Calidi Biotherapeutics, Inc.

We are subject to litigation and contingencies in the ordinary course of its business, including those related to its business, business transactions, employee-related matters, and other matters. Other than the matters discussed below, we are not currently party to any other material legal proceedings.

Physician Agreement Matter

On July 19, 2016, Calidi entered into a partnership agreement with certain physicians whereby the physicians would provide certain services to Calidi. In connection with the partnership agreement, Calidi granted the physicians stock options as consideration for those services pursuant to Calidi’s equity incentive plan. The partnership agreement was deemed terminated on March 21, 2018. Under the terms of the stock option agreements and the equity incentive plan, the physicians had three months from the termination date to exercise their vested stock options before those options would automatically expire and cancel unexercised, while all unvested stock options are forfeited immediately on the termination date. The physicians did not elect to exercise any of their vested options thereby resulting in full cancellation of those options in accordance with the equity incentive plan.

On March 14, 2022, the physicians filed a lawsuit (entitled Lander v. Calidi Biotherapeutics, Inc., filed in the Superior Court of the State of California in and for the County of San Diego (Case No. 37-2022-00009690-CU-BC-CTL) against Calidi in San Diego Superior Court, seeking, among other claims, declaratory relief and claiming that the stock options granted to them pursuant to the partnership agreement, have not expired and remain exercisable by the physicians. The physicians are claiming 300,000 in vested stock options to be valid and exercisable, even though the physicians have not provided any services to Calidi since the March 21, 2018 termination date.

On December 6, 2022, Calidi and the physicians participated in mediation in San Diego, California. In order to attempt to settle all claims and avoid a costly trial, Calidi offered the physicians 5,000 shares of Calidi common stock valued at $38.60 per share and 10,000 options to purchase Calidi common stock at an exercise price of $38.60 per share in full settlement of the claims. The mediation was terminated without settlement and Calidi planned to go to trial with a preliminary trial date set for March 8, 2024 in San Diego Superior Court. On March 24, 2023, Calidi initiated an arbitration proceeding with the American Health Lawyers Association seeking declaratory relief under Delaware law, specifically to determine that the Partnership Agreement was terminated in 2018, which is not a matter before the San Diego Superior Court. The arbitration was stayed by the Superior Court, pending the related civil action. Based on the stay, Calidi moved for a judgment on the pleadings to be heard in January 2024.

On February 9, 2024, Calidi settled the physicians lawsuit. Under the settlement agreement, as consideration for a full release and discharge of claims, and dismissal of claims by the parties, Calidi agreed to provide to the physicians the following: (a) the issuance of an aggregate of 20,000 restricted shares of our common stock (the “Restricted Shares”), and (b) the issuance of an aggregate of 40,000 warrants to purchase Restricted Shares, which (i) has an per share exercise price equal to $13.20; and (ii) are exercisable for 5 years after the date of issuance of the warrants, subject to the terms set forth in such warrant (the “Warrant”). In addition, Calidi granted piggy-back rights with respect to the Restricted Shares and any shares issued pursuant to any Warrants (“Warrant Shares”) that will be granted by the proposed settlement agreement. However, Calidi will have the right to refuse to register the Restricted Shares and Warrant Shares if it determines, in Calidi’s sole discretion based on commercially reasonable grounds, that the inclusion of the Restricted Shares and Warrant Shares pursuant to piggy-back rights will adversely affect Calidi’s ability to raise capital from such registration statement.

Former Chief Accounting Officer and Interim Chief Financial Officer

On November 15, 2023, Tony Kalajian, our prior Chief Accounting Officer and interim Chief Financial Officer, filed a complaint in the Superior Court of the State of California County of San Diego against Calidi, Mr. Camaisa, our Chief Executive Officer, and Ms. Pizarro, our Chief Corporate Development Officer and Chief Legal Officer, alleging defamation and constructive discharge of Mr. Kalajian’s position of Chief Accounting Officer and interim Chief Financial Officer (Case No. 37-2023-00049813-CU-DF-CTL) (the “Primary Case”). Mr. Kalajian is seeking $575,000 in damages under his employment contract, damages to be proven at trial, punitive damages, and attorney’s fees.

Calidi successfully moved to disqualify Mr. Kalajian’s counsel, Robert Brownlie, which is now on appeal. It also filed a claim against Mr. Kalajian in arbitration for breach of fiduciary duty, constructive fraud, conversion, and declaratory relief relating to bonuses Mr. Kalajian caused to be paid to himself and the accounting team. Due to the appeal, in November 2024, the Court issued a discretionary stay on this case and all related cases, as described below.

Calidi denies the allegations and, along with the two named officers, continues to vigorously defend the lawsuit and related claims, prosecute its claims against Mr. Kalajian, and seek recovery of a $150,000 bonus Mr. Kalajian approved to be paid to himself without first obtaining proper authorization by the Company’s Board of Directors. No trial date is scheduled. Discovery has not yet commenced. Therefore, at this time, Calidi is unable to evaluate the outcome of this case or estimate the amount or range of potential loss

On February 29, 2024, Mr. Kalajian filed a Petition for Writ of Mandate in the Superior Court of California, County of San Diego, seeking to compel the production of certain corporate records from Calidi. This “Writ of Mandate” case is deemed related to the Primary Case above and is stayed.

On May 1, 2024, Mr. Kalajian filed a complaint in the Superior Court of the State of California, County of San Diego against Calidi alleging intentional conversion and violation of Section 158 of the Delaware General Corporations Code due to Calidi’s failure to remove a restrictive legend from 13,943 shares of Calidi’s Common Stock. Mr. Kalajian is seeking compensatory damages to be proven at trial, punitive damages and attorney’s fees, and an order requiring removal of the restrictive legend from his share certificates. Calidi intends to vigorously defend itself. This case is deemed related to the Primary Case above and is stayed.

In March 2025, in connection with Mr. Kalajian’s hiring of new counsel, the parties stipulated to lift the stay on the Primary Case and all related cases, terminated all rights to arbitration, consolidate all cases for purposes of discovery and trial, dismiss the Writ of Mandate case, and agree to set a future hearing on Mr. Kalajian’s motion for summary adjudication/judgment.

Securities Matter

On October 29, 2024, Mr. Yian Zeng filed a complaint against Calidi related to securities fraud in violation of the California Corporations Code, breach of covenant of good faith and fair dealing, unjust enrichment, restitution, breach of fiduciary duty, and constructive fraud in US District Court, Southern District of California (Case Number 3:24-cv-02026-H-KSC). After service in January 2025, Calidi filed an Answer to the complaint on February 10, 2025. Calidi vigorously opposes this case and categorically denies all claims. Discovery has not commenced. Therefore, at this time, Calidi is unable to evaluate the outcome of this case or estimate the amount or range of potential loss.

Unasserted Claim Settlement

On March 8, 2024, Calidi entered into a convertible promissory note purchase agreement with an investor who previously entered into a series of related agreements (the “Investor”) for a loan in the principal amount of $2.0 million (the “2024 Loan”), and settlement of $1.5 million of an unasserted claim. In connection with the 2024 Loan, Calidi issued convertible notes due in 2028 evidencing the aggregate principal amount of $3.5 million (the “2024 Notes”). The 2024 Notes also provides the Investor a right to convert all, but not less than all, the Principal Amount (as defined in the 2024 Notes) and accrued interest into shares of the Company’s common stock at a conversion rate equal to a 6% discount to the 10-day VWAP preceding execution of the 2024 Notes, convertible after the earlier of 180 days or the effective registration date with mandatory conversion for Investor in the event that the Company completes a registered financing of at least $8 million or of at least $2 million to a non-affiliated purchaser with an effective price of 150% of the Note conversion price with a conversion price reset to be completed 30 (thirty) days after the effective registration date.

On April 19, 2024, the $1.5 million convertible note was paid in full upon the closing of a public offering by Calidi, in which the Holder participated in an amount equal to the principal amount of the convertible note (See Note 7). On September 27, 2024, $0.2 million and accrued interest of $11,000 of the $2.0 million convertible note was converted into 184,810 shares of common stock (See Note 7). From October 21, 2024 through November 6, 2024, principal of $1.8 million and accrued interest of approximately $118,000 of the Company’s existing $2.0 million convertible note was converted into 1,679,045 shares of common stock (See Note 7). Upon completion of the conversions, the convertible note was no longer outstanding as of December 31, 2024.