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Item 3.02.
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Unregistered Sales of Equity Securities.
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June Placements
In the June Placements, the Company sold $1.7 million in aggregate principal amount of Notes and related Warrants to various accredited investors. The
principal amount of the Notes plus unpaid accrued interest at an annual rate of 7.0% is convertible at the election of the holders into shares of Common Stock at any time prior to maturity, at an initial conversion price of $0.75 per share, with an
aggregate of 2,266,665 shares of the Company’s Common Stock underlying the Notes.
As part of the investment in the Notes, the Company also issued
Warrants exercisable for 50% of the shares into which the Notes are convertible, with Warrants for an aggregate of 1,133,332 shares of Common Stock issued in the June Placements. The Warrants are exercisable at a price of $1.00 per share. The
Warrants are currently exercisable in full and will expire five years from the date of issuance.
The Subscription Agreements contain certain
“piggyback” registration rights relating to resales of shares of Common Stock underlying the Notes and the Warrants.
Prior to the consummation
of the June Placements, the Company engaged a placement agent to assist with identifying certain investors to participate in the offering of its Notes and Warrants. In consideration for such services, the placement agent will receive warrants (the
“Placement Agent Warrants”) exercisable for 8% of the shares of Common Stock underlying Notes sold to qualifying investors. The Placement Agent Warrants will be exercisable at a price of $0.825 per share and will expire five years from the
date of issuance. The Placement Agent Warrants will also contain cashless exercise rights and rights to assign such warrants to its qualifying employees and affiliates. In addition, the placement agent is entitled to a cash fee equal to 9% of the
gross proceeds received by the Company from qualifying investors first introduced to the Company by the placement agent, as well as a non-accountable expense fee of $20,000, which was paid on June 19, 2017. The placement agent is not entitled
to any compensation relating to investors not first introduced by it to the Company.
In connection with the June Placements, the placement agent is
entitled to Placement Agent Warrants for 53,333 shares of Common Stock and a cash fee of $45,000.
Each of the investors in the June Placements and the
placement agent has represented to the Company that it is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The
Company relied on the exemption from registration afforded by Section 4(a)(2) of the Securities Act in connection with the issuance of the Note, the Warrants and the Placement Agent Warrants.
May Placement
On June 19, 2017, the terms of the
Warrants issued to investors in the May Placement were modified to reflect certain revised offering terms. As compared to the May Placement, the terms of the June Placements were identical, except that in the June Placements (i) coverage for
the Warrants was increased from 25% to 50% of the shares into which the Notes are convertible, resulting in an increase in the aggregate number of shares for which such Warrants are exercisable from 383,333 to 766,666 and (ii) the exercise
price of the Warrants was decreased from $1.35 to $1.00. The terms of the May Placement remain otherwise unchanged and are described in the Prior
8-K,
which is incorporated herein by reference as modified
hereby.
Consultant Warrant
On June 21, 2017, the Company issued a warrant (the “Consultant Warrant”) for 200,000 shares of Common Stock to a third-party consultant, as
consideration for services provided. The Consultant Warrant is exercisable at a price of $0.64 per share and will expire five years from the date of issuance. The Consultant Warrant will vest 25% on the date of issuance, 25% on December 31,
2017 and 50% upon the completion of certain strategic milestones. The Company relied on the exemption from registration afforded by Section 4(a)(2) of the Securities Act in connection with the issuance of the Consultant Warrant.
General
The foregoing description of the Notes, the
Warrants, the Placement Agent Warrants, the Consultant Warrant, the May Placement and the June Placements is qualified in its entirety by reference to the full text of the Notes, the Warrants, the Placement Agent Warrants, the Consultant Warrant and
the Subscription Agreements, the revised forms of each of which are attached as Exhibits 4.1, 4.2, 4.3, 4.4 and 10.1, respectively, and are incorporated herein by reference.