name to NAYA Biosciences, Inc., pursuant to an Amendment to Articles of Incorporation filed with the Nevada Secretary of State on October 15, 2024 (the “Name Change”). Pursuant to Nevada law, a stockholder vote was not necessary to effectuate the Name Change.
LEGACY INVO also announced that it intends for its common stock to cease trading under the ticker symbol “INVO” and begin trading under its new ticker symbol, “NAYA”, on the Nasdaq Capital Market, as promptly as possible.
Series C-1 Preferred
The Company’s Articles of Incorporation, as amended, authorizes the Company to issue 100,000,000 shares of preferred stock, $0.0001 par value per share, issuable from time to time in or more series (“Preferred Stock”). On October 14, 2024, the Company filed with the Nevada Secretary of State a Certificate of Designation of Series C-1 Convertible Preferred Stock (the “Series C-1 Certificate of Designation”) which sets forth the rights, preferences, and privileges of the Series C-1 Preferred. Thirty thousand three hundred seventy five (30,375) shares of Series C-1 Preferred with a stated value of $1,000.00 per share were authorized under the Series C-1 Certificate of Designation.
Each share of Series C-1 Preferred has a stated value of $1,000.00, which is convertible into shares of the Company’s common stock (the “Common Stock”) at a conversion price equal to $1.02913 per share, subject to adjustment. The Series C-1 Preferred may not be converted into shares of the Company’s Common Stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred. Each share of Series C-1 Preferred shall automatically convert into the Company’s common stock if the Company’s stockholders approve the issuance, except that the Company may not effect such conversion if, after giving effect to the conversion or issuance, the holder, together with its affiliates, would beneficially own in excess of 19.99% of the Company’s outstanding common stock.
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Commencing on the ninety-first (91st) day after the first issuance of any Series C-1 Preferred, the holders of Series C-1 Preferred shall be entitled to receive dividends on the stated value at the rate of two percent (2%) per annum, payable in shares of the Company’s common stock at the conversion price. Such dividends shall continue to accrue until paid. Such dividends will not be paid in shares of the Company’s common stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Convertible Preferred Stock. The holders of Series C-1 Preferred shall also be entitled to receive a pro-rata portion, on an as-if convertible basis, of any dividends payable on Common Stock.
The Series C-1 Preferred ranks senior to the Company’s common stock and junior to the Series C-2 Preferred. Subject to the rights of the holders of any senior securities, in the event of any voluntary or involuntary liquidation, dissolution, or winding up, or sale of the Company, each holder of Series C-1 Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to the amount as would be paid on the Company’s common stock issuable upon conversion of the Series C-1 Preferred, determined on an as-converted basis, without regard to any beneficial ownership limitation.
Other than those rights provided by law, the Series C-1 Preferred has no voting rights. The Series C-1 Preferred is not redeemable.
Series C-2 Preferred Stock
On October 14, 2024, the Company filed with the Nevada Secretary of State a Certificate of Designation of Series C-2 Convertible Preferred Stock (the “Series C-2 Certificate of Designation”) which sets forth the rights, preferences, and privileges of the Series C-2 Preferred. Eight thousand five hundred seventy six (8,576) shares of Series C-2 Preferred with a stated value of $1,000.00 per share were authorized under the Series C-2 Certificate of Designation.
Each share of Series C-2 Preferred has a stated value of $1,000.00, which, along with any additional amounts accrued thereon pursuant to the terms of the Series C-2 Certificate of Designation (collectively, the “Conversion Amount”) is convertible into shares of the Company’s common stock (the “Common Stock”) at a conversion price equal to $0.6893 per share, subject to adjustment. The Series C-2 Preferred may not be converted into shares of the Company’s Common Stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-2 Convertible Preferred Stock. Each share of Series C-2 Preferred shall become convertible into the Company’s common stock at the option of the holder of such Series C-2 Preferred shares if the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred, except that the Company may not effect such conversion if, after giving effect to the conversion or issuance, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the Company’s outstanding common stock.
Commencing on the ninety-first (91st) day after the first issuance of any Series C-2 Preferred, the holders of Series C-2 Preferred shall be entitled to receive dividends on the stated value at the rate of ten percent (10%) per annum, payable in shares of the Company’s common stock, with each payment of a dividend payable in shares of the Company’s common stock at a conversion price of eighty-five percent (85%) of the average of the volume weighted average price of the Company’s common stock for the five (5) trading days before the applicable dividend date. Such dividends shall continue to accrue until paid. Such dividends will not be paid in shares of the Company’s common stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred. The holders of Series C-2 Preferred shall also be entitled to receive a pro-rata portion, on an as-if convertible basis, of any dividends payable on Common Stock.
The Series C-2 Preferred ranks senior to the Company’s common stock and to the Series C-1 Preferred. Subject to the rights of the holders of any senior securities, in the event of any voluntary or involuntary liquidation, dissolution, or winding up, or sale of the Company, each holder of Series C-2 Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to the greater of (a) 125% of the Conversion Amount with respect to such shares, and (b) the amount as would be paid on the Company’s common stock issuable upon conversion of the Series C-2 Preferred, determined on an as-converted basis, without regard to any beneficial ownership limitation.
Other than those rights provided by law, the Series C-2 Preferred has no voting rights. The Series C-2 Preferred is only redeemable upon a “Bankruptcy Triggering Event” or a “Change of Control” that occurs 210 days after the closing date of the Merger.
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Exhibit 99.4
NAYA BIOSCIENCES, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Legacy NAYA Merger
On October 11, 2024 (the “Effective Time”), the Company, Merger Sub, and Legacy NAYA entered into an Amended and Restated Agreement and Plan of Merger (the “A&R Merger Agreement”) and consummated and the transactions contemplated thereby. Upon the terms and subject to the conditions set forth in the A&R Merger Agreement, Merger Sub merged with and into Legacy NAYA, with Legacy NAYA continuing as the surviving corporation and a wholly owned subsidiary of the Company.
At the Effective Time and as a result of the consummation of the Merger:
● Each share of Class A common stock, par value $0.000001 per share, and Class B common stock, par value $0.000001 per share, of Legacy NAYA (“Legacy NAYA common stock”) outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by Legacy NAYA as treasury stock or owned by the Company or Merger Sub, automatically converted into the right to receive 118,148 shares of the Company’s common stock and 30,375 shares of the Company’s newly-designated Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred”). The Company and FNL have agreed that the Company NAYA shall issue to FNL a pre-funded common stock purchase warrant to purchase up to 459,508 shares of the Company’s common stock in leiu of 459,508 shares of the aforementioned common stock. The Series C-1 Preferred is not redeemable, has no voting rights, and may not be converted into shares of the Company’s Common Stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred. If the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred, such Series C-1 Preferred will automatically convert into approximately 29,515,315 shares of the Company’s common stock, subject to adjustment if, as a result of such conversion if, after giving effect to the conversion or issuance, any single holder, together with its affiliates, would beneficially own in excess of 19.99% of the Company’s outstanding common stock. A description of the rights, preferences, and privileges of the Series C-1 Preferred are set forth in Item 5.03 below.
● Certain outstanding debt obligations of Legacy NAYA, including a portion of an amended and restated senior secured convertible debenture issued to Five Narrow Lane LP (“FNL”), with a combined principal balance of $8,575,833 converted into the right to receive 669,508 shares of the Company’s common stock and 8,576 shares of the Company’s newly-designated Series C-2 Convertible Preferred Stock (the “Series C-2 Preferred”). The Series C-2 Preferred is only redeemable upon a “Bankruptcy Triggering Event” or a “Change of Control” that occurs 210 days after the closing date of the Merger. The Series C-2 Preferred may not be converted into shares of the Company’s Common Stock unless and until the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred. If the Company’s stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred, such Series C-2 Preferred will be convertible at the option of the holders into approximately 12,441,607 shares of the Company’s common stock, subject to limitations on beneficial ownership by the holders thereof.
● The remaining balance of the amended and restated senior secured convertible debenture issued to FNL in the amount of $3,934,146 was exchanged for a 7.0% Senior Secured Convertible Debenture in the principal balance of $3,934,146 due December 11, 2025 (the “Debenture”). A description of the rights, preferences, and privileges of the Debenture are set forth below.
● Legacy NAYA has been renamed “NAYA Therapeutics Inc.”
In addition, Legacy NAYA stock options shall be converted into Company options to acquire a number of shares of the Company’s common stock equal to the number of shares of Legacy NAYA common stock subject to such Legacy NAYA options multiplied by 8.9108 (the “Exchange Ratio”) (rounded up to the nearest whole share) at an exercise price per share of such Legacy NAYA stock option divided by the Exchange Ratio, and Legacy NAYA restricted stock units shall be converted into Company restricted stock units representing the right to receive a number of shares of the Company’s common stock equal to the number of shares of Legacy NAYA common stock subject to such Legacy NAYA restricted stock unit multiplied by the Exchange Ratio. However, such options may not be exercised for shares of the Company’s common stock and such restricted stock units may not be settled for shares of the Company’s common stock unless and until the Company’s stockholders approve the issuance of common stock upon exercise of such options and settlement of such restricted stock units.
Pursuant to the A&R Merger Agreement, the Company is required to hold a meeting of its stockholders to, among other things, (i) ratify the A&R Merger Agreement and the transactions contemplated thereby, including the Merger, (ii) approve the increase in the amount of authorized shares under the Company’s Second Amended and Restated 2019 Stock Incentive Plan, (iii) approve the issuance of the Company’s common stock issuable upon conversion of the Series C-1 Preferred and Series C-2 Preferred, and (iv) approve an amendment to the Company’s articles of incorporation to (1) increase the number of shares of the Company’s authorized common stock to 100,000,000 shares, and (2) effectuate a reverse stock split of the Company’s common stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20, as determined by the Company’s board of directors in its discretion. The Company also agreed to take all action necessary to hold the aforementioned stockholder meeting as soon as reasonably practicable.
Pursuant to both the A&R Merger Agreement and the Assignment Agreement described below, the Company has agreed to file a registration statement with the SEC to register for resale the shares of the Company’s common stock issued pursuant to the Merger and the shares of common stock issuable upon exercise or conversion of the Series C-1 Preferred, the Series C-2 Preferred, and the Debenture, as applicable, as soon as practicable but in no event later than 30 days after the Closing Date.
7.0% Senior Secured Convertible Debenture
In connection with the Merger, on October 11, 2024, the Company issued the Debenture to FNL in an exchange of an outstanding note of Legacy NAYA held by FNL. The Debenture carries an interest rate of seven percent (7%) per annum, payable on the first business day of each calendar month commencing November 1, 2024. The maturity date of the Debenture is December 11, 2025 (the “Maturity Date”), at which point the outstanding principal amount, together with any accrued and unpaid interest and other fees, shall be due and payable to the holder of the Debenture.
Conversion. At any time after the Company’s stockholders approve the issuance of any Company common stock upon conversion of the Debenture, the holder of the Debenture will be entitled to convert any portion of the outstanding and unpaid principal amount and accrued interest into shares of Company common stock at a conversion price of $0.93055 per share, subject to adjustment as described therein. The Debenture may not be converted and shares of Company common stock may not be issued upon conversion of the Debenture if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of the outstanding common stock of the Company.
Prepayment. The Company may not prepay the Debenture without the prior written consent of FNL
Monthly Redemption. Commencing March 14, 2025 and on the 14th of each month thereafter until the Maturity Date, the Company shall redeem $437,127.24, plus accrued but unpaid interest and other fees, of the principal amount of the Debenture.
Mandatory Redemption. While any portion of the Debenture is outstanding, if the Company receives gross proceeds of more than $3,000,000 from any equity or debt financings (other than a public offering as described herein), the Company shall, at the option of the holder, apply one-third (1/3) of such gross proceeds to the redemption of the principal amount of the Debenture, except that if such equity or debt financing is a public offering of the Company’s securities pursuant to a registration statement on Form S-1, the Company shall, at the option of the holder, apply one hundred percent (100%) of such gross proceeds, not to exceed $500,000, to the redemption of the principal amount of the Debenture. The Company has also agreed that, if it received gross proceeds of more than $2,000,000 from any equity or debt financing, it shall, at the option of the holder, apply $500,000 of such gross proceeds to the redemption of the principal amount of the Debenture.
The Debenture contains events representations, warranties, covenants, and events of default that are customary for similar transactions. Upon an event of default, the Debenture becomes immediately due and payable, and the Borrower is subject to a default rate of interest of 15% per annum and a default sum as stipulated.
Wisconsin Fertility Institute Acquisition
On August 10, 2023, the Company, through Wood Violet Fertility LLC, a Delaware limited liability company (“WVF”) and wholly owned subsidiary of INVO Centers, LLC, consummated its acquisition of Wisconsin Fertility Institute (“WFI”) for a combined purchase price of $10 million, of which $2.5 million was paid on the closing date (net cash paid was $2,150,000 after a $350,000 holdback) plus assumption of the inter-company loan owed by WFRSA (as defined below) in the amount of $528,756. The remaining three installments of $2.5 million each will be paid on the subsequent three anniversaries of closing. The sellers have the option to take all or a portion of the final three installments in shares of INVO common stock valued at $125.00, $181.80, and $285.80, for the second, third, and final installments, respectively.
WFI is comprised of (a) a medical practice, Wisconsin Fertility and Reproductive Surgery Associates, S.C., a Wisconsin professional service corporation d/b/a Wisconsin Fertility Institute (“WFRSA”), and (b) a laboratory services company, Fertility Labs of Wisconsin, LLC, a Wisconsin limited liability company (“FLOW”). WFRSA owns, operates and manages WFI’s fertility practice that provides direct treatment to patients focused on fertility, gynecology and obstetrics care and surgical procedures, and employs physicians and other healthcare providers to deliver such services and procedures. FLOW provides WFRSA with related laboratory services.
The Company purchased the non-medical assets of WFRSA and one hundred percent of FLOW’s membership interests. WVF and WFRSA entered into a management services agreement pursuant to which WFRSA outsourced all its non-medical activities to WVF.
Pro Forma Financial Statements
The following unaudited pro forma financial statements are based on the Company’s historical consolidated financial statements including the historical combined financial statements of WFI, and the historical financial statements of Legacy NAYA, adjusted to give effect to the WFI Acquisition and the Legacy NAYA Merger and related financing transactions. The unaudited pro forma statements of operations for the nine months ended September 30, 2024 and the year ended December 31, 2023 give effect to these transactions as if they had occurred on January 1, 2023. The unaudited pro forma balance sheet as of September 30, 2024 gives effect to these transactions as if they had occurred on September 30, 2024.
The unaudited pro forma balance sheet and unaudited statement of operations are presented for informational purposes only and do not purport to be indicative of the combined financial condition that would have resulted if the acquisition would have occurred on January 1, 2023.
The unaudited pro forma financial statements should be read together with the Company’s historical financial statements, which are included in its latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, WFI’s historical financial statements which are included on the and Legacy NAYA’s historical financial statements, which are included in this Form 8-K/A.
NAYA BIOSCIENCES, INC.
PRO FORMA BALANCE SHEET
(UNAUDITED)
AS OF SEPTEMBER 30, 2024
NAYA (Legacy INVO) September 30, 2024 | Legacy NAYA September 30, 2024 | Pro Forma Adjustments | Pro Forma Balances | |||||||||||||
| ASSETS | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash | $ | 471,591 | $ | 756,461 | $ | 500,000 | (a) | $ | 1,728,052 | |||||||
| Accounts receivable, net | 257,051 | - | - | 257,051 | ||||||||||||
| Inventory | 241,539 | - | - | 241,539 | ||||||||||||
| Investment in Legacy INVO | - | 778,113 | (778,113 | )(b) | - | |||||||||||
| Prepaid expenses and other current assets | 987,300 | 33,247 | - | 1,020,547 | ||||||||||||
| Total current assets | 1,957,481 | 1,567,821 | (278,113 | ) | 3,247,189 | |||||||||||
| Property and equipment, net | 415,245 | - | - | 415,245 | ||||||||||||
| Lease right of use | 2,343,645 | - | - | 2,343,645 | ||||||||||||
| Intangible assets, net | 3,480,306 | - | - | 3,480,306 | ||||||||||||
| Goodwill | 5,878,986 | - | 35,886,383 | (c) | 41,765,369 | |||||||||||
| Equity investments | 771,826 | - | - | 771,826 | ||||||||||||
| Investment in Legacy NAYA | 2,172,000 | - | (2,172,000 | )(b) | - | |||||||||||
| Total assets | $ | 17,019,489 | $ | 1,567,821 | $ | 33,436,270 | $ | 52,023,580 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Accounts payable and accrued liabilities | $ | 2,655,106 | $ | 2,014,436 | $ | - | 4,669,542 | |||||||||
| Accrued compensation | 640,038 | 1,213,242 | - | 1,853,280 | ||||||||||||
| Notes payable – current portion, net | 837,183 | 12,561,074 | (8,575,833 | )(d) | ||||||||||||
| 310,000 | (a) | 5,132,424 | ||||||||||||||
| Notes payable – related parties, net | 880,000 | 290,000 | - | 1,170,000 | ||||||||||||
| Deferred revenue | 562,402 | - | - | 562,402 | ||||||||||||
| Lease liability, current portion | 230,729 | - | - | 230,729 | ||||||||||||
| Additional payments for acquisition, current portion | 2,500,000 | - | - | 2,500,000 | ||||||||||||
| Other current liabilities | 350,000 | - | 350,000 | |||||||||||||
| Total current liabilities | 8,655,458 | 16,078,752 | (8,265,833 | ) | 16,468,377 | |||||||||||
| Notes payable, net of current portion | 1,134,418 | - | - | 1,134,418 | ||||||||||||
| Lease liability, net of current portion | 2,252,929 | - | - | 2,252,929 | ||||||||||||
| Additional payments for acquisition, net of current portion | 5,000,000 | - | - | 5,000,000 | ||||||||||||
| Total liabilities | 17,042,805 | 16,078,752 | (8,265,833 | ) | 24,855,724 | |||||||||||
| Mezzanine equity | ||||||||||||||||
| NAYA Series C-2 Preferred Stock, $1000.00 par value | - | - | 8,576,000 | (d) | 8,576,000 | |||||||||||
| Stockholders’ equity | ||||||||||||||||
| NAYA Series A Preferred Stock, $5.00 par value | 1,643,904 | - | (1,643,904 | )(b) | - | |||||||||||
| NAYA Series B Preferred Stock, $5.00 par value | 6,000,000 | - | (6,000,000 | )(b) | - | |||||||||||
| NAYA Series C-1 Preferred Stock, $1000.00 par value | - | - | 30,375,000 | (e) | 30,375,000 | |||||||||||
| NAYA Common Stock, $.0001 par value | 391 | - | 33 | (e) | ||||||||||||
| 19 | (a) | 443 | ||||||||||||||
| Legacy NAYA Series A Preferred stock, par value $0.000001 per share | - | - | - | - | ||||||||||||
| Legacy NAYA Class A Common stock, par value $0.000001 per share | - | 1 | (1 | )(e) | - | |||||||||||
| Legacy NAYA Class B Common stock, par value $0.000001 | - | 1 | (1 | )(e) | - | |||||||||||
| Legacy NAYA Preferred Stock Payable | 750,000 | (750,000 | )(e) | - | ||||||||||||
| Additional paid-in capital | 55,873,514 | 16,052,218 | 189,982 | (a) | ||||||||||||
| 5,471,904 | (b) | |||||||||||||||
| (25,830,080 | )(e) | 51,757,539 | ||||||||||||||
| Accumulated deficit | (63,541,125 | ) | (31,313,151 | ) | 31,313,151 | (e) | (63,541,125 | ) | ||||||||
| Total stockholders’ equity | (23,316 | ) | (14,510,931 | ) | 33,126,103 | 18,591,856 | ||||||||||
| Total liabilities and stockholders’ equity | $ | 17,019,489 | $ | 1,567,821 | $ | 33,436,270 | 52,023,580 | |||||||||
NAYA BIOSCIENCES, INC.
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024
NAYA (Legacy INVO) September 30, 2024 | Legacy NAYA September 30, 2024 | Pro Forma Adjustments | Pro Forma September 30, 2024 | |||||||||||||
| Revenue: | ||||||||||||||||
| Product revenue | $ | 1,418,011 | $ | - | $ | - | $ | 1,418,011 | ||||||||
| Clinic revenue | 15,140 | - | - | 15,140 | ||||||||||||
| Total revenue | 1,433,151 | - | - | 1,433,151 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenue | 988,465 | - | - | 988,465 | ||||||||||||
| Selling, general and administrative | 1,514,593 | 2,976,074 | - | 4,490,667 | ||||||||||||
| Research and development | - | 176,104 | - | 176,104 | ||||||||||||
| Depreciation and amortization | 230,495 | - | - | 230,495 | ||||||||||||
| Total operating expenses | 2,733,553 | 3,152,178 | - | 5,885,731 | ||||||||||||
| Loss from operations | (1,300,402 | ) | (3,152,178 | ) | - | (4,452,580 | ) | |||||||||
| Other income (expense): | ||||||||||||||||
| Gain (loss) from equity method joint ventures | (27,372 | ) | - | - | (27,372 | ) | ||||||||||
| Loss on debt extinguishment | - | (3,750,000 | ) | - | (3,750,000 | ) | ||||||||||
| Other income | - | 600,00 | - | 600,00 | ||||||||||||
| Change in fair value of investment | - | (865,791 | ) | - | (865,791 | ) | ||||||||||
| Interest expense | (273,629 | ) | (5,126,323 | ) | - | (135 | ) | |||||||||
| Total other expense, net | (301,001 | ) | (9,142,114 | ) | - | (9,443,115 | ) | |||||||||
| Net loss before income taxes | (1,601,403 | ) | (12,294,292 | ) | - | (13,895,695 | ) | |||||||||
| Income taxes | 29,259 | - | - | 29,259 | ||||||||||||
| Net loss | $ | (1,630,662 | ) | $ | (12,294,292 | ) | $ | - | $ | (13,924,954 | ) | |||||
| Net loss per common share | ||||||||||||||||
| Basic | (0.42 | ) | (4.33 | ) | - | (2.98 | )(f) | |||||||||
| Diluted | (0.42 | ) | (4.33 | ) | - | (2.98 | )(f) | |||||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | 3,885,985 | 2,841,359 | - | 4,673,641 | (f) | |||||||||||
| Diluted | 3,885,985 | 2,841,359 | - | 4,673,641 | (f) | |||||||||||
NAYA BIOSCIENCES, INC.
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2023
NAYA (Legacy INVO) Dec 31, 2023 | WFI For the period January 1, 2023 thru August 9, 2023 | Pro Forma Adjustments | Pro Forma as Adjusted Dec 31, 2023 | Legacy NAYA Dec 31, 2023 | Pro Forma Adjustments | Pro Forma Combined Dec 31, 2023 | ||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||
| Clinic revenue | $ | 2,862,574 | $ | 3,207,596 | $ | - | $ | 6,070,170 | $ | - | $ | - | $ | 6,070,170 | ||||||||||||||
| Product revenue | 158,001 | - | - | 158,001 | - | - | 158,001 | |||||||||||||||||||||
| Total revenue | 3,020,575 | 3,207,596 | - | 6,228,171 | - | - | 6,228,171 | |||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||
| Cost of revenue | 1,934,437 | 1,558,041 | - | 3,492,478 | - | - | 3,492,478 | |||||||||||||||||||||
| Selling, general and administrative | 7,486,454 | 726,763 | - | 8,213,217 | 2,159,626 | - | 10,372,843 | |||||||||||||||||||||
| Research and development | 165,945 | - | - | 165,945 | 975,148 | - | 1,141,093 | |||||||||||||||||||||
| Depreciation and amortization | 200,894 | 10,299 | - | 211,193 | - | 211,193 | ||||||||||||||||||||||
| Total operating expenses | 9,787,730 | 2,295,103 | - | 12,082,833 | 3,134,774 | - | 15,217,607 | |||||||||||||||||||||
| Income (loss) from operations | (6,767,155 | ) | 912,493 | - | (5,854,662 | ) | (3,134,774 | ) | - | (8,989,436 | ) | |||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||||
| Loss from equity method investment | (60,270 | ) | - | - | (60,270 | ) | - | - | (60,270 | ) | ||||||||||||||||||
| Impairment from equity method joint venture | (89,794 | ) | (89,794 | ) | (89,794 | ) | ||||||||||||||||||||||
| Loss from debt extinguishment | (163,278 | ) | (163,278 | ) | (163,278 | ) | ||||||||||||||||||||||
| Interest expense - related party | - | - | - | - | (144,000 | ) | - | (144,000 | ) | |||||||||||||||||||
| Interest expense | (925,909 | ) | (47 | ) | - | (925,956 | ) | - | - | (925,956 | ) | |||||||||||||||||
| Foreign currency exchange loss | (420 | ) | - | - | (420 | ) | - | - | (420 | ) | ||||||||||||||||||
| Total other income (expense ) | (1,239,671 | ) | (47 | ) | - | (1,239,718 | ) | (144,000 | ) | - | (1,383,718 | ) | ||||||||||||||||
| Income (loss) before income taxes | (8,006,826 | ) | 912,446 | - | (7,094,380 | ) | (3,278,774 | ) | - | (10,373,154 | ) | |||||||||||||||||
| Income taxes | 27,786 | 1,046 | - | 28,832 | - | - | 28,832 | |||||||||||||||||||||
| Net income (loss) | $ | (8,034,612 | ) | $ | 911,400 | $ | - | $ | (7,123,212 | ) | $ | (3,278,774 | ) | $ | - | $ | (10,401,986 | ) | ||||||||||
| Net loss per common share: | ||||||||||||||||||||||||||||
| Basic | $ | (5.13 | ) | $ | (4.55 | ) | (1.28 | ) | $ | (4.42 | )(f) | |||||||||||||||||
| Diluted | $ | (5.13 | ) | $ | (4.55 | ) | (1.28 | ) | $ | (4.42 | )(f) | |||||||||||||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||||||||||||||
| Basic | 1,565,951 | 1,565,951 | 2,563,642 | 2,353,607 | (f) | |||||||||||||||||||||||
| Diluted | 1,565,951 | 1,565,951 | 2,563,642 | 2,353,607 | (f) | |||||||||||||||||||||||
NAYA BIOSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 – Basis of presentation
The Legacy NAYA Merger is accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. As the acquirer for accounting purposes, the Company has estimated the fair value of Legacy NAYA’s assets acquired and liabilities assumed and conformed the accounting policies of Legacy NAYA to its own policies.
Note 2 – Calculation of purchase consideration and preliminary purchase price allocation
The following table summarizes the fair value of purchase consideration that was transferred on the Closing Date:
| Value of 328,148 shares of NAYA common stock issued | $ | 223,961 | ||
| Value of 459,508 prefunded warrants of NAYA issued | 313,614 | |||
| Value of 30,375 shares of NAYA series C-1 preferred stock issued | 20,144,202 | |||
| Value of 8,576 shares NAYA series C-2 preferred stock issued | 8,491,395 | |||
| Total purchase consideration | $ | 29,173,172 |
The value of the common stock and prefunded warrants is based on the closing price of NAYA common stock as of October 10, 2024. The value of the shares of preferred stock is based on the number of common shares on an as converted basis and the closing price of NAYA common stock as of October 10, 2024.
The Company has performed a preliminary valuation analysis of the fair market value of Legacy NAYA’s assets and liabilities. The following table summarizes the preliminary allocation of the purchase price as of September 30, 2024:
| Cash | $ | 756,461 | ||
| Prepaid expenses and other current assets | 33,247 | |||
| Goodwill | 35,886,383 | |||
| Accounts payable and accrued expenses | (3,227,678 | ) | ||
| Notes payable | (4,275,241 | ) | ||
| Total consideration | $ | 29,173,172 |
This preliminary purchase price allocation has been used to prepare pro forma adjustments in the unaudited pro forma balance sheet and income statements. The final purchase price allocation will be determined when NAYA has completed all detailed valuations and necessary calculations, which are expected to be finalized within the next twelve months. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (i) changes in identifiable net assets, (ii) changes in fair values of property, plant and equipment, and (iii) other changes to assets and liabilities.
Note 3 – Pro forma adjustments
The pro forma adjustments are based on the NAYA’s preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial statements:
| (a) | Represents (i) proceeds of $0.5 million from the FNL Debenture after the closing of the Legacy NAYA Merger, and (ii) issuance of 190,000 shares of NAYA common stock upon the conversion of $190,000 in notes payable. | |
| (b) | Represents the cancellation of (i) 328,780 shares of NAYA Preferred Series A and (ii) 1,200,000 shares of NAYA Preferred Series B in connection with the Legacy NAYA Merger. |
| (c) | Represents the preliminary goodwill associated with the Legacy NAYA Merger as presented in Note 2. Goodwill represents the estimate of the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. | |
| (d) | Represents certain outstanding debt obligations of Legacy NAYA, including a portion of an amended and restated senior secured convertible debenture issued to FNL, with a combined principal balance of $8,575,833 converted into the right to receive 669,508 shares of the Company’s common stock and 8,576 shares of the Company’s Series C-2 Preferred. | |
| (e) | Represents the following equity adjustments associated with the closing of the Legacy NAYA Merger: |
| Legacy NAYA Class A Common Stock | Legacy NAYA Class B Common Stock | Legacy NAYA Preferred Stock | NAYA (Legacy INVO) Common Stock | NAYA (Legacy INVO) Series C-1 Preferred Stock | Additional paid-in | Accumulated | Total stockholders’ | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Payable | Shares | Amount | Shares | Amount | capital | deficit | equity | |||||||||||||||||||||||||||||||||||||
| Elimination of Legacy NAYA’s historical equity | (1,756,432 | ) | (1 | ) | (1,367,618 | ) | (1 | ) | (750,000 | ) | - | - | - | - | (16,052,218 | ) | 31,313,151 | 14,510,931 | ||||||||||||||||||||||||||||||
| Issuance of NAYA stock | - | - | - | - | - | 328,148 | 33 | 30,375 | 30,375,000 | (9,777,862 | ) | - | 20,597,171 | |||||||||||||||||||||||||||||||||||
| Pro forma adjustment | (1,756,432 | ) | (1 | ) | (1,367,618 | ) | (1 | ) | (750,000 | ) | 328,148 | 33 | 30,375 | 30,375,000 | (25,830,080 | ) | 31,313,151 | 35,108,102 | ||||||||||||||||||||||||||||||
(f)
Loss Per Share
Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted earnings per share are computed similarly to basic earnings per share except that the denominator is increased to include potentially dilutive securities. The Company’s diluted loss per share is the same as the basic loss per share for the pro forma periods ending September 30, 2024 and December 31, 2023 as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
| Nine Months Ended September 30, 2024 | Year Ended December 31, 2023 | |||||||
| Pro forma net loss (numerator) | $ | (13,924,954 | ) | (10,401,986 | ) | |||
| Basic and diluted weighted-average number of common shares outstanding as of period end | 3,885,985 | 1,565,951 | ||||||
| NAYA common stock issued as consideration for Legacy NAYA | 328,148 | 328,148 | ||||||
| NAYA prefunded warrants issued as consideration for Legacy NAYA | 459,508 | 459,508 | ||||||
| Total basic and diluted weighted-average number of common shares and prefunded warrants outstanding upon closing of the Legacy NAYA Merger (denominator) | 4,673,641 | 2,353,607 | ||||||
| Basic and diluted net loss per common share | (2.98 | ) | (4.42 | ) | ||||
The Company has excluded the following dilutive securities issued with the closing of the Legacy NAYA Merger from the calculation of fully diluted shares outstanding because the result would have been anti-dilutive:
| NAYA preferred series C-1 shares | 30,375 | |||
| NAYA preferred series C-2 shares | 8,576 | |||
| Total | 38,951 |