Biostage Inc. agreed to place 40 million common shares with Bin Zhao, a private investor.
The common shares are being offered at 10 cents per share, for $4.0 million in gross proceeds, and are convertible to a preferred equivalent.
Jim McGorry, Biostage's CEO, said in a news release that the company has been in survival mode since the last private placement endeavor failed in October. The new private placement will help Biostage get "back in operation at a more efficient size and structure," he added.
Biostage also placed warrants to purchase 60 million of its common shares, or a convertible preferred equivalent. The warrants will have an exercise price of 10 cents per common share, representing an additional $6.0 million to the company if exercised in the future.
According to the binding memorandum of understanding, the U.S. company may identify other investors who can participate in the private placement on the same conditions for gross proceeds of up to $2 million.
Following the closing of the transaction, Zhao will own more than 49.99% of Biostage's common and certain preferred stock.
The company expects the private placement closing and funding to occur later this month. The closing is subject to Biostage completing its reverse stock split as approved by the shareholders.