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Item
1.01.
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Entry
into a Material Definitive Agreement.
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Private
Placement
As
previously disclosed, on February 26, 2019, the Company consummated a private placement offering with a large institutional
investor consisting of the sale of 10,872,716 shares of the Company’s common stock, at a price of $1.3796 per share
(the “Private Placement”). On March 12, 2019, the Company entered into a securities purchase agreement
(the “Purchase Agreement”) and consummated a second closing to the Private Placement with certain
existing stockholders entitled to preemptive rights in connection with the initial closing of the Private Placement,
consisting of the sale of 3,512,124 shares of the Company’s common stock, at the same price and on the same terms as
the initial closing of the Private Placement, through the exercise of such preemptive rights and the purchase of certain
additional shares. The aggregate gross proceeds from both closings of the Private Placement was approximately $19.8 million
and the aggregate net proceeds was approximately $19.5 million. The investors included HEC Master Fund LP,
an affiliate of Douglas L. Braunstein and BioStar Ventures III-XF, L.P., an affiliate of Louis A. Cannon M.D., both of whom
are directors of the Company. The shares sold in the Private Placement are subject to a contractual six month
lock-up.
In connection with the Private Placement, the Company also entered into a registration rights agreement (the
“Registration Rights Agreement”) with the second closing investors requiring the Company to register the resale
of the shares. Under the Registration Rights Agreement, the Company will be required to prepare and file a registration
statement with the Securities and Exchange Commission within 90 days of the second closing of the Private Placement and to
use commercially reasonable efforts to have the registration statement declared effective within 180 days of the second
closing of the Private Placement.
Amendment
to Loan and Security Agreement
On
March 14, 2019, the Company entered into the first amendment (the “Amendment”) to the loan and security agreement
(the “Loan Agreement”) by and among Silicon Valley Bank (“SVB”), as collateral agent, and the lenders
party thereto from time to time, including Solar Capital Ltd. and SVB, dated March 16, 2018 (the “Effective Date”).
The Amendment provides the Company with an additional term loan of $2.75 million (the “New Term Loan”), all of which
was outstanding principal as of March 14, 2019. The New Term Loan bears interest at a floating rate per annum equal to the
greater of (i) 8.83% and (ii) the sum of (a) the one month ICE Benchmark LIBOR based on U.S. Dollar deposits, plus
(b) 7.25%. Proceeds from the New Term Loan may be used for working capital and general business purposes. The New Term Loan
is secured by substantially all of the Company’s personal property, other than its intellectual property. The New Term Loan
restricts the Company’s ability to grant any interest in its intellectual property other than certain permitted licenses
and permitted encumbrances set forth in the Loan Agreement. The Company is required to make monthly interest-only payments on
the New Term Loan commencing on April 1, 2019, and continuing on the first calendar day of each calendar month thereafter through
March 31, 2020. Commencing on April 1, 2020, and continuing on the first calendar day of each calendar month thereafter, the Company
is required to make consecutive equal monthly payments of principal, together with applicable interest, in arrears to each lender,
calculated pursuant to the Loan Agreement. All unpaid principal and accrued and unpaid interest with respect to the New Term Loan
is due and payable in full on March 1, 2022. Upon repayment of the New Term Loan, the Company is also required to make a final
payment to the lenders equal to 6.0% of the original principal amount of the New Term Loan. At the Company’s option, the
Company may prepay the outstanding principal balance of the New Term Loan in whole but not in part, subject to a prepayment fee
of 2.5% of any amount prepaid prior to the first anniversary of the Effective Date, 1.5% of the amount prepaid if the prepayment
occurs after the first anniversary of the Effective Date through and including the second anniversary of the Effective Date, or
1.0% of the amount prepaid if the prepayment occurs after the second anniversary of the Effective Date through and including the
third anniversary of the Effective Date. Except as amended by the Amendment, all other the terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Agreement and other loan documents remain in full force and effect.
In
connection with the Amendment, the Company issued the lenders warrants (the “Warrants”) to purchase an aggregate
of 300,000 shares of the Company’s common stock, at an exercise price of $1.3796, subject to adjustment for stock splits,
stock dividends, combinations or similar events. The Warrants may be exercised for cash or on a cashless basis.
The
Company did not use an underwriter or placement agent for the Private Placement or financing arrangement and did not pay any
commissions in connection with such transactions. The Company intends to use the proceeds from the Private Placement and the
financing arrangement for general corporate purposes. The shares and the Warrants were issued to “accredited
investors”, as that term is defined in Regulation D of the Securities Act of 1933, as amended (the “Securities
Act”), and were issued and sold in reliance upon the exemption from the registration requirements of the Securities
Act, set forth under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act,
relating to sales by an issuer not involving any public offering and in reliance on similar exemptions under applicable state
laws.
The
foregoing is a brief description of the material terms of the
form of Warrant, Purchase
Agreement, the Registration Rights Agreement, and the Amendment, copies of which are attached hereto as Exhibits 4.1, 10.1, 10.2
and 10.3, respectively, and incorporated herein by reference
. The foregoing does not purport to be a complete description
of the rights and obligations of the parties under the Warrants, Purchase Agreement, the Registration Rights Agreement, or the
Amendment and such description is qualified in its entirety by reference to the exhibits.
The
form of Warrant, Purchase Agreement, the Registration Rights Agreement, and the Amendment are being filed as exhibits hereto in
order to provide investors and stockholders with information about the terms contained therein. They are not intended to provide
any other factual information about the Company or any of the other parties thereto. The assertions embodied in the representations
and warranties contained in such documents, respectively, are given only as of the dates specified therein and may have been qualified
by information provided among the parties. Such representations and warranties were used for the purpose of allocating risk, both
known and unknown, among the parties rather than to make affirmative factual claims or statements. Accordingly, you should not
rely on the representations and warranties as current characterizations of factual information, or as definitively stating actual
facts, with respect to any parties to such agreements.