Item 1.01
Entry into a Material Definitive Agreement
Securities Purchase Agreement
On January 16, 2019, Apricus Biosciences, Inc. (the “Company” or “Apricus”) and Seelos Therapeutics, Inc. (“Seelos”) entered into
Amendment Agreements (collectively, the “Third Amendment”) with each Investor (as defined below) amending that certain Securities Purchase Agreement (the “Purchase Agreement” and the transactions contemplated thereby, the “Financing”), made and
entered into as of October 16, 2018, by and among the Company, Seelos and the buyers listed on the signature pages attached thereto (the “Investors”), and amended by those certain Amendment Agreements, made and entered into as of November 16,
2018 (the “First Amendment”) and those certain Second Amendment Agreements, made and entered into as of January 4, 2019 (the “Second Amendment”). The Third Amendment reduces the estimated pro forma warrant liability and increases the estimated
stockholders’ equity of the combined organization, which is required in order to meet certain of the listing requirements of the Nasdaq Capital Market following the closing of the Merger (as defined below).
As previously disclosed in the Company’s current report on Form 8-K filed on July 30, 2018, the Company, Seelos and Arch Merger Sub,
Inc., a wholly owned subsidiary of Apricus (“Merger Sub”), are party to that certain Agreement and Plan of Merger and Reorganization, as amended (the “Merger Agreement”), pursuant to which among other matters, and subject to the satisfaction or
waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Seelos, with Seelos continuing as a wholly owned subsidiary of Apricus and the surviving corporation of the merger (the “Merger”).
Additionally, as previously disclosed in the Company’s current reports on Form 8-K filed on October 17, 2018 and November 16, 2018,
pursuant to the Purchase Agreement, (i) Seelos agreed to sell to the Investors an aggregate of 1,187,336 shares of Seelos’ common stock (the “Initial Shares” and, as converted into the right to receive a number of shares of Company common stock
equal to the exchange ratio in the Merger, the “Converted Initial Shares”) and deposit an additional 1,187,336 shares of Seelos’ common stock into escrow for the benefit of the Investors if the volume-weighted average closing trading price of a
share of the Company’s common stock as quoted on the Nasdaq Capital Market for the first three trading days immediately following the closing date of the Financing is lower than the price paid by the Investors for the Initial Shares (to the
extent issued and as converted into the right to receive a number of shares of Company common stock equal to the exchange ratio in the Merger, the “Converted Additional Shares”), and (ii) the Company agreed to issue warrants representing the
right to acquire an amount of Company common stock up to the amount issuable in exchange for 80% of the combined Converted Initial Shares and Converted Additional Shares, (the “Series A Warrants”), and additional warrants to purchase shares of
Company common stock (the “Series B Warrants” together with the Series A Warrants, the “Investor Warrants”). The First Amendment provided that the Investor Warrants were revised to provide that the Company shall in no event issue shares of the
Company’s common stock pursuant to the exercise of the Series A Warrants and the Series B Warrants, in the aggregate, in excess of the difference obtained by subtracting the number of Converted Initial Shares and the number of Converted
Additional Shares from 533,773,068, prior to giving effect to the reverse split to be effected in connection with the Merger (the “Warrant Issuance Cap”). In the event that the Company is unable to issue shares of the Company’s common stock
pursuant to an exercise of Series A Warrants or the Series B Warrants due to the application of the Warrant Issuance Cap, the Company will pay to the exercising holder an amount in cash equal to the difference between the last closing trade price
of the Company’s common stock and the applicable exercise price, if any, to the extent not previously paid to the Company.
Further, as previously disclosed in the Company’s current Report on Form 8-K filed on January 4, 2019, the Second Amendment provided
that the Series A Warrants were to be comprised of two series of Series A Warrants, a Series A-1 Warrant (“A-1 Warrant”), which would constitute 70% of the Series A Warrants issuable to each Investor pursuant to the Purchase Agreement, and a
Series A-2 Warrant (“A-2 Warrant”), which would constitute 30% of the Series A Warrants issuable to each Investor pursuant to the Purchase Agreement. The form of the A-2 Warrants was not amended pursuant to the Second Amendment and were to be in
the form attached as Exhibit A-1 attached to the First Amendment, and as filed as Exhibit 4.1 to the Company’s current report on Form 8-K filed November 16, 2018. The A-1 Warrants were to be in the form attached as Exhibit A-1 attached to the
First Amendment, except as follows: (i) the provision that required a cash payment in the event that upon any exercise of the warrant, the Company did not have sufficient authorized shares to deliver to the Investor was deleted; (ii) the
provisions on Fundamental Transactions (as defined therein) was revised to state that in the event a Fundamental Transaction was not within the Company’s control, a holder of the warrant will be entitled to the same type of consideration (and in
the same proportion) offered and paid to the holders of common stock; and (iii) the definitions of “Black Scholes Consideration Value” and “Black Scholes Value” were amended to remove the minimum volatility factor and change references to the
“highest Weighted Average Prices” during the calculation period to the “average of the Weighted Average Prices”. In addition, the provision of the Purchase Agreement pertaining to the date by which the closing of the Financing must occur before
the Investors have the right to terminate the Purchase Agreement was extended from December 31, 2018 to January 18, 2019.
The Third Amendment provides that the Series A Warrants shall be comprised of a single series of warrants which shall be in the form
of the A-1 Warrants. In addition, the provision of the Purchase Agreement pertaining to the date by which the closing of the Financing must occur before the Investors have the right to terminate the Purchase Agreement was extended from to January
18, 2019 to January 31, 2019.
Transaction Document
The representations, warranties and covenants contained in the Third Amendment were made solely for the benefit of the parties to the
Third Amendment and ROTH Capital Partners, LLC acting as exclusive placement agent. In addition, such representations, warranties and covenants (i) are intended as a way of allocating the risk between the parties to the Third Amendment and not as
statements of fact, and (ii) may apply standards of materiality in a way that is different from what may be viewed as material by stockholders of, or other investors in, the Company. Accordingly, the Third Amendment is filed with this report only
to provide investors with information regarding the terms of transaction, and not to provide investors with any other factual information regarding the Company. Stockholders should not rely on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state of facts or condition of the Company. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Third Amendment, which
subsequent information may or may not be fully reflected in public disclosures.
The Third Amendment is filed as Exhibit 10.1 to this Current Report on Form 8-K. The foregoing summary of the terms of this document
are subject to, and qualified in its entirety by, the copy of such document filed as Exhibit 10.1 to this Current Report on Form 8-K, which is incorporated herein by reference.
As a result of the Third Amendment, the Series A Warrants will now be equity-classified and will no longer be accounted for as a
liability on the Company’s pro forma balance sheet, resulting in a higher stockholders’ equity. Pro forma financial information with respect to the combined organization after the Merger and reflecting the effects of the Purchase Agreement, as
amended by the First Amendment, the Second Amendment and the Third Amendment, is provided in Item 9.01 of, and set forth in Exhibit 99.1 to, this Current Report on Form 8-K.
Merger Agreement Amendment
On January 16, 2019, the Company, Arch Merger Sub, Inc. (“Merger Sub”) and Seelos entered into Amendment No. 3 to that certain
Agreement and Plan of Merger and Reorganization (as amended by that certain Amendment No. 1 to the Agreement and Plan of Merger and Reorganization on October 16, 2018 and Amendment No. 2 to the Agreement and Plan of Merger and Reorganization on
December 14, 2018, the “Merger Agreement”), made and entered as of July 30, 2018, by and among the Company, Merger Sub and Seelos (the “Merger Amendment”), whereby the following amendment was agreed upon by the parties: the reference to “January
18, 2019” in Section 9.1(b) of the Merger Agreement, pertaining to the “End Date” by which the transactions contemplated by the Merger Agreement shall have been consummated was amended and restated to read “January 31, 2019”.
The Merger Amendment is filed as Exhibit 2.1 to this Current Report on Form 8-K. The foregoing summary of the terms of the Merger
Amendment is subject to, and qualified in its entirety by, the copy of the Merger Amendment filed as Exhibit 2.1 to this Current Report on Form 8-K, which is incorporated herein by reference.