Item 1.01
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Entry into a Material Definitive Agreement
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On July 17, 2020, Oncternal Therapeutics, Inc. (“Oncternal” or the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with several institutional and accredited investors for the sale by the Company of 2,581,867 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a purchase price of $2.3825 per share, in a registered direct offering. Concurrently with the sale of the Shares, pursuant to the Purchase Agreement the Company also sold warrants to purchase up to an aggregate of 1,290,933 shares of Common Stock (the “Warrants”). Subject to certain ownership limitations, the Warrants are immediately exercisable at an exercise price equal to $2.32 per share of Common Stock (the “Exercise Price”), subject to adjustments as provided under the terms of the Warrants. The Warrants are exercisable for five and one-half years from the initial exercise date. The closing of the sales of these securities under the Purchase Agreement occurred on July 21, 2020.
The gross proceeds to the Company from the transactions are approximately $6.2 million, before deducting the placement agent’s fees and other estimated offering expenses, and excluding the proceeds, if any, from the exercise of the Warrants. The Company intends to use the net proceeds from this offering for general corporate purposes, including expenses related to the clinical development and further preclinical development of cirmtuzumab and TK216, preclinical development of its ROR1 CAR-T program, and for working capital purposes.
The Shares (but not the Warrants or shares of Common Stock issuable upon exercise of the Warrants) were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, which was filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2017 and subsequently declared effective on January 5, 2018 (File No. 333-222268) (the “Registration Statement”), and a related prospectus supplement.
The Warrants and the shares issuable upon exercise of the Warrants are being sold and issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and Rule 506 promulgated under the Securities Act as sales to accredited investors, and in reliance on similar exemptions under applicable state laws.
An entity affiliated with Shanghai Pharmaceuticals Holding Co., Ltd. (“SPH”) purchased shares pursuant to the Purchase Agreement. SPH is the sole stockholder of Shanghai Pharmaceutical (USA) Inc. (“SPH USA”), the Company’s largest stockholder. Two of the Company’s directors, Xin Nakanishi, Ph.D. and Man Cho, are affiliated with SPH. In addition, SPH USA is party to a license agreement with the Company under which the Company granted exclusive rights to SPH USA to manufacture, develop, market, distribute and sell in the People’s Republic of China, Hong Kong, Macau, and Taiwan, the Company’s product candidates under its license agreements with Georgetown University and the Regents of the University of California. Additionally, entities affiliated with, respectively, Daniel L. Kisner, a member of the Company’s board of directors, and Hazel M. Aker, the Company’s General Counsel, also purchased shares pursuant to the Purchase Agreement.
The representations, warranties and covenants contained in the Purchase Agreement were made solely for the benefit of the parties to the Purchase Agreement. In addition, such representations, warranties and covenants: (i) are intended as a way of allocating the risk between the parties to the Purchase Agreement 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 Purchase Agreement 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 statement 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 Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures.
Pursuant to the previously disclosed engagement letter (the “Engagement Letter”) dated May 15, 2020 between the Company and H.C. Wainwright & Co., LLC (“Wainwright”), the Company has agreed to pay Wainwright an aggregate fee equal to 7.0% of the gross proceeds received by the Company from the sale of the securities in the transaction (other than in connection with a total of 1,101,289 shares of Common Stock sold to existing stockholders) as well as a management fee equal to 1.0% of the gross proceeds received by the Company from the sale of the securities in the transactions. Pursuant to the Engagement Letter, the Company also issued to Wainwright or its designees warrants to purchase up to 6.0% of the aggregate number of shares of Common Stock sold in the transactions (the “Placement Agent Warrants”). The Engagement Letter has a 12-month tail, a 10 month right of first refusal period, indemnity and other customary provisions for transactions of this nature. The Placement Agent Warrants have substantially the same terms as the Warrants, except that the Placement Agent Warrants are exercisable for five years from the date of the Purchase Agreement and have an exercise price equal to 125% of the purchase price per Common Share in this offering, or $2.9781 per share . The Placement Agent Warrants and the shares issuable upon exercise of the Placement Agent Warrants were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the
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