Item
1.01
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Entry
Into a Material Definitive Agreement.
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Membership
Interest Purchase Agreement
On
March 23, 2020, Akers Biosciences, Inc. (the “Company”) entered into a Membership Interest Purchase Agreement
(the “MIPA”) with the members of Cystron Biotech, LLC (individually, each a “Seller,” and
collectively, the “Sellers”), pursuant to which the Company will acquire 100% of the membership interests (the
“Membership Interests”) of Cystron Biotech, LLC (“Cystron”).
As
consideration for the Membership Interests, the Company will deliver to the Sellers: (1) that number of newly issued shares of
the Company’s common stock equal to 19.9% of the issued and outstanding shares of the Company’s common stock and pre-funded
warrants as of the date of the MIPA, but, to the extent that the issuance of the Company’s common stock would result in
any Seller owning in excess of 4.9% of the Company’s outstanding common stock, then, at such Seller’s election, such
Seller may receive “common stock equivalent” preferred shares with a customary 4.9% blocker (with such common stock
and preferred stock collectively referred to as “Common Stock Consideration”), and (2) $1,000,000.
Additionally,
the Company shall (A) make an initial payment to the Sellers of up to $1,000,000 upon the Company’s receipt of cumulative
gross proceeds from the consummation of an initial equity offering after the date of the MIPA of $8,000,000, and (B) pay to Sellers
an amount in cash equal to 10% of the gross proceeds in excess of $8,000,000 raised from future equity offerings after the date
of the MIPA until the Sellers have received an aggregate additional cash consideration equal to $10,000,000. Upon the achievement
of certain milestones, including the completion of a Phase 2 study that meets its primary endpoints, Sellers will be entitled
to receive an additional 750,000 shares of the Company’s common stock or, in the event the Company is unable to obtain stockholder
approval for the issuance of such shares, 750,000 shares of non-voting preferred stock that are valued following the achievement
of such milestones and shall bear a 10% annual dividend (the “Milestone Shares”). Sellers will also be entitled
to contingent payments from the Company of up to $20,750,000 upon the achievement of certain milestones, including the approval
of a new drug application by the U.S. Food and Drug Administration.
The
Company shall also make quarterly royalty payments to Sellers equal to 5% of the net sales of a COVID-19 vaccine or combination
product by the Company (the “COVID-19 Vaccine”) for a period of five (5) years following the first commercial
sale of the COVID-19 Vaccine; provided, that such payment shall be reduced to 3% for any net sales of the COVID-19 Vaccine above
$500 million.
In
addition, Sellers shall be entitled to receive 12.5% of the transaction value, as defined in the MIPA, of any change of control
transaction, as defined in the MIPA, that occurs prior to the fifth (5th) anniversary of the closing date of the MIPA,
provided that the Company is still developing the COVID-19 Vaccine at that time. Following the consummation of any change of control
transaction, the Sellers shall not be entitled to any payments as described above under the MIPA.
Support
Agreement
On
March 23, 2020, as an inducement to enter into the MIPA, and as one of the conditions to the consummation of the transactions
contemplated by the MIPA, the Sellers entered into a shareholder voting agreement with the Company (the “Support Agreement”),
pursuant to which each Seller agreed to vote their shares of the Company’s common stock or preferred stock in favor of each
matter proposed and recommended for approval by the Company’s management at every meeting of the stockholders and on any
action or approval by written consent of the stockholders.
Registration
Rights Agreement
To
induce the Sellers to enter into the MIPA, on March 23, 2020, the Company entered into a registration rights agreement (the “Registration
Rights Agreement”) with the Sellers, pursuant to which the Company shall by the 30th day following the closing
of the transactions contemplated by the MIPA, file with the United States Securities and Exchange Commission (the “SEC”)
an initial Registration Statement on Form S-3 (if such form is available for use by the Company at such time) or, otherwise, on
Form S-1, covering all of the shares of the Company’s common stock issued, or underlying the preferred stock issued, at
closing under the MIPA and to subsequently register the common stock issued or underlying the preferred stock issued at Milestone
Shares.
License
Agreement
Cystron
is a party to a License and Development Agreement (the “Initial License Agreement”) with Premas Biotech PVT
Ltd. (“Premas”). As a condition to the Company’s entry into the MIPA, Cystron amended and restated the
Initial License Agreement on March 19, 2020 (as amended and restated, the “License Agreement”). Pursuant to
the License Agreement, Premas granted Cystron, amongst other things, an exclusive license with respect to Premas’ vaccine
platform for the development of a vaccine against COVID-19 and other corona virus infections.
Upon
the achievement of certain developmental milestones by Cystron, Cystron shall pay to Premas a total of up to $2,000,000.
The
foregoing summaries of the MIPA, the Support Agreement, the Registration Rights Agreement and the License Agreement are not complete
and are qualified in their entirety by reference to the full text of the exhibits to this Current Report on Form 8-K.