12. Subsequent Events

On April 10, 2023, Robert Faulkner was appointed as a Class III director of the Company, effective as of April 14, 2023. Mr. Faulkner’s compensation for serving as a director of the Board will consist of cash fee in the amount of $40,000. In addition, Mr. Faulkner will be granted restricted stock units, with a grant date fair market value of $100,000 on the date of each annual stockholder meeting of the Company, with each such grant vesting on the one year anniversary of the grant date of such grant. 

On April 10, 2023, the Company’s board of directors approved the issuance of 58,100 options and SARs for a subset of employees of the Company at a $1.73 exercise price.

On April 19, 2023 (the “Closing Date”), the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with RedCo II Master Fund, L.P. (“Redmile”) and HINSIGHT-AUGX HOLDINGS, LLC, a wholly owned indirect subsidiary of HCA Healthcare, Inc. (the “Purchasers”), pursuant to which the Company sold to the Purchasers for aggregate consideration of $11,999,999.29 an aggregate of 3,125,000 shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at a purchase price of $1.60 per share (the “Purchase Price per Share”), pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 4,375,273 shares of Common Stock (the “Pre-Funded Warrant Shares”), at a price per Pre-Funded Warrant equal to the Purchase Price per Share, less $0.0001, and breakeven warrants (the “Breakeven Warrants” and together with the Shares and the Pre-Funded Warrants, the “Securities”) to purchase up to 1,875,069 shares of Common Stock (the “Breakeven Warrant Shares” and together with the Pre-Funded Warrant Shares, the “Warrant Shares”), at an exercise price of $1.75 per share, that will become exercisable on the earliest of (1) the date on which the Company closes an equity or debt financing prior to December 31, 2025, (2) December 31, 2025, if the Company cannot provide written certification that it has achieved cash flow break even from operations, excluding interest payments, for two out of three consecutive quarters between the Closing Date and December 31, 2025, on such date, (3) immediately prior to a change of control that occurs prior to December 31, 2025, and (4) the date on which a specified Regulatory Event occurs (such earliest date, the “Initial Exercise Date”); provided, however, that the Breakeven Warrants shall terminate effective as of 5:00 P.M. Pacific Time on December 31, 2025 if none of the foregoing events have occurred on or prior to December 31, 2025.“Regulatory Event” is defined as the determination by any Purchaser (including any successors or assigns), upon the advice of qualified healthcare regulatory counsel, that the Ownership Interest (directly or indirectly) of any person in the Company or its direct or indirect subsidiaries either (i) results in prohibited referrals to such Purchaser or any of its respective Affiliates under applicable law or (ii) causes such Purchaser or any of its respective Affiliates to fail to comply in any respect with any requirement for reimbursement eligibility under any Government Program. “Ownership Interest” is defined as any direct or indirect ownership or investment interest whether through equity, debt or other means, including but not limited to stock, stock options, warrants, partnership shares, limited liability company memberships, as well as loans and bonds. “Government Program” is defined as the federal Medicare (including Medicare Part D and Medicare Advantage), Medicaid, Medicaid-waiver and CHAMPUS/TRICARE programs, any other similar or successor federal health care program (as defined in 42 U.S.C. §1320a-7b(f)) and any similar state or local programs. In no event shall the Initial Exercise Date be prior to the 6-month anniversary of the date of issuance, and the Breakeven Warrants will expire seven years following the date of issuance. The Pre-Funded Warrants have an exercise price of $0.0001 per Pre-Funded Warrant Share, became exercisable upon issuance and remain exercisable until exercised in full. The Purchase Agreement contains representations and warranties of the Company and the Purchasers that are typical for transactions of this type. The Purchase Agreement also contains covenants on the part of the Company that are typical for transactions of this type. The Purchase Agreement also contemplates that Redmile and the Company will finalize and enter into a separate equity line of credit within 30 days of the date of the Purchase Agreement, subject to the approval of the Company’s stockholders. This equity line of credit would allow the Company to sell shares of Common Stock having an aggregate price of up to $5,000,000 to Redmile from time to time, at a purchase price of $1.60 per share. On April 19, 2023, in connection with the Purchase Agreement, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, requiring the Company to register the securities issued under the Purchase Agreement. Pursuant to the Registration Rights Agreement, the Company will be required to file, on or prior to May 19, 2023 (the “Filing Date”), a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) to register the resale of the Shares and the Warrant Shares.