Item
1.01.
|
Entry
into a Material Definitive Agreement
|
On
September 12, 2018, RespireRx Pharmaceuticals Inc. (the “Company”) entered into Common Stock and Warrant Purchase
Agreements (the “Purchase Agreements”) with accredited investors (each a “Purchaser” and collectively,
the “Purchasers”), pursuant to which the Company offered units in a private placement (the “Offering”)
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”),
and pursuant to which the Company sold such units for aggregate cash consideration of $250,750, which amount includes the conversion
of a certain promissory note previously issued by the Company as described below. This was the initial closing of the Offering
and additional subsequent closings at the same Unit Purchase Price (as defined below) may take place with other purchasers until
a maximum of $1.5 million of units have been sold. Closings may take place until October 15, 2018.
The
price per unit in the initial closing of the Offering was $1.05 (the “Unit Purchase Price”). The Warrants are exercisable
until 5:00 p.m. on April 30, 2023 and may be exercised at 150% of the Unit Purchase Price. 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 $3.00 or more for any five consecutive trading days. In total, 238,814
shares of Common Stock were purchased, together with Warrants to purchase an additional 238,814 shares of Common Stock.
Prior
to the initial closing of the Offering, the Company issued to Arnold S. Lippa, Ph.D, and James S. Manuso, Ph.D., the Company’s
Executive Chairman and Chief Scientific Officer and Vice Chairman and Chief Executive Officer, respectively, $100,000 aggregate
principal amount ($50,000 each) of demand promissory notes bearing interest at 10% (the “Demand Promissory Notes”).
The Demand Promissory Note issued to Dr. Lippa, exclusive of any interest accrued, was exchanged or converted into the Offering
simultaneously with its initial closing. The principal amount of, but not the interest on, the Demand Promissory Note was taken
into consideration when determining if the Company had achieved the minimum amount necessary to effect the initial closing of
the Offering. The Demand Promissory Note issued to Dr. Manuso was not exchanged or converted in connection with the initial closing
of the Offering, but the Company anticipates that it will be exchanged or converted in connection with a future closing.
In
addition, as set forth in the Purchase Agreements, 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 within stockholders’ equity, and excluding any form of debt
or convertible debt or preferred stock redeemable at the discretion of the holder (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, 2018. For clarity, a Purchaser’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 of such Purchaser,
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 of such Purchaser 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 will be the Investment Amount 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 of such Purchaser 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, each Purchaser has an exchange 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 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
is 1.2 times the entire Investment Amount described above. Under certain circumstances, as described in Section 2(h) of the Purchase
Agreements, 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 Agreements) 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 and without volume limits
(assuming the holder is not an affiliate).
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 Agreements, 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 (i) the schedules thereto, and (ii) 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.