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Item 1.01
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Entry into a Material Definitive Agreement
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On January 17, 2020, Seneca Biopharma, Inc. (the “Company”)
entered into a letter agreement (“Letter Agreement”) with certain institutional holders warrant holders of the Company’s
Series M Warrants and Series N Warrants (each as defined below) (collectively, the “Holders”). Pursuant to the Letter
Agreement, each Holder will receive:
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(i)
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one (1) Series P common stock replacement warrant (“Series P Warrant”) for every one
(1) share purchased upon exercise of outstanding Series M common stock purchase warrants (“Series M Warrants”) issued
on July 30, 2019 in the Company’s registered offering; and
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(ii)
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one (1) Series Q common stock replacement warrant (“Series Q Warrant”) for every one
(1) share purchased upon exercise of outstanding Series N common stock purchase warrants (“Series N Warrants”) issued
on July 30, 2019 in the Company’s registered offering.
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Pursuant to the Letter Agreement, and as an inducement to exercise
the Series M Warrants and Series N Warrants, the exercise price of the Holder’s Series M Warrants and Series N Warrants are
being reduced from $2.70 to $1.36 per share. The Holders collectively own (i) 2,777,777 Series M Warrants and (ii) 2,777,777 Series
N Warrants. The Holders are exercising all of their Series M Warrants and Series N Warrants. The closing is expected to take place
on or about January 22, 2020, subject to customary closing conditions. The Company anticipates receiving gross proceeds of approximately
$7,555,553, not including closing costs and placement agent fees as further described below.
Notwithstanding the foregoing, in the event that a warrant exercise
would cause the Holder to exceed the beneficial ownership limitation of the Series M Warrants or Series N Warrants (collectively,
the “Replacement Warrants”), the Company shall only issue such number of shares that would not cause the Holder to
exceed the maximum amount permitted thereunder, with the balance to be held in abeyance until notice from the Holder that the balance
(or portion thereof) may be issued in compliance with such limitations.
The Series P Warrants will have substantially the same terms as
the Series M Warrants (except for provisions customary for an unregistered warrant, including a restricted legend) and (i) will
have registration rights whereby the Company agrees to register the shares underlying the Series P Warrants within ninety (90)
days) of closing, (ii) will be exercisable immediately upon issuance, (iii) will have a term of two (2) years from the date of
issuance, and (iv) will have an exercise price per share of $1.23.
The Series Q Warrants will have substantially the same terms as
the Series N Warrants (except for provisions customary for an unregistered warrant, including a restricted legend) and (i) will
have registration rights whereby the Company agrees to register the shares underlying the Series Q Warrants within ninety (90)
days) of closing, (ii) will be exercisable immediately upon issuance, (iii) will have a term of five (5) years from the date of
issuance, and (iv) will have an exercise price per share of $1.23.
Subject to the terms of the Letter Agreement, if the shares underlying
the Replacement Warrants are not registered, the Company will be required to pay certain liquidated damages as more fully described
in the Letter Agreement in the event that the Company fails to remove the restrictive legend on the shares underlying the Replacement
Warrants on a timely basis once the Company is legally able to do so.
In the event that the shares underlying the Replacement Warrants
are not subject to an effective registration statement at the time of exercise, the Inducement Warrants may be exercised on a cashless
basis at any time after six (6) months from the issuance date. A copy of the form of Replacement Warrants is attached to this report
as Exhibit 4.01
The Company further agrees that until thirty (30) trading days after
January 17, 2020, it will not enter into any other warrant exercise agreement with any other warrant holder that contains terms
that are more favorable than those contained in the Letter Agreement.
In connection with the transactions contemplated in the Letter Agreement,
the Company entered into a letter agreement (the “Placement Agent Agreement”) with H.C. Wainwright & Co., LLC (the
“Placement Agent”). Pursuant to the terms of the Placement Agent Agreement, the Placement Agent is entitled to (i)
a cash fee equal to 8% of the gross proceeds raised in the transactions contemplated by the Letter Agreement, (ii) a common stock
purchase warrant equal to 8% of the aggregate number shares of common stock issued in the Offering with an exercise price of $1.70,
and a term of five (5) years (the “Placement Agent Warrant”), (iii) a management fee equal to 1.0% of the gross proceeds
raised, (iv) $35,000 for non-accountable expenses; and (v) up to $90,000 in expenses of legal counsel and other out-of-pocket closing
expenses. Additionally, the Placement Agent will receive a tail fee of 8% cash and 8% warrant coverage as described above with
respect to any additional financing completed with any investors that entered into the Letter Agreement within the 12-month period
following date of the Letter Agreement.
Additionally, for a period of ten (10) months following the closing
of the transaction contemplated by the Letter Agreement, the Placement Agent will have a right of first refusal to act as the sole
book-running manager, underwriter, or placement agent for any future capital raising transactions.
The foregoing descriptions of the Letter Agreement, Replacement
Warrants, the Placement Agent Agreement, and the Placement Agent Warrant do not purport to be complete and are qualified in their
entirety by reference to the full text of the Letter Agreement, Series P Warrants, Series Q Warrants, Placement Agent Agreement,
and the Placement Agent Warrant, copies of which are attached to this current report as Exhibits 10.01, 4.01, 4.02, 10.02, and
4.03, respectively. On January 17, 2020, the Company issued a press release announcing the transactions described in Item 1.01
above. A copy of the press release is attached to this report as Exhibit 99.01.