4. Acquisition

On May 1, 2020, the Company entered into a Stock Purchase Agreement with the sole shareholder of Noachis Terra Inc. (“NTI”), pursuant to which the Company acquired one hundred percent (100%) of the total issued and outstanding common stock of NTI (the “Transaction”). In exchange, the shareholder received the following: (i) cash consideration equal to $1,925,000, of which approximately $500,000 has been applied to extinguish NTI’s pre-Transaction liabilities (a portion of which were due to the shareholder); (ii) 9,200,000 restricted shares of the Company’s common stock, the sale of which shares cannot occur until the earlier of (a) the Company’s share price closing above $2.50 per share, (b) the Company’s announcement that it has received funding from the Biomedical Advanced Research and Development Authority (“BARDA”), NIH or any other Governmental Authority to fully fund the development program for SARS-CoV-2 vaccine, or (c) six months from the Transaction’s closing; and (iii) warrants to purchase 9,200,000 shares of the Company’s common stock, which warrants carry an exercise price of $1.25 per share, a five-year term, and may not be exercised until the Company has obtained shareholder approval with respect to the exercisability of the warrants pursuant to the New York Stock Exchange American (“NYSE”) requirements. At the Company’s Annual Meeting of Shareholders held on August 21, 2020, the shareholders approved the issuance of up to 9,200,000 shares of common stock upon the exercise of the warrants.

The warrants may not be exercised until the earlier of (a) notification of BARDA’s willingness to fund development of the TerraCoV2 vaccine product candidate, (b) Phase 1 clinical results demonstrating activity, or (c) the first anniversary of the Transaction’s closing. The Company is also obligated to pay the former sole shareholder of NTI contingent consideration based upon the exercise of certain of the Company’s outstanding warrants as follows: (i) twenty percent (20%) of the cash proceeds received by the Company upon exercise of the Company’s warrants carrying an exercise price of $0.75 and $0.90 and (ii) forty-five percent (45%) of the cash proceeds received by the Company upon exercise of the Company’s warrants carrying an exercise price of $1.00, in each case, for so long as the warrants remain outstanding.

At the closing of the Transaction, the aggregate fair value of purchase consideration was $9,955,699, consisting of $1,925,000 of cash, the Company’s common stock (9,200,000 shares), and warrants to purchase the Company’s common stock, as follows:

The Company determined that the acquisition should be accounted for as an asset purchase. The asset which was acquired was in-process research and development which does not have any alternative uses and therefore the aggregate fair value of the purchase price being recorded in research and development expenses in 2020.