Item
1.01.
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Entry
into a Material Definitive Agreement.
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On
September 3, 2020, Tonix Pharmaceuticals Holding Corp. (the “Company”) entered into a purchase agreement, dated as
of September 3, 2020 (the “Purchase Agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant
to which Lincoln Park has committed to purchase up to $30.0 million of shares (the “Purchase Shares”) of the Company’s
common stock, $0.001 par value per share (the “Common Stock”). Concurrently with entering into the Purchase Agreement,
the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln
Park with certain registration rights related to the shares issued under the Purchase Agreement (the “Registration Rights
Agreement”).
Beginning
on the Commencement Date (as defined below) and thereafter, the Company has the right, in its sole discretion, to present Lincoln
Park with a purchase notice (a “Regular Purchase Notice”), directing Lincoln Park to purchase up to 750,000 Purchase
Shares (the “Regular Purchase Amount”) provided that the closing sale price of the Common Stock is not below $0.10
on the purchase date (a “Regular Purchase”). The Regular Purchase Amount may be increased to up to 1,000,000 shares
if the closing sale price of the Common Stock is not below $0.75 per share, and to up to 1,250,000 shares if the closing sale
price of the Common Stock is not below $1.00 per share. The Company and Lincoln Park may mutually agree to increase the Regular
Purchase Amount provided that Lincoln Park’s committed obligation under each Regular Purchase shall not exceed 4,000,000
shares on any purchase date.
The
Purchase Agreement provides for a purchase price per Purchase Share for each Regular Purchase (the “Purchase Price”)
equal to the lesser of:
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the
lowest sale price of the Common Stock on the Nasdaq Global Market on the purchase date
of such shares; and
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the
average of the three lowest closing sale prices for the Common Stock on the Nasdaq Global
Market during the ten consecutive business days ending on the business day immediately
preceding the purchase date of such shares.
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In
addition, on any date on which the Company submits a Purchase Notice for the maximum amount allowed for such a Regular Purchase
to Lincoln Park and the closing sale price of the Common Stock is not below $0.20, it also has the right, in its sole discretion,
to present Lincoln Park with an accelerated purchase notice (an “Accelerated Purchase Notice”), directing Lincoln
Park to purchase an amount of Purchase Shares (an “Accelerated Purchase”), which number of Purchase Shares will not
exceed the lesser of (i) 300% of the number of shares purchased pursuant to such Regular Purchase and (ii) 30% of the total
number of shares of the Common Stock traded on Nasdaq during all or a specified period on the applicable Accelerated Purchase
date as set forth in the Purchase Agreement. The purchase price per Purchase Share for each such Accelerated Purchase will be
equal to 97% of the lesser of:
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the volume-weighted average price of the Common Stock on the Nasdaq Global Market during the applicable Accelerated Purchase Measurement Period (as such term is defined in the Purchase Agreement) on the applicable Accelerated Purchase date; and
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the
closing sale price of the Common Stock on the Nasdaq Global Market on the applicable
Accelerated Purchase date.
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The
Company may also direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares
to be purchased thereunder have been properly delivered to Lincoln Park in accordance with the Purchase Agreement, to make purchases
of an additional amount of our Common Stock upon the same terms as an Accelerated Purchase, (an “Additional Accelerated
Purchase”).
The purchase price of Regular Purchases, Accelerated Purchases and
Additional Accelerated Purchases and the minimum closing sale price for a Regular Purchase will be adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the
business days used to compute the purchase price. The aggregate number of shares that the Company can sell to Lincoln Park under
the Purchase Agreement may in no case exceed 26,042,434 shares (subject to adjustment as described above) of the Common Stock (which
is equal to approximately 19.99% of the shares of the Common Stock outstanding immediately prior to the execution of the Purchase
Agreement) (the “Exchange Cap”), unless (i) stockholder approval is obtained to issue Purchase Shares above the
Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of our
Common Stock to Lincoln Park under the Purchase Agreement equals or exceeds $0.8496 per share (which represents the lower of (A)
the official closing price of our Common Stock on Nasdaq on the trading day immediately preceding the date of the Purchase Agreement
and (B) the average official closing price of our Common Stock on Nasdaq for the five consecutive trading days ending on the trading
day immediately preceding the date of the Purchase Agreement, adjusted such that the transactions contemplated by the Purchase
Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules); provided that at no time may Lincoln Park
(together with its affiliates) beneficially own more than 4.99% (which Lincoln Park may increase up to 9.99% upon 61 days’
prior written notice to us) of the Company’s issued and outstanding Common Stock. The Company issued 600,000 shares of Common
Stock to Lincoln Park as a commitment fee in connection with entering into the Purchase Agreement (the “Commitment
Shares” and together with the Purchase Shares, the “Shares”).
The
Purchase Agreement contains customary representations, warranties, covenants, closing conditions and indemnification and termination
provisions. Sales under the Purchase Agreement may commence only after certain conditions have been satisfied (the date on which
all requisite conditions have been satisfied, the “Commencement Date”), which conditions include the delivery to Lincoln
Park of a prospectus supplement covering the shares of Common Stock issued or sold by the Company to Lincoln Park under the Purchase
Agreement, the filing with The Nasdaq Stock Market of a Listing of Additional Shares notification with respect to the Shares and
Nasdaq having raised no objection to the consummation of transactions contemplated under the Purchase Agreement, and the receipt
by Lincoln Park of a customary opinion of counsel and other certificates and closing documents. We anticipate that such conditions
will be satisfied on or around September 4, 2020.
The
Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving
one business day notice to Lincoln Park to terminate the Purchase Agreement. Lincoln Park has covenanted not to cause or engage
in any manner whatsoever, any direct or indirect short selling or hedging of the Common Stock. Although the Company has agreed
to reimburse Lincoln Park for a limited portion of the fees it incurred in connection with the Purchase Agreement, the Company
did not pay any additional amounts to reimburse or otherwise compensate Lincoln Park in connection with the transaction, other
than the issuance of the Commitment Shares.
There
are no limitations on use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions
on the Company’s ability to enter into variable rate transactions described in the Purchase Agreement), rights of first
refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Company may deliver Purchase Notices
under the Purchase Agreement, subject to market conditions, and in light of its capital needs from time to time and under the
limitations contained in the Purchase Agreement. Any proceeds that the Company receives under the Purchase Agreement are expected
to be used for working capital and general corporate purposes.
The
issuance of the Purchase Shares and Commitment Shares have been registered pursuant to the Company’s effective shelf registration
statement on Form S-3 (File No. 333-237610) (the “Registration Statement”), and the related base prospectus
included in the Registration Statement, as supplemented by a prospectus supplement to be filed on or around the Commencement Date
(the “Prospectus Supplement”). A copy of the legal opinion as to the legality of the Shares is filed as Exhibit 5.01
attached hereto.
The
foregoing is a summary description of certain terms of the Purchase Agreement and the Registration Rights Agreement and, by
its nature, is incomplete. Copies of the Purchase Agreement and the Registration Rights Agreement are filed as Exhibits 10.01
and 10.02 attached hereto. The foregoing descriptions of the Purchase Agreement and the Registration Rights Agreement are
qualified in their entirety by reference to such exhibits. The Purchase Agreement and Registration Rights Agreement contain
customary representations and warranties, covenants and indemnification provisions that the parties made to, and solely for
the benefit of, each other in the context of all of the terms and conditions of such agreements and in the context of the
specific relationship between the parties thereto. The provisions of the Purchase Agreement and Registration Rights
Agreement, including any representations and warranties contained therein, are not for the benefit of any party other than
the parties thereto and are not intended as
documents for investors and the public to obtain factual information about the current state of affairs of the parties thereto.
Rather, investors and the public should look to other disclosures contained in the Company’s annual, quarterly and current
reports it may file with the Securities and Exchange Commission (the “SEC”).
The
information contained in this Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of
an offer to buy the shares of the Company’s Common Stock discussed herein, nor shall there be any offer, solicitation or
sale of the shares in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction.