Item
1.01
|
Entry
into a Material Definitive Agreement.
|
Investment
by Nostrum Pharmaceuticals LLC
On
May 22, 2020, we entered into a Preferred Stock Purchase Agreement with Nostrum Pharmaceuticals, LLC, a Delaware limited liability
company (“Nostrum”) pursuant to which we sold to Nostrum 1,700,000 shares of our newly designated Series B
Convertible Preferred Stock, for a total purchase price of $1.7 million. Nostrum is the parent of Nostrum Laboratories, Inc.,
a privately-held pharmaceutical company engaged in the formulation and commercialization of specialty pharmaceutical products
and controlled-release, orally administered, branded and generic drug products.
The
Series B Convertible Preferred Stock is convertible into shares of our Common Stock at an initial conversion ratio of .0113 shares
of Series B Convertible Preferred Stock for each share of Common Stock. Accordingly, the Series B Convertible Preferred Stock
is currently convertible in the aggregate into 150,442,478 shares of our Common Stock.
We will use the proceeds from the sale of
the Series B Convertible Preferred Stock to fund working capital requirements in preparation for conducting a Phase 3
clinical trial in the United States for our Generx® product candidate. We believe that Nostrum’s assets and experience
in the formulation and commercialization of pharmaceutical products will facilitate the administration and completion of the Phase
3 clinical trial on a cost-effective basis.
Under
the Preferred Stock Purchase Agreement, we have agreed to use our best efforts to become current in our reporting obligations
under the Securities Exchange Act of 1934, as amended. We have engaged Marcum LLP as our independent public accounting firm to
perform audits of our financial statements for the years ended December 31, 2017, 2018 and 2019. We intend to file a “super
10-K” report with the SEC covering each of those three fiscal years promptly following the completion of the audits, and
thereafter to remain compliant with our public company reporting requirements.
We
will need additional capital to complete the Phase 3 clinical trial for Generx. We anticipate raising that capital from
the sale of additional debt or equity securities to Nostrum or to third parties. However, there are no agreements or arrangements
in place with Nostrum or any third party for additional funding at this time. If we are able to secure additional financing, it
may be on terms that are dilutive or otherwise unfavorable to existing stockholders.
On
May 28, 2020, we issued a press release announcing the investment. A copy of the press release is attached as Exhibit 99.1
hereto.
Transactions
with Shanxi Taxus Pharmaceuticals Co., Ltd.
In
connection with the Preferred Stock Purchase Agreement, we entered into certain arrangements with Shanxi Taxus Pharmaceuticals
Co., Ltd. (“Shanxi”). Shanxi has previously paid a subscription of $600,000 to acquire shares of our Common
Stock or shares of capital stock in our Angionetics Inc. subsidiary. On April 10, 2020 we entered into a Reaffirmation and Ratification
Agreement with Shanxi (the “Ratification Agreement”) confirming that we have applied the $600,000 payment to
the purchase of license rights to our Generx® product candidate in greater China and have assigned our residual rights to
Excellagen to Shanxi. We previously entered into a strategic cooperation agreement and a subscription agreement with Shanxi. Mr.
Jiayue Zhang, a member of our Board of Directors, is the Chairman and substantial stockholder of Shanxi. In connection
with the entry into the agreements described below, we terminated all prior agreements with Shanxi and entered into a mutual release
of claims.
On
April 10, 2020, our Angionetics, Inc. subsidiary entered into a Distribution and License Agreement with Shanxi, as amended by
the First Amendment to Distribution and License Agreement dated April 14, 2020 (as amended, the “Shanxi License Agreement”),
granting Shanxi certain license rights with respect to our Generx product candidate. The distribution and license rights commence
only after we obtain U.S. FDA approval for marketing and sale of Generx in the United States. The license rights include (a) a
non-exclusive right to manufacture Generx products in China, and (b) an exclusive right to market and sell Generx products in
Singapore, Macau, Hong Kong, Taiwan, any other municipality other than mainland China where Chinese (Mandarin or Cantonese) is
the common language, the Russian Federation and the Commonwealth of Independent States (i.e., Armenia, Azerbaijan, Belarus, Kazakhstan,
Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan). The Shanxi License Agreement provides for a royalty ranging from
5% up to 10% based on the level of annual net sales of the Generx product sold by Shanxi in the licensed territory.
On
April 10, 2020, our Activation Therapeutics, Inc. subsidiary entered into a License and Patent Assignment Agreement with
Shanxi (the “Shanxi Assignment Agreement”) pursuant to which we transferred of all of our assets related
to our Excellagen product to Shanxi. We had previously sold our Excellagen product to U.S.-based Olaragen Therapeutix, Inc.
(“Olaragen”), but retained rights to manufacture, use and sell the product in Greater China, the Russian
Federation and the Commonwealth of Independent States. Under the terms of the Assignment Agreement, we transferred all of our
license rights to manufacture, use, market and sell Excellagen to Shanxi. We also assigned to Shanxi a Chinese patent that we
received on Excellagen. In July 2018, we sold Excellagen to Olaragen for $4,000,000. At closing, we received a cash payment
of $650,000. Based on the terms of the Shanxi Assignment Agreement, we retain the right to receive from Olaragen up to
$3,350,000, based on a 10% royalty from the future from worldwide sales outside of China.
Following
the Shanxi Assignment Agreement, our ongoing business is currently focused solely on the development of our Generx product candidate.
References
to Agreements
The
foregoing descriptions of the Preferred Stock Purchase Agreement, the Ratification Agreement, the Shanxi License Agreement and
the Shanxi Assignment Agreement do not purport to be complete and are qualified in their entirety by reference to the copies of
the agreements attached to this report as Exhibits 10.1 through 10.5 and incorporated by reference.
The
agreements have been included to provide investors and stockholders with information regarding their respective terms. Those agreements
are not intended to provide any other factual information about our company or Nostrum. The representations, warranties and covenants
contained in those agreements were made only for purposes of those agreements and as of specific dates, were solely for the benefit
of the parties to those agreements, may be subject to limitations agreed upon by the contracting parties, and may be subject to
standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not
third-party beneficiaries under any of the agreements and should not rely on the representations, warranties or covenants or any
descriptions thereof as characterizations of the actual state 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 agreements, which subsequent information
may or may not be fully reflected in our public disclosures.
Forward-Looking
Statements
This
document contains “forward-looking statements” that involve substantial risks and uncertainties for purposes of the
safe harbor provided by the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical
facts, included in this communication regarding strategy, future operations, future financial position, prospects, plans and objectives
of management are forward-looking statements. In addition, when or if used in this communication, the words “will,”
“may,” “would,” “approximate,” “expect,” “intend,” and similar expressions
and their variants may identify forward-looking statements. Examples of forward-looking statements include statements relating
to (a) our having or securing the capital necessary to support our future operations; (b) our ability to successfully initiate
and complete the Phase 3 clinical trial for Generx® or any other clinical trials; and (c) the strategic focus and plans
for our company following the investment by Nostrum. Actual results could differ materially from those contained in any forward-looking
statement as a result of various factors, including the risk factors included in the Company’s periodic reports filed with
the SEC. Forward looking statements are based on information available and assumptions as of the date of this report. Except as
required by applicable law, we do not undertake any obligation to revise or update any forward-looking statement, or to make any
other forward-looking statements, whether as a result of new information, future events or otherwise.