Item
1.01 Entry into a Material Definitive Agreement.
On
March 28, 2017, RespireRx Pharmaceuticals Inc. (the “Company”) entered into Common Stock and Warrant Purchase Agreements
(“Purchase Agreement”) with each of two accredited investor (each, a “Purchaser” and, together with purchasers
in the initial closing under the Private Placement, the “Purchasers”), pursuant to which, the Company sold units for
aggregate cash consideration of $300,000, with each unit consisting of (i) one share of the Company’s Common Stock, par
value $0.001 per share (“Common Stock”), and (ii) one Warrant to purchase an additional share of Common Stock (each
a “Warrant” and collectively, the “Warrants”). This closing was the second closing of a private placement
of up to $1,500,000 (the “Private Placement”), bringing the aggregate amount raised under the Private Placement as
of March 28, 2017 to $350,000.
The
initial closing of the Private Placement for $50,000 occurred on March 10, 2017. The Company filed a Current Report on Form 8-K
in connection with that initial closing on March 16, 2017.
Closing Date
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Number of
Shares Issued
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Number of Shares
Issuable Upon
Exercise of Warrants
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March 10, 2017
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20,000
|
|
|
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20,000
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March 28, 2017
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|
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120,000
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|
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120,000
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Total
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140,000
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140,000
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|
The
price per unit in the private placement (“Private Placement”) was $2.50 (the “Per Unit Price”). The Warrants
are exercisable until 5:00 p.m. on December 31, 2021 and may be exercised at 110% of the Per Unit Price, or $2.75 per share of
Common Stock. The Warrants have a cashless exercise provision and certain “blocker” provisions limiting the percentage
of shares of Common Stock of the Company that the purchaser can hold upon exercise. The Warrants are also subject to a call by
the Company at $0.001 per share upon ten (10) days written notice if the Company’s Common Stock closes at 200% or more of
the Unit Purchase Price for any five (5) consecutive trading days. The Purchasers were non-affiliated investors. In total, 120,000
shares of Common Stock were purchased in the second closing of the Private Placement, together with Warrants to purchase an additional
120,000 shares of Common Stock. There may be subsequent closings with other purchasers until a maximum of $1.5 million has been
raised. Closings may take place until June 30, 2017.
In
addition, as set forth in the Purchase Agreement, each Purchaser has an unlimited number of exchange rights, which are options
and not obligations, to exchange such Purchaser’s entire investment (but not less than the entire investment) into one or
more subsequent equity financings (consisting solely of convertible preferred stock or common stock or units containing preferred
stock or common stock and warrants exercisable only into preferred stock or common stock) that would be considered as “permanent
equity” under United States Generally Accepted Accounting Principles and the rules and regulations of the United States
Securities and Exchange Commission, and therefore classified as stockholders’ equity, and excluding any form of debt or
convertible debt (each such financing a “Subsequent Equity Financing”). These exchange rights are effective until
the earlier of: (i) the completion of any number of Subsequent Equity Financings that aggregate at least $15 million of gross
proceeds, or (ii) December 30, 2017. For clarity, an investor’s entire investment is the entire amount invested (“Investment
Amount”) (for purposes of the multiple described below) and all of the Common Stock and Warrants purchased (for purposes
of the exchange) pursuant to the Purchase Agreement, however, if the Warrants have been exercised in part or in whole on a cashless
basis, then the Investment Amount (for purposes of the multiple described below) will be the Investment Amount (for purposes of
the multiple described below) and all of the Common Stock initially purchased pursuant to the Purchase Agreement plus any shares
of Common Stock issued pursuant to a cashless exercise and any Warrants remaining after such cashless exercise (for purposes of
the exchange), or, if the Warrants have been exercised for cash, then the entire Investment Amount will be the amount initially
invested plus the amount of cash paid upon cash exercise (for purposes of the multiple described below) and all of the Common
Stock initially purchased pursuant to the Purchase Agreement plus any shares of Common Stock issued pursuant to the cash exercise
and any Warrants remaining after such cash exercise (for purposes of the exchange).
At
the time of a Subsequent Equity Financing, Purchaser has a right to either: (a) retain the securities purchased or subsequently
acquired in a Subsequent Equity Financing into which they had previously exchanged, or (b) exchange the all the securities purchased
or acquired in a Subsequent Equity Financing into which such Purchaser had previously exchanged, into securities issued in the
next Subsequent Equity Financing (assuming the next Subsequent Equity Financing is one for which an exchange right is available).
The
dollar amount (calculated as a ratio) used to determine the measurement amount for the exchange into a Subsequent Equity Financing
will be 1.2 times the entire Investment Amount described above. Under certain circumstances, as described in Section 2(h) of the
Purchase Agreement, the multiple will be 1.4 times the entire Investment Amount described above.
There
is a floor price of $1.00 per common share equivalent in any exchange transaction.
In
the case of an Acquisition (as defined in the Purchase Agreement) in which the Company is not the surviving entity, the holder
of each Warrant would receive from any surviving entity or successor to the Company, in exchange for such Warrant, a new warrant
from the surviving entity or successor to the Company, substantially in the form of the existing Warrant and with an exercise
price adjusted to reflect the nearest equivalent exercise price of common stock (or other applicable equity interest) of the surviving
entity that would reflect the economic value of the Warrant, but in the surviving entity.
Unlimited
piggy-back registration rights have been granted with respect to the Common Stock, and the Common Stock underlying the Warrants,
unless such Common Stock is eligible to be sold without volume limits under an exemption from registration under any rule or regulation
of the SEC that permits the holder to sell securities of the Company to the public without registration.
Placement
agent fees, brokerage commissions, finder’s fees or similar payments are due and payable in the form of cash and warrants
to qualified referral sources in connection with certain sales of the shares of Common Stock and Warrants, while other sales did
not result in any fees or commissions. Accordingly, the amount of such fees, on a percentage basis, varies in each closing. No
such fees were paid to referral sources for the initial closing. In connection with the second closing, fees payable to referral
sources in cash totaled $20,000, or 6.7% of the aggregate amount paid for the units sold, and 8,000 warrants (the warrants issuable
to qualified referral sources are referred to herein as the “Placement Agent Warrants”) are issuable, or warrants
for that number of shares equal to 6.7% of the number of shares of Common Stock issued as part of the units, but not the shares
underlying the Warrants. Placement Agent Warrants are exercisable until December 31, 2021 at $2.75 per share. The Placement Agent
Warrants have a cashless exercise provision. The placement agent that is due Placement Agent Warrants is Aurora Capital
LLC (“Aurora”). Both Arnold S. Lippa and Jeff E. Margolis, officers and directors of the Company, have indirect ownership
interests in Aurora through interests held in its members, and Jeff E. Margolis is also an officer of Aurora. As a result, both
Arnold S. Lippa and Jeff E. Margolis, or entities in which they have interests, will receive a portion of the Placement Agent
Warrants awarded in the Private Placement.
The
shares of Common Stock and Warrants were offered and sold 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 provided in Rule
506(b) of Regulation D promulgated thereunder. None of the shares of Common Stock issued as part of the units, the Warrants, the
Common Stock issuable upon exercise of the Warrants or any warrants issued to a qualified referral source have been registered
under the Securities Act or any other applicable securities laws, and unless so registered, may not be offered or sold in the
United States except pursuant to an exemption from the registration requirements of the Securities Act.
This
description of the Purchase Agreement, including the form of Warrant, does not purport to be complete and is qualified in its
entirety by reference to the form of Purchase Agreement (including the Form of Warrant attached as Exhibit A thereto), which is included as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein
by reference.