Note 17. Subsequent Events

Third Note Amendment

On July 1, 2024, the Company entered into the Third Note Amendment to the Secured Notes with the Investors. Pursuant to the Third Note Amendment, the Company and the Investors agreed to defer the July Redemption Payment of $10.5 million over a period of ten equal monthly payments commencing August 1, 2024.

July Letter Agreement and Warrants

In connection with the Third Note Amendment and as consideration for the deferral of the July Redemption Payment, on July 1, 2024, the Company also entered into a letter agreement (the “July Letter Agreement”) with the Investors pursuant to which the Company issued to the Investors warrants to purchase 1,650,000 shares of the Company’s common stock that are exercisable on the issuance date at an exercise price of $3.00 per share and expire on the five year anniversary of the date on which the resale registration statement required to be filed by the Company pursurant to the July Letter Agreement is declared effective by the SEC. The Investors may exercise these warrants by paying the exercise in cash or by reducing the outstanding principal amount under the Secured Notes. These warrants may also be exercised on a cashless basis under certain circumstances.

The warrants were issued to the Investors, and any shares of common stock issuable upon exercise of the warrants will be issued to the Investors, pursuant to the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D as promulgated by the SEC under the Securities Act. Pursuant to the July Letter Agreement, the Company has agreed to file with the SEC a resale registration statement as soon as practicable but in no event later than thirty days after the issuance date of the warrants to register the resale of the shares of common stock underlying the warrants. The July Letter Agreement contains customary representations, warranties and agreements by the Company, indemnification obligations of the Company, and other obligations of the parties.

Reduction in Force

On August 9, 2024, the Company commenced a reduction in force plan to streamline its business operations, reduce costs and create further operating efficiencies, which affected 63 employees, representing approximately 30% of the Company’s workforce. In connection with the reduction in force, the Company currently estimates it will incur approximately $1.1 million to $1.7 million of costs, consisting primarily of personnel expenses such as salaries and wages, one-time severance payments, and other benefits. The majority of the cash payments related to these expenses will be paid out during the fourth quarter of 2024.

Warrant Inducement Exercise

On August 12, 2024, the Company entered into a warrant inducement (the “Inducement Agreement”) with certain warrant holders (the “Warrant Holders”) which references the warrants (the “Existing Warrants”) registered for sale under the registration statement on Form S-3 (file No. 333-268346) in the amount of 742,857 warrants to purchase shares of the Company’s common stock, par value $0.00001 per share.

Pursuant to the Inducement Agreement, the holders of the Existing Warrants agreed to reduce the exercise price of their Existing Warrants totaling 742,857, from $19.78 per share to $2.28 per share. Additionally, the Company agreed to issue registered warrants with an exercise price of $2.28 per share to purchase 1,485,714 shares of Common Stock (the “New Warrants”), pursuant to a warrant agreement (the “New Warrant Agreement”). If exercised in full, the Company will receive aggregate gross proceeds up to approximately $1.6 million, before deducting expenses payable by the Company.