Avalo Therapeutics, Inc. 8-K

What Happened

• Avalo Therapeutics, Inc. (AVTX) filed an 8-K on June 11–12, 2026 announcing an unregistered exchange of preferred stock and amendments to employment agreements for its senior officers. On June 11, 2026 the company exchanged 4,294.675 outstanding shares of Series C non‑voting convertible preferred stock for 4,294.675 shares of a newly created Series C‑1 non‑voting convertible preferred stock. The exchange was effected in reliance on Sections 3(a)(9) and 4(a)(2) of the Securities Act. The company also filed a Certificate of Designation for the Series C‑1 shares with the Delaware Secretary of State.

Key Details

• Exchange specifics: 4,294.675 shares of Series C were exchanged for 4,294.675 shares of Series C‑1; after the exchange 4,085.379 shares of Series C remain outstanding.
• Conversion ratio and limits: Each Series C‑1 share converts into 1,000 shares of common stock (no fractional shares; fractions rounded up). Conversion is subject to a Beneficial Ownership Limitation preventing a holder from owning more than 9.99% of common stock after conversion (the exchanged class removes a prior 4.99% ownership cap that applied to the investor).
• Executive amendments (effective June 12, 2026): Amendments affect Garry A. Neil, M.D. (CEO), Christopher Sullivan (CFO), Mittie Doyle, M.D. (CMO) and Taylor Boyd (CBO). Key severance features:
  • Termination without Cause/for Good Reason: typically 12 months base salary (Dr. Neil: 18 months), unpaid/prorated bonuses, COBRA health premiums, and for options granted before the amendment, full vesting with post‑termination exercise windows (12 months for Neil & Sullivan; 6 months for Doyle & Boyd).
  • Termination around a Change in Control (CIC window): cash severance of 1.0x base salary (1.5x for Dr. Neil) plus 1.0x target bonus, full acceleration of time‑based equity awards (subject to release), prorated annual bonus, COBRA coverage, and specified exercise windows for vested options.
  • 280G safety‑valve: payments will be reduced if necessary so the executive is not subject to the Section 4999 excise tax, provided the executive is better off after the reduction.

Why It Matters

• Capital structure: The creation of Series C‑1 and the specific conversion ratio (1,000:1) and ownership cap change (to 9.99%) materially affect dilution potential and an individual investor’s ability to increase stake through conversion. Investors should watch potential dilution if Series C‑1 holders convert.
• Executive continuity and cost: The amended severance and CIC protections strengthen post‑termination pay and equity acceleration for key leaders (CEO, CFO, CMO, CBO). These changes could increase potential cash and equity payouts in the event of a termination or change in control, which is relevant for governance and potential transaction scenarios.
• Compliance note: The stock exchange was done on an unregistered basis relying on securities‑law exemptions; no public registration of the new Series C‑1 shares was made in this filing.