DEF 14A: Biora Therapeutics Seeks Stockholder Approval for Share Issuance and Incentive Plan Amendment

Biora Therapeutics is holding a special meeting to seek stockholder approval for issuing shares related to convertible notes and warrants, as well as to amend its equity incentive plan.

Summary

• Biora Therapeutics is convening a special meeting of stockholders on November 13, 2024, to vote on several proposals.
• The primary proposals involve authorizing the issuance of common stock related to convertible notes and warrants, aiming to comply with Nasdaq Listing Rule 5635(d).
• Specifically, the company seeks approval for shares underlying warrants issued under a Convertible Notes Purchase Agreement (Proposal 1A), warrants amended under a Convertible Notes Exchange Agreement (Proposal 1B), and convertible senior secured notes issued under these agreements (Proposal 1C).
• Additionally, Biora is requesting approval to amend and restate its 2018 Equity Incentive Plan, increasing the authorized shares by 1,850,000 and extending the plan's term (Proposal 2).
• A third proposal concerns the potential adjournment of the special meeting to solicit additional proxies if needed (Proposal 3).
• The record date for determining stockholders eligible to vote is October 18, 2024.
• The Board of Directors recommends voting FOR all proposals.

Sentiment

Score: 6

Explanation: The document is neutral in tone, primarily focused on outlining the proposals for the special meeting. While the need for additional financing and share issuance can be seen as a potential concern, the document presents it as a necessary step for the company's operations and growth.

Positives

• Approval of the proposals would allow Biora Therapeutics to comply with Nasdaq listing rules and issue necessary shares related to financing agreements.
• Increasing the share reserve under the equity incentive plan would provide flexibility to attract, retain, and incentivize employees.
• The company expects the additional shares requested for the 2018 Plan, along with the evergreen provision, would provide flexibility to continue to grant equity-based awards for approximately two to three years.
• The Warrant Amendments provide that, after the stockholder approval of Proposal 1B, the company may repurchase 20% of such warrants at a price of $0.01 per share underlying such warrants, subject to certain conditions. If the Company exercises this repurchase option, it would reduce the potential dilution associated with the Amended Warrants at a relatively low cost.

Negatives

• Approval of the share issuance proposals will result in dilution of existing stockholders' ownership.
• Failure to approve the proposals could hinder the company's ability to access financing and retain key personnel.
• The company may incur substantial additional costs and expenses in the event that stockholders do not approve Proposals 1A, 1B, and 1C, as they will be required to call a special meeting of stockholders each ninety (90) days after this Special Meeting at least two times, and thereafter at each subsequent annual meeting to seek stockholder approval of the matters that are the subject of this Proposal 1A until the earlier of the date on which (i) stockholder approval is obtained or (ii) the securities referenced above are no longer outstanding and not subject to issuance under the terms of the Note Purchase Agreement and the Note Exchange Agreement.

Risks

• The market price of Biora Therapeutics' common stock could be adversely affected by the issuance of new shares.
• The company's ability to fund operations and advance research and development plans could be materially and adversely impacted if the proposals are not approved.
• The company's estimate that the additional shares requested for the 2018 Plan under this proposal, along with the evergreen provision under the 2018 Plan, would provide flexibility to continue to grant equity-based awards for approximately two to three years is only an estimate, in management's judgment, based on current circumstances.

Future Outlook

The company expects that the additional shares requested for the 2018 Plan under this proposal, along with the evergreen provision under the 2018 Plan, would provide flexibility to continue to grant equity-based awards for approximately two to three years, assuming a level of grants consistent with the number of equity-based awards granted during 2023 and usual levels of shares becoming available for new awards as a result of forfeitures of outstanding awards throughout the projected period.

Management Comments

• The Board recommends that you vote your shares FOR each of the proposals.
• The Board believes that approval of the amendment and restatement of the 2018 Plan, including the proposed increase to the shares authorized for issuance thereunder and the extension of the plan term, will promote our interests and those of our stockholders and will help us continue to be able to attract, motivate, retain and reward persons important to our success.

Industry Context

Many companies use equity incentive plans to attract and retain talent, particularly in competitive industries like biotechnology. Seeking stockholder approval for share issuance is a common practice to comply with exchange listing rules and maintain corporate governance standards.

Comparison to Industry Standards

• The use of equity incentive plans is a standard practice in the biotechnology industry, with companies like Amgen, Gilead Sciences, and Regeneron Pharmaceuticals all maintaining similar plans to attract and retain talent.
• The proposed increase of 1,850,000 shares for Biora's equity incentive plan should be assessed in the context of the company's size, stage of development, and burn rate compared to its peers.
• The terms of the convertible notes and warrants, including interest rates and exercise prices, should be compared to similar financing instruments used by other small-cap biotech companies.

Related Party Transactions

• Athyrium Capital Management, LP, a related party of the Company, has a substantial interest, direct or indirect, by security holdings or otherwise, in Proposal 1B that is not shared by all other stockholders.
• Jeffrey A. Ferrell, a member of the Board, is President of Athyrium Opportunities Associates Co-Invest LLC and Athyrium Opportunities Associates III GP LLC and the Managing Member of Athyrium Funds GP Holdings LLC, which is the Managing Member of Athyrium Opportunities Associates Co-Invest LLC and Athyrium Opportunities Associates III GP LLC, and in his capacity as such may be deemed to exercise shared voting and investment power over the shares owned by certain entities affiliated with Athyrium Capital Management, LP.

Stakeholder Impact

• Approval of the proposals could impact shareholders through dilution of ownership.
• Employees may benefit from the increased flexibility of the equity incentive plan.
• The company's ability to secure financing could impact its relationships with creditors and suppliers.

Next Steps

• Stockholders should review the proxy materials and vote on the proposals.
• The company will hold the special meeting on November 13, 2024, to tally the votes and determine the outcome of the proposals.
• The company intends to file with the SEC a registration statement on Form S-8 covering the new shares authorized for issuance under the 2018 Sixth Amended Plan in the first quarter of 2025.

Key Dates

Keywords

stockholder approval, share issuance, equity incentive plan, convertible notes, warrants, Biora Therapeutics, dilution, Nasdaq, financing, proxy statement