Subscription Agreement

6 Months Ended

Jun. 30, 2024

Subscription Agreement [Abstract]

Subscription Agreement

Note 8 — Subscription Agreement

On December 18, 2023, the Company entered into a subscription agreement (the “Subscription Agreement”) with the PMX Investor, who became a stockholder of Onconetix at the closing of the PMX Transaction (see Notes 5 and 11), for the sale of 20 million units, each comprised of 1 share of common stock and 0.30 pre-funded warrants (the “Units”) at $0.25 per Unit. The Subscription Agreement includes a make-whole provision which requires the issuance of additional shares of common stock in the event that the 270-day volume weighted average price after the closing of the Subscription Agreement, is below $0.25. The Subscription Agreement will only close upon obtaining Stockholder Approval for certain transactions involving the Company’s Series B Preferred Stock, as further described in Note 5.

The Subscription Agreement is accounted for as a liability in accordance with ASC 480, Distinguishing Liabilities from Equity, (“ASC 480”), as the make-whole provision could result in a variable number of shares being issued upon settlement. The related party subscription agreement liability is measured at fair value at the commitment date and at each subsequent reporting period, with changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2024 and December 31, 2023, the fair value of the related party subscription agreement liability is estimated to be approximately $886,000 and $864,000, respectively, and the change in fair value of the related party subscription agreement liability for the three and six months ended June 30, 2024 was an increase of approximately $248,000 and $22,000, respectively. The fair value was determined using a Monte-Carlo option pricing model, and as of June 30, 2024 and December 31, 2023, the Company estimated a 55% probability that the Subscription Agreement will close. The significant assumptions used in the Monte-Carlo model, which utilizes Level 3 inputs (see Note 3), are as follows as of June 30, 2024 and December 31, 2023:

	June 30, 2024			December 31, 2023
Exercise price	$	0.25		$	0.25
Term (years)		0.87			1.2
Expected stock price volatility		110	%		95	%
Risk-free rate of interest		5.14	%		4.64	%