Item 1.01
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Entry Into a Material Definitive Agreement
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Offers to Amend and Exercise Certain Warrants to Purchase
Common Stock
The Company commenced an Offer to
Amend and Exercise Warrants dated September 25, 2017 and as amended on October 12, 2017, October 17, 2017 and November 16, 2017,
to purchase an aggregate of 2,396,676 shares of common stock issued to (i) holders of promissory notes, Series A Convertible Preferred
stock and other indebtedness upon conversion of such indebtedness and preferred stock in connection with the Company’s initial
public offering which closing occurred in July 2016, (ii) investors participating in and brokers assisting with certain of the
Company’s private placement financings which closings occurred from January 2017 to September 2017, (iii) the placement
agent and its assignees of the Company’s private placement financings with respect to which closings occurred from October
2012 to January 2015 and (iv) the Company’s public relations firm. These warrants are known together as the “Original
Warrants” and this Offer to Amend and Exercise Warrants is known as the “September 2017 Offer to Amend and Exercise”.
The Company also commenced an Offer to
Amend and Exercise Warrants dated October 17, 2017 and as amended on November 16, 2017, held by holders of record as of September
19, 2017 to purchase 2,025,000 shares of the Company’s common stock at an exercise price of $5.625 per share issued to investors
in the Company’s initial public offering which closing occurred in July 2016. These warrants are known together as the “IPO
Warrants” and this Offer to Amend and Exercise Warrants is known as the (“IPO Warrant Offer to Amend and Exercise”).
The September 2017 Offer to Amend and Exercise and the IPO Warrant Offer to Amend and Exercise are together known as the “Offers
to Amend and Exercise”.
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The Offers to Amend and Exercise expired at 5:00 p.m. Pacific
time (9:00 p.m. Eastern time) on November 24, 2017 (the “Expiration Date”).
Pursuant to the September 2017 Offer to Amend and Exercise,
an aggregate of 1,820,895 Original Warrants were tendered by their holders and were amended and exercised in connection therewith
for gross proceeds to the Company of approximately $819,403. Such tendered Original Warrants represent approximately 76% of the
Company’s outstanding Original Warrants as of November 24, 2017.
Pursuant to the IPO Warrant Offer to Amend and Exercise, an
aggregate of 1,063,978 IPO Warrants were tendered by their holders and were amended and exercised in connection therewith for
gross proceeds to the Company of approximately $478,790. Such tendered IPO Warrants represent approximately 53% of the Company’s
outstanding IPO Warrants as of November 24, 2017.
The Company issued the Original Warrants in private placement
transactions in reliance on the exemption from registration provided by Rule 506 of Regulation D under the Securities Act of 1933,
as amended (the “Securities Act”). In connection with such transactions, the holders of the Original Warrants represented
that they were “accredited investors.” Similarly, the issuance of the shares of the Company’s common stock upon
the amendment and exercise of the 1,820,895 Original Warrants was exempt from registration under the Securities Act pursuant to
Rule 506 of Regulation D. In connection with the September 2017 Offer to Amend and Exercise, all holders of tendered Original
Warrants represented that they were “accredited investors.”
The Company registered the IPO Warrants in connection with
its initial public offering in July 2016. However, the issuance of the shares of the Company’s common stock upon the
amendment and exercise of the 1,063,978 IPO Warrants was exempt from registration under the Securities Act pursuant to Rule 506
of Regulation D. In connection with the IPO Warrants Offer to Amend and Exercise, less than 35 holders of tendered IPO Warrants
represented that they were not “accredited investors”
Stock Purchase Agreement
As previously disclosed, the Company currently has an outstanding
debt owed to Walgreens of $1.2 million. The debt was incurred in 2015 in connection with certain price protection afforded Walgreens
by the Company. Walgreens agreed to settle the debt in full for the sum of $600,000 if payment was made by November 30, 2017.
To obtain sufficient funds to repay the debt to Walgreens,
the Company’s Board of Directors approved the issuance of shares of its common stock to an unaffiliated investor. Further
to the terms of a Stock Purchase Agreement dated September 12, 2017 (the ‘‘Stock Purchase Agreement’’),
the investor placed $600,000 in escrow. As approved by the Company’s stockholders at its special meeting held on November
9, 2017 (the “Special Meeting”), the Company issued the investor 1,850,418 shares of common stock which was equal
to 1,195,000 divided by the lesser of (i) $0.80 or (ii) the average closing bid price of the Company’s common stock for
the ten trading days immediately preceding the date of the Special Meeting (ten-day average was $0.6458).
Following the amendment and exercise of the 1,820,895 Original
Warrants and 1,063,978 IPO Warrants pursuant to the terms of the Offers to Amend and Exercise, as well as the issuance of 1,850,418
shares of common stock further to the aforementioned Stock Purchase Agreement, the Company had 14,360,972 shares of common stock
issued and outstanding, excluding outstanding options and warrants to purchase 16,834 and 1,536,803 shares of the Company’s
common stock, respectively.