Calidi Biotherapeutics Inc

Investing in our common stock is highly speculative and involves risks. You should carefully consider the additional risk factors below as well as the risk factors described in Part I, Item 1A, “Risk Factors” in our Form 10-K and any updates to those risk factors or new risk factors contained in any registration statements that we filed or file with the SEC. Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should carefully consider the following risks, together with all of the other information contained in this report and Form 10-K, in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. Any of the following risks could have an adverse effect on our business, financial condition, operating results, or prospects and could cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. Our business, financial condition, operating results, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

We have insufficient cash to continue our operations for the next 12 months and our continued operations are dependent on us raising capital and these conditions give rise to substantial doubt over the Company’s ability to continue as a going concern.

As of March 31, 2024, we had approximately $1.2 million in cash and restricted cash of $0.2 million, an accumulated deficit of approximately $106.8 million, and a working capital deficit of approximately $13.0 million. We believe that our existing cash and cash equivalents as of March 31, 2024, and our anticipated expenditures and commitments for the next twelve months, will not enable us to fund our operating expenses and capital expenditure requirements for the twelve months from March 31, 2024. Based on our existing cash and cash equivalents as of May 10, 2024, we believe we have insufficient cash to continue operations through June, 2024, unless we raise additional short-term capital. These conditions give rise to substantial doubt over the Company’s ability to continue as a going concern. We will need to raise additional capital to support our operations and execute our business plan. We will be required to pursue sources of additional capital through various means, including debt or equity financings. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other convertible securities that will have additional dilutive effects. Further, the sale of or the perception of the sale of a substantial number of our common stock by selling securityholders pursuant to a registration statement filed with the SEC will adversely affect the price of our common stock due to our limited trading volume. In addition, the sale of a substantial number of our common stock by such selling securityholders will adversely affect the share price that we may obtain in future financings and may adversely affect our ability to conduct and complete future financings. We cannot assure that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us and may cause existing shareholders both book value and ownership dilution. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations. Our ability to obtain needed financing may be impaired by such factors as the weakness of capital markets, and the fact that we have not been profitable, which could impact the availability and cost of future financings. If the amount of capital we are able to raise from financing activities is not sufficient to satisfy our capital needs, we may have to reduce our operations accordingly.

Sales and issuances of our common stock or other securities would result in dilution of the percentage ownership of our stockholder and could cause our share price to fall.

If we sell additional shares of our common stock, convertible securities or other equity securities, existing stockholders may be materially diluted by subsequent sales and new investors could gain rights, preferences, and privileges senior to existing holders of our common stock. In addition, the resale, or perceived potential resale, of a substantial number of shares of our common stock in the public market could adversely affect the market price for our common stock We will need to raise capital in order to fund our business objectives. In addition, pursuant to our obligations under certain registration rights agreements, we have (1) registered on another registration statement filed with the SEC 20,393,816 shares of common stock, 1,912,154 warrants to purchase our common stock, and 1,912,154 shares of common stock issuable upon exercise of the private warrants; (2) agreed to also register on another registration statement shares of common stock issuable upon conversion of two outstanding convertible promissory notes issued on March 8, 2024 for the principal amount of $1.5 million and $2.0 million (“$2 Million Note”), respectively issued on pursuant to a Settlement Agreement and Release of All Claims Agreement dated on March 8, 2024; (3) agreed to register 200,000 shares of our common stock and 400,000 shares of common stock underlying warrants in connection with a settlement agreement with certain physicians related to stock options; and (4) registered a number of common stock underlying certain Series A, B and C warrants issued in connection with our public offering that closed on April 18, 2024.

Until such time that it is no longer effective, the registration statement registering such securities will permit the resale of these shares. In addition, securityholders may also sell their shares pursuant to an exemption available under the securities laws. The sale of new securities or the resale, or perceived potential resale, of a substantial number of shares of our common stock in the public market could adversely affect the market price for our common stock and make it more difficult for other shareholders to sell their holdings at times and prices that they determine are appropriate.

Certain of our outstanding securities are subject to mandatory conversion and/or exercise price reset. Our stockholders are subject to significant dilution upon the occurrence of certain events which could result in a decrease in our stock price.

As of May 3, 2024 we had approximately 114.7 million shares of our common stock reserved or designated for future issuance upon the exercise of outstanding options and warrants, and conversion of outstanding convertible debt. Included in the shares of common stock designated for future issuance discussed above are approximately 78.0 million shares issuable under the Common Warrants at a current exercise price of $0.60, and 12.8 million shares issuable under warrants to be issued in connection with a mandatory conversion of $1.0 million note (“Conversion Note”), that are subject reset of exercise price. The exercise price of the Common Warrants and the Conversion Warrants is subject to adjustment upon the effectiveness of a reverse stock split. Upon a reverse stock split, the exercise price shall be reduced, and only reduced, to the lesser of (i) the then exercise price and (ii) 90% of the lowest VWAP for the reset exercise price. In addition, the $2 Million Note also provide the investor a right to convert the note into shares of our common stock at an initial note conversion price equal to 94% of the 10-day VWAP ending the business day preceding execution of the Convertible Notes subject to a reset note conversion price equal to 94% of 10-day VWAP ending one hundred eighty (180) days after the issuance date.

In the event of future price resets, the number of shares of our common stock that are subject to such warrants and notes will increase so that the aggregate purchase price payable applicable to the exercise of the warrants after the reset of the exercise price is the same as the aggregate purchase price payable immediately prior to the reset. Any future resets to the exercise price of the Common Warrants, Conversion Warrants and $2 Million Note will have a further dilutive effect on our existing stockholders and could result in a decrease in our stock price. In addition, future sales of substantial amounts of our common stock into the public and the issuance of the shares reserved for future issuance, in payment of our term debt, and/or in exchange for outstanding warrants will be dilutive to our existing stockholders and could result in a decrease in our stock price.