Item
1.01 Entry into a Material Definitive Agreement.
Public
Offering
On
July 17, 2020, Hancock Jaffe Laboratories, Inc., a Delaware corporation (the “Company,” “our,” “we,”
or “us”), entered into an Underwriting Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann
& Co. Inc., as representative of the several underwriters named therein (the “Underwriters”), relating to a firm
commitment public offering (the “Public Offering”) of 12,500,000 units (the “Units”), consisting of an
aggregate of (i) 12,500,000 shares (the “Firm Shares”) of common stock, par value $0.00001 per share (the “Common
Stock”), and (ii) warrants to purchase up to 12,500,000 shares of Common Stock (the “Firm Warrants”), at a public
offering price of $0.32 per Unit. Pursuant to the terms of the Underwriting Agreement, the Underwriters also exercised their overallotment
option in full, purchasing an additional 1,875,000 shares of Common Stock (the “Option Shares”; and, together with
the Firm Shares, the “Shares”) and warrants to purchase up to 1,875,000 shares of Common Stock (the “Option
Warrants”; and, together, with the Firm Warrants, the “Warrants”), for an aggregate purchase of 14,375,000 Shares
and Warrants to purchase up to 14,375,000 shares of Common Stock. After giving effect to these transactions, the Company has 38,324,333
shares of Common Stock outstanding (not assuming the exercise of the Warrants).
The
Warrants have an initial exercise price of $0.32 per share, subject to customary adjustments, and will expire seven years from
the date of issuance. The Warrants are exercisable on the date that we file an amendment to our amended and restated certificate
of incorporation to reflect our stockholders’ approval of either an increase in the number of our authorized shares of common
stock or a reverse stock split (the “Stockholder Approval Date”), in either case in an amount sufficient to permit
the exercise in full of the Warrants.
The
offering of the Units is being made pursuant to our registration statement on Form S-1, as amended (File No. 333- 239658) (the
“Registration Statement”), which the Securities and Exchange Commission declared effective on July 16, 2020.
The
Underwriting Agreement contains customary representations, warranties, covenants, agreements, and indemnification, including for
liabilities under the Securities Act of 1933, as amended. In addition, pursuant to the terms of the Underwriting Agreement, each
of our officers and directors have entered into “lock-up” agreements with the Underwriters that generally prohibit
the sale, transfer, or other disposition of our securities, without the prior written consent of the Underwriters, for a period
of ninety (90) days following the announcement of the Public Offering. We have also agreed in the Underwriting Agreement (a) to
similar lock-up restrictions on the issuance and sale of our securities for the earlier of (i) ninety (90) days following the
closing date of the Public Offering, and (ii) fifteen (15) days following the stockholders meeting relating to the Stockholder
Approval Date, and (b) restrictions on consummating variable rate transactions for the earlier of (i) ninety (90) days following
the closing date of the Public Offering, and (ii) fifteen (15) days following stockholders meeting relating to the Stockholder
Approval Date, although we will be permitted to issue stock options or stock awards to directors, officers and employees under
our existing plans.
Certain
investors in the Public Offering agreed with the representative of the Underwriters to enter into a lock-up and voting agreement
(the “Lock-Up and Voting Agreements”) whereby each such investor is subject to a lock-up period through July 21, 2020.
Additionally, those investors have agreed to vote all shares of common stock each beneficially owns on the closing date of the
Public Offering, including the Shares, with respect to any proposals presented to the stockholders of the Company. Additionally,
certain investors that have agreed to enter into the Lock-Up and Voting Agreements will as consideration for their waiver of certain
rights described in those certain Securities Purchase Agreements dated April 24, 2020, and June 1, 2020, be issued unregistered
warrants substantially similar to the Warrants and the Private Warrants (as defined below) sold in the Public Offering and Private
Placement (as defined below), respectively, except that such warrants will have a term of five (5) years, will have an exercise
price equal to $0.37 per share and carry piggy-back registration rights. The number of shares of common stock underlying such
warrants will be equal to the dollar amount subscribed by such investor in the Public Offering and/or the concurrent private placement
(described below), multiplied by 1.5, which equates to warrants to purchase up to an aggregate of 3,495,000 shares of Common
Stock.
Pursuant
to the Underwriting Agreement, we also issued to the Underwriters as compensation a warrant (the “Underwriters’ Warrant”)
to purchase up to 750,000 shares of Common Stock (the “Underwriters’ Warrant Shares”). The Underwriters’
Warrant and Underwriters’ Warrant Shares were registered pursuant to the Registration Statement.
In
connection with the Public Offering, we also entered into a Warrant Agent Agreement (the “Warrant Agent Agreement”)
with VStock Transfer, LLC, as warrant agent. The Warrants were issued in registered form pursuant to the Warrant Agent Agreement
and, initially, are issued and maintained in the form of a security held in book-entry form and The Depository Trust Company or
its nominee is the sole registered holder of the Warrants, subject to the holder’s right to receive a warrant in certificated
form pursuant to the terms of the Warrant Agent Agreement.
The
foregoing summaries of the Underwriting Agreement, the Warrants, the Underwriters’ Warrants, and the Lock-Up and Voting
Agreements do not purport to be complete and are qualified in their entirety by reference to the form of Underwriting Agreement
attached to the Registration Statement as Exhibit 1.1, the form of Warrant and Underwriters’ Warrants attached to the Registration
Statement as Exhibit 4.18, the form of Lock-Up and Voting Agreements attached to the Registration Statement as Exhibit 4.19, and
the form of Warrant Agent Agreement attached hereto as Exhibit 4.1, respectively.
Concurrent
Private Placement
In
a concurrent private placement (the “Private Placement” and, together with the Public Offering, the “Offerings”),
we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers named therein (the
“Purchasers”), pursuant to which the Company agreed to issue and sell to the Purchasers (i) 4,205,406 shares of Series
C Convertible Preferred Stock (the “Preferred Stock”) at a price per share of $0.37, which may convert into 6,078,125
shares (the “Conversion Shares”) of Common Stock (not including the issuance of shares of Common Stock pursuant to
certain dividend rights), which represents a conversion ratio of approximately 1-to-1.445, and (ii) unregistered warrants (the
“Private Warrants”) to purchase up to 6,078,125 shares (the “Private Warrant Shares”) of Common Stock,
at an exercise price of $0.32 per Private Warrant.
Preferred
Stock
The
following is a summary of the material terms of the Preferred Stock. This summary is not complete. The following summary of the
terms and provisions of the Preferred Stock is qualified in its entirety by reference to the Certificate of Designations of the
Series C Convertible Preferred Stock (the “Certificate of Designations”) setting forth the terms of the Series C Preferred
Stock and our amended and restated certificate of incorporation.
Ranking
The
Preferred Stock ranks senior to our Common Stock and any future preferred stock of the Company with respect to dividend rights
and/or rights upon distributions or liquidation.
Dividends
The
holders of the Preferred Stock are entitled to receive as dividends in kind at an annual rate equal to 8.0% of the per share purchase
price of the Preferred Stock for each of the then outstanding shares of Preferred Stock, calculated on the basis of a 360-day
year consisting of twelve 30-day months. Such dividends will begin to accrue and accumulate (to the extent not otherwise declared
and paid as set forth above) on each share of Preferred Stock, from the date of issuance of such share of Preferred Stock.
Conversion
If
at any time after the later of (i) the date that we file an amendment to our amended and restated certificate of incorporation
to reflect our stockholders’ approval of either an increase in the number of our authorized shares of Common stock or a
reverse stock split (in either case in an amount sufficient to permit the conversion in full of the Preferred Stock and exercise
in full of the Private Warrants), and (ii) the date of approval as may be required by the applicable rules and regulations of
The Nasdaq Stock Market LLC (or any successor entity) from the stockholders of the Company with respect to the transactions contemplated
by the Purchase Agreement, including the issuance of all of the Conversion Shares and the Private Warrant Shares in excess of
19.99% of the issued and outstanding Common Stock on the closing date of the Private Placement (collectively, a “Capital
Event”), and subsequent to a Capital Event the Company (i) consummates a merger, or (ii) raises an aggregate of at least
$8,000,000 in gross proceeds in a transaction or series of transactions within any twelve (12) month period, then the Company
may force the automatic conversion of the Preferred Stock into Conversion Shares.
Voting
Rights
The
holders of the Series C Preferred Stock shall be entitled to vote on any matter submitted to the stockholders of the Company for
a vote. One (1) share of Preferred Stock shall carry the same voting rights as one (1) share of Common Stock.
Private
Warrants
The
Private Warrants have an initial per share exercise price of $0.32, subject to customary adjustments, and will expire seven years
from the date of issuance. The Private Warrants are exercisable on the later of (i) the date that we file an amendment to our
amended and restated certificate of incorporation to reflect our stockholders’ approval of either an increase in the number
of our authorized shares of Common Stock or a reverse stock split (in either case in an amount sufficient to permit the conversion
in full of the Preferred Stock and exercise in full of the Private Warrants), and (ii) the date of approval as may be required
by the applicable rules and regulations of The Nasdaq Stock Market LLC (or any successor entity) from the stockholders of the
Company with respect to the transactions contemplated by the Purchase Agreement, including the issuance of all of the Conversion
Shares and the Private Warrant Shares in excess of 19.99% of the issued and outstanding Common Stock on the closing date of the
Private Placement.
The
Preferred Stock, the Conversion Shares, the Private Warrants, and the Private Warrant Shares are not being registered under the
Securities Act of 1933, as amended (the “Securities Act”) and were not offered pursuant to the Registration Statement,
rather the Preferred Stock and the Private Warrants were offered pursuant to the exemption provided in Section 4(a)(2) under the
Securities Act, and Rule 506(b) promulgated thereunder.
In
connection with the Private Placement, the Company entered into a registration rights agreement (the “Registration Rights
Agreement”) with each of the Purchasers. Pursuant to the Registration Rights Agreement, the Company agreed to cause a resale
registration statement on Form S-1 providing for the resale by holders of the Conversion Shares and the Private Warrant Shares,
to be filed thirty (30) calendar days following the Stockholders Approval Date, and the Company will use commercially reasonable
efforts to have such resale registration statement declared effective as soon as practicable.
The
foregoing summaries of the Certificate of Designations, Purchase Agreement, Private Warrants, and the Registration Rights Agreement
do not purport to be complete and are qualified in their entirety by reference to the Certificate of Designations attached hereto
as Exhibit 3.1, the form of Purchase Agreement attached to the Registration Statement as Exhibit 10.53, the form of Private Warrants
attached to the Registration Statement as Exhibit 4.18, and the form of Registration Rights Agreement attached to the Registration
Statement as Exhibit 10.54, respectively.
Ladenburg
Thalmann & Co. Inc. acted as the sole book-running manager and sole placement agent in connection with the Public Offering
and Private Placement, respectively.
The
net proceeds to the Company from the Offerings is approximately $5.2 million, after deducting underwriting discounts and commissions
and estimated offering expenses payable by the Company. The Offerings closed on July 21, 2020.