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Item 1.01
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Entry into a Material Definitive Agreement
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On September 7, 2018, Precipio. Inc. (“we”
or the “Company”) entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital
Fund, LLC (“LPC”), pursuant to which we have the right to sell to LPC, and LPC has committed to purchase from us, from
time to time, up to $10,000,000 of our common stock, subject to certain limitations, during the 24 months term of the Purchase
Agreement. As consideration for its commitment to purchase shares of our common stock under the Purchase Agreement, we agreed to
issue 600,000 commitment shares to LPC as a commitment fee (the “Commitment Shares”).
Concurrently with the execution of the Purchase
Agreement on September 7, 2018, the Company and LPC also entered into a registration rights agreement (the “Registration
Rights Agreement”), pursuant to which the Company agreed, among other things, to file a registration statement (the “Registration
Statement”) with the Securities and Exchange Commission (the “SEC”), no later than October 5, 2018, to register
for resale by LPC under the Securities Act of 1933, as amended (the “Act”), the Commitment Shares and the shares of
common stock that we may elect to issue and sell to LPC from time to time under the Purchase Agreement.
We do not have the right to commence any sales
to LPC under the Purchase Agreement until each of the conditions set forth in the Purchase Agreement, all of which are outside
of LPC’s control, have been satisfied, including the Registration Statement being declared effective by the SEC. Thereafter,
under the Purchase Agreement, on any business day selected by us on which the closing price of our common stock is not less than
$0.10 per share (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction as provided in the Purchase Agreement), we may direct LPC to purchase up to 450,000 shares of
our common stock on such business day (each, a “Regular Purchase”), provided, however, that (i) the Regular Purchase
may be increased to up to 500,000 shares, provided that the closing sale price of our common stock is not below $0.50 on the purchase
date (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other
similar transaction as provided in the Purchase Agreement) and (ii) the Regular Purchase may be increased to up to 550,000 shares,
provided that the closing sale price of our common stock is not below $0.75 on the purchase date (subject to adjustment for any
reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided
in the Purchase Agreement). In each case, LPC’s maximum commitment in any single Regular Purchase may not exceed $1,000,000.
LPC has no right to require the Company to sell any shares of common stock to LPC, but LPC
is obligated to make purchases as we direct, subject to certain conditions.
The purchase price per share for each such Regular
Purchase will be based off of prevailing market prices of our common stock immediately preceding the time of sale without any fixed
discount.
In addition to Regular Purchases described
above, we may also direct LPC, on any business day on which we have properly submitted a Regular Purchase notice directing LPC
to purchase the maximum number of shares of our common stock that we are then permitted to include in a single Regular Purchase
notice and the closing sale price of our common stock on such business day is not below $0.25 per share (subject to adjustment
for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided
in the Purchase Agreement), to purchase an additional amount of our common stock, which we refer to as an Accelerated Purchase,
not to exceed the lesser of: (i) 25% of the aggregate shares of our common stock traded during all or, if certain trading volume
or market price thresholds specified in the Purchase Agreement are crossed on the applicable Accelerated Purchase date, which is
defined as the next business day following the purchase date for the corresponding Regular Purchase, the portion of the normal
trading hours on the applicable Accelerated Purchase date prior to such time that any one of such thresholds is crossed; and (ii)
3 times the number of purchase shares purchased pursuant to the corresponding Regular Purchase.
Under certain circumstances and in accordance
with the Purchase Agreement, the Company may direct LPC to purchase shares in multiple Accelerated Purchases on the same trading
day, provided that (i) the closing price of our common stock on the business day immediately preceding such business day is not
less than $0.25 per share (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse
stock split or other similar transaction as provided in the Purchase Agreement) and (ii) all prior Accelerated Purchases (including
those that have occurred earlier on the same day) have been completed and all of the shares to be purchased thereunder (and under
the corresponding Regular Purchase) have been properly delivered to LPC in accordance with the Purchase Agreement. The price per
share in each Accelerated Purchase will be based on the market prices of the Company’s common stock at the time of such Accelerated
Purchase calculated as set forth in the Purchase Agreement.
Other
than as described above, there are no trading volume requirements or restrictions under the Purchase Agreement, and we will control
the timing and amount of any sales of our common stock to LPC.
There are no restrictions on future financings,
rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights
Agreement other than a prohibition on entering into a “Variable Rate Transaction,” as defined in the Purchase Agreement.
Under applicable rules of The NASDAQ Capital
Market, in no event may we issue or sell to LPC under the Purchase Agreement more than 19.99% of the shares of our common stock
outstanding immediately prior to the execution of the Purchase Agreement (which is 4,628,859 shares based on 23,155,872 shares
outstanding immediately prior to the execution of the Purchase Agreement) (the “Exchange Cap”), unless (i) we obtain
stockholder approval to issue shares of common stock in excess of the Exchange Cap or (ii) the average price of all applicable
sales of our common stock to LPC under the Purchase Agreement equal or exceed $0.4728 (which represents the closing consolidated
bid price of our common stock on September 7, 2018, plus an incremental amount to account for our issuance of the Commitment Shares
to LPC), such that issuances and sales of our common stock to LPC under the Purchase Agreement would be exempt from the Exchange
Cap limitation under applicable NASDAQ rules.
The Purchase Agreement also prohibits us from
directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of our common stock
then beneficially owned by LPC and its affiliates, would result in LPC and its affiliates having beneficial ownership, at any single
point in time, of more than 4.99% of the then total outstanding shares of our common stock, as calculated pursuant to Section 13(d)
of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder.
The net proceeds under the Purchase Agreement
to us will depend on the frequency and prices at which we sell shares of common stock to LPC. We expect that any proceeds received
by us from such sales to LPC will be used for working capital and general corporate purposes.
The Purchase
Agreement and the Registration Rights Agreement contain customary representations, warranties, agreements and closing conditions
to as well as indemnification rights and termination provisions. We have the right to terminate the Purchase Agreement at any time,
at no cost or penalty.
In the event of bankruptcy proceedings by or against us, the Purchase Agreement will automatically
terminate without action of any party.
During any “event of default” under the
Purchase Agreement, all of which are outside of LPC’s control, LPC does not have the right to terminate the Purchase Agreement;
however, the Company may not initiate any regular or other purchase of shares by LPC, until such event of default is cured.
The foregoing descriptions of the Purchase Agreement
and the Registration Rights Agreement are qualified in their entirety by reference to the full text of such agreements, copies
of which are attached hereto as Exhibit 10.01 and 10.02, respectively, and each of which is incorporated herein in its entirety
by reference. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements
and as of specific dates, were solely for the benefit of the parties to such agreements, and may be subject to limitations agreed
upon by the contracting parties.