Press Release

Kalytera Announces Closing of Private Placement of Common Shares and Common Share Purchase Warrants, and Provides Corporate Update

By August 7, 2020 August 8th, 2020 No Comments

Kalytera Therapeutics, Inc. (TSX VENTURE: KLY and OTC: KALTF) (the “Company” or “Kalytera”) today provided the following updates regarding recent and ongoing activities.

Private Placement

As previously announced on July 24, 2020, the Company closed in escrow it’s previously announced non-brokered private placement (the “Private Placement”) of units comprised of common shares (“Shares”) and one half common share purchase warrants (“Warrants”) in the capital of the Company. The Company confirms that it received final acceptance for the Private Placement on July 24, 2020, and has completed escrow closing and post-closing matters, culminating in a final raised amount of gross proceeds of CDN $309,430.50 from the issuance of 20,628,700 shares and 10,314,350 warrants. The Company wishes to thank all involved parties in assisting with the closing and post-closing matters in light of the Covid-19 slow down.

Each unit had a purchase price of $0.015 per unit. Each full common share purchase warrant will have an exercise price of CDN $0.05, and a term of 24 months. At any time on or after the date that is 4 months from the closing date, if the daily volume weighted average trading price of the common shares on the TSX Venture Exchange (the “TSXV”) equals or exceeds $0.10 CAD for a period of at least 10 consecutive trading days, the Company shall be entitled to accelerate the expiration date of the Warrants to the date that is 30 days from the date that notice of such acceleration is given. From and after the new accelerated expiration date, no Warrant may be exercised, and all unexercised Warrants shall be void. The securities offered have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended or any U.S. state securities laws, and any securities issued to US Persons are restricted securities subject to an indefinite hold period unless traded in compliance with applicable exemptions.

The company paid a cash commission of 8% of the gross proceeds raised and closed in respect of the offering to Echelon Wealth Partners Inc. (“Echelon”) with respect of the funds raised by it, and broker’s warrants to this finder, exercisable within 30 months following the relevant closing date, to acquire in aggregate that number of common shares which is equal to 8% of the number of units sold under the offering with respect of the funds raised by it, which warrants expiry 30 months from issuance (closing date of July 22, 2020) and are exercisable at $0.05 per warrant. Accordingly, Echelon received a cash finder fee of $20,000.04 and 1,333,336 broker warrants. Except for the mentioned commission and warrants to Echelon, no bonus, finder’s fee, commission, agent’s option, or similar compensation, whether in cash or securities, has been paid or is payable in connection with the Private Placement.

The proceeds from the placement will be used to pay auditor and accounting fees, director & officer insurance premiums and other accounts payable.

Trading Halt

On June 22, 2020, the British Columbia Securities Commission (the “BCSC”) issued a Failure-to-File Cease Trade Order against the Company (the “FFCTO”) due to the Company’s failure to file by the prescribed filing deadlines its annual financial statements for the year ending December 31, 2019, and the accompanying Management’s Discussion and Analysis and certifications, (the “Filings”). Please refer to the Company’s press release of June 30, 2020 for more details. The Company had been granted the Order to commence the Private Placement as an exception to the FFCTO. The Company is working to complete the Filings. Upon filing of the Filings, the Company will apply to have the FFCTO fully revoked. The Company expects that the FFCTO would be removed prior to the expiration of the customary hold period for private placement offerings that affect all issuers, in which case investors would not be subject to any hold periods beyond what is expected for all private placements.

Appointment of Director

Effective July 16, 2020 the board of directors of the Company appointed Robin Hutchison to fill a vacancy on the Company’s board of directors. Mr. Hutchison was previously a director of the Company and the Company welcomes his return to the board.

Salzman Group Acquisition

The Company previously announced that it has entered into a binding Letter of Intent to acquire Salzman Group.

Transaction Highlights

  • Kalytera announced on July 16, 2020 that it has entered into a License Agreement (the “License Agreement”), under which Salzman Group has granted to Kalytera an exclusive, worldwide license to develop and commercialize R-107, for the treatment of coronavirus and COVID-19 infection.
  • The License Agreement is the first step in a larger transaction in which Kalytera will acquire Salzman Group (the “Acquisition”). The Acquisition is expected to close later this year, subject to customary conditions including TSXV and shareholder approvals.
  • Salzman Group is the owner of R-107, a proprietary drug with issued and pending composition of matter and method of use patents in approximately 40 countries, including the U.S., Australia, Brazil, China, Europe, India, Japan, Russia and South Korea.
  • R-107 is a liquid prodrug of nitric oxide. Based on the fact that nitric oxide is an approved treatment for acute respiratory failure in newborns, and the clinical evidence of nitric oxide’s antiviral activity against strains of coronavirus, Salzman Group is developing R-107 for treatment of coronavirus and COVID-19 infection.
  • Salzman Group is also developing R-107 for chlorine inhalation lung injury (“CILI”). This project has been funded in whole or in part with Federal funds from the U.S. Department of Health and Human Services.

In connection with the acquisition of Salzman Group, the Company anticipates that it will announce the following matters shortly after the Company’s shares resume trading after it has been granted full revocation of the FFCTO:

  • Initiation of an equity or debt financing to provide 6-months working capital, which is a TSXV requirement for close of Salzman Group acquisition, as previously disclosed
  • Scheduling of a special meeting of shareholders to approve the acquisition of Salzman Group, as previously disclosed

Status of Debt Owed to Former Shareholders of Talent Biotechs, Ltd.

In 2017, Kalytera’s wholly owned subsidiary, Kalytera Therapeutics Israel, Ltd. (“Kalytera Israel”) acquired Talent Biotechs Ltd. (“Talent”) from the former shareholders of Talent (the “Former Shareholders”, under the terms of a share purchase agreement (the “SPA”) between Kalytera, Kalytera Israel, Talent and the Former Shareholders. Under the terms of the SPA, Kalytera Israel is obligated to make certain milestone payments (the “Milestone Payments”) to the Former Shareholders.

Kalytera Israel failed to pay certain Milestone Payments when they became due under the SPA, and issued a promissory note (the “Note”) in favor of the Former Shareholders evidencing such debt. Kalytera Israel is obligated to pay USD $3 million to the Former Shareholders under the terms of the Note.

Kalytera Israel is in default under the terms of the SPA and the Note, and has received a formal notice of default from the representative of the Former Shareholders. The obligations of Kalytera Israel under the Note are guaranteed by Talent, and both Kalytera Israel and Talent are parties to a Security Agreement, under which they have secured their obligations under the Note by pledging certain assets to the Former Shareholders as security for the Note (the “Pledged Assets’). The Pledged Assets are the assets of the Company’s product development program under which the Company was evaluating cannabidiol (“CBD”) in the prevention and treatment of graft versus host disease (“GVHD”). The Pledged Assets are both tangible and intangible assets, consisting primarily of tangible assets, such as patient blood samples, and intangible assets, such as contract rights, clinical and preclinical data, know how, and intellectual property rights that are held under a license agreement between MOR Research Applications, Ltd. and Talent. The Pledged Assets also include all shares of the Company’s two subsidiaries, Kalytera Israel and Talent.

The Company and the representative of the Former Shareholders are in discussions regarding a contemplated agreement (the “Agreement”) under which Kalytera Israel will transfer ownership of all Pledged Assets, other than the shares of Kalytera Israel, to the Former Shareholders in consideration for the release and discharge by the Former Shareholders of all obligations the Company and its subsidiaries may have to such Former Shareholders, including all obligations under the Note and SPA.

The Company and the representative of the Former Shareholders expect to complete discussions regarding the contemplated Agreement, and will enter into the Agreement subject to approval by the Company’s shareholders and the TSXV as applicable. The Company will schedule a meeting of shareholders at which it will seek such approval. The Company confirms that no securities of the Company are to be traded with respect of the contemplated Agreement and the Company’s securities remain subject to the FFCTO.

The Company confirms that there is no other material information concerning the affairs of the Company that has not been previously generally disclosed.

About Kalytera Therapeutics

Kalytera Therapeutics, Inc. (“Kalytera”) is committed to developing new treatments for a variety of diseases and disorders, by discovering, developing, manufacturing and delivering innovative human therapeutics. Kalytera focuses on areas of unmet medical need, and leverages its expertise to find solutions that will improve health outcomes and dramatically improve people’s lives.

Kalytera Company Contact

Robert Farrell
President and CEO
Phone: (888) 861-2008

Cautionary Statements

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This press release may contain certain forward-looking information and statements (“forward-looking information”) within the meaning of applicable Canadian securities legislation, that are not based on historical fact, including without limitation in respect of its product candidate pipeline, planned clinical trials, regulatory approval prospects, intellectual property objectives and other statements containing the words “believes”, “anticipates”, “plans”, “intends”, “will”, “should”, “expects”, “continue”, “estimate”, “forecasts” and other similar expressions. In particular, this press release contains such forward-looking information regarding the acquisition of Salzman Group, related or proposed research and development activities of Kalytera, the Private Placement, the discussions and the results of such discussions with Talent with respect of the Note, SPA, the Pledged Assets, and other matters related to the same (which may or may not transpire as currently contemplated), the possibility of getting a full revocation of the FFCTO or its timing to avoid any effects on the hold period of securities issued to any investors of the Private Placement, and each of the foregoing’s possible effects on the business and operations of Kalytera. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risk that: future clinical studies may not proceed as expected or may produce unfavorable; acquisition of Salzman Group might not be completed (including the Company not receiving final acceptance for its completion) or completed on terms currently disclosed; and any funds raised may be insufficient to carry out the activities for which they are intended for or any other activity; and the proposed activities for which they are intended for and any other activity of the Company might not be completed as currently planned due to economic, business and other factors, some of which are beyond the control of the Company . Kalytera undertakes no obligation to comment on analyses, expectations or statements made by third parties, its securities, or financial or operating results (as applicable). Although Kalytera believes that the expectations reflected in forward-looking information in this press release are reasonable, such forward-looking information has been based on expectations, factors and assumptions concerning future events which may prove to be inaccurate and are subject to numerous risks and uncertainties, certain of which are beyond Kalytera’s control. With respect of Kalytera’s press releases , readers should read the disclaimers and other cautionary information in such news releases. The forward-looking information contained in this press release is expressly qualified by this cautionary statement and is made as of the date hereof. Kalytera disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.