Item 1.01
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Entry into a Material Definitive Agreement
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On March 8, 2019,
CHF Solutions, Inc. (the “Company”)
entered into an Underwriting
Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Underwriter”), pursuant to which the Company issued and sold, in a registered public offering by the Company (the “Public Offering”), (a) 146,607 Class A Units
(the “Class A Units”), with each Class A Unit consisting of one share of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), one warrant that expires on the fifth anniversary of the date of issuance (referred to as the
“Series 1 warrants”) to purchase one share of our Common Stock and one warrant that expires on the earlier of: (i) the eighteen-month anniversary of the date of issuance and (ii) the 30th trading day following our public announcement of our
receipt from the U.S. Food and Drug Administration of clearance or approval of a modification to the product label for the Aquadex FlexFlow system to include pediatric patients (referred to as the “Series 2 warrants” and, collectively with the
Series 1 warrants, the “Warrants”) to purchase one share of our Common Stock, with each Class A Unit offered to the public at an offering price of $5.25 per Class A Unit and (b) 1,910,536 Class B Units (the “Class B Units”, and collectively with
the Class A Units, the “Units”), with each Class B Unit consisting of one share of the Company’s Series G Convertible Preferred Stock, par value $0.0001 per share (the “Series G Preferred Stock”), convertible into one share of Common Stock, a
Series 1 warrant to purchase one share of Common Stock and a Series 2 warrant to purchase one share of Common Stock, with each Class B Unit offered to the public at an offering price of $5.25 per Class B Unit.
In addition, pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45 day option (the “Overallotment Option”) to purchase up to (i)
308,571 additional shares of Common Stock, (ii) additional Series 1 warrants to purchase up to 308,571 additional shares of Common Stock and/or (iii) additional Series 2 warrants to purchase up to 308,571 additional shares of Common Stock solely
to cover over-allotments. The Overallotment Option was exercised in full on March 8, 2019.
The Units were not certificated and the shares of Common Stock, shares of Series G Preferred Stock and Warrants comprising such Units were immediately
separable and were issued separately in the Public Offering. The securities were offered by the Company pursuant to (i) the registration statement on Form S-1 (File No. 333-229102), and each amendment thereto, which was initially filed with the
Securities and Exchange Commission (the “Commission”) on December 31, 2018 and declared effective by the Commission on March 7, 2019, and an additional registration statement on Form S-1 (File No. 333-230142) filed by the Company with the
Commission on March 7, 2019 pursuant to Rule 462(b) under the Securities Act of 1933, as amended (collectively, the “Registration Statements”).
On March 12, 2019, the Public Offering closed, and the Company issued and sold (i) 455,178 shares of Common Stock (which includes 308,571 shares of Common
Stock sold pursuant to the exercise of the Overallotment Option), (ii) 1,910,536 shares of Series G Preferred Stock, (iii) 2,365,714 Series 1 warrants (which includes 308,571 Series 1 warrants sold pursuant to the exercise of the Overallotment
Option) and (iv) 2,365,714 Series 2 warrants (which includes 308,571 Series 2 warrants sold pursuant to the exercise of the Overallotment Option), pursuant to the Registration Statements and the Underwriting Agreement. The net proceeds to the
Company, after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company, are expected to be approximately $11.0 million.
Each Warrant is exercisable at a price per share of Common Stock of $5.25.
Subject to
limited exceptions, a holder of Warrants will not have the right to exercise any portion of its Warrants if the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s
affiliates) would beneficially own a number of shares of Common Stock in excess of 4.99% (or, upon election by a holder prior to the issuance of any warrants, 9.99%)
of the shares of Common Stock then outstanding
.
At the holder’s option, upon notice to the Company, the holder may increase or decrease this beneficial ownership limitation not to exceed 9.99% of the shares of Common Stock then outstanding,
with any such increase becoming effective upon 61 days’ prior notice to the Company
.
Additionally, subject to certain exceptions, if, after 180 days after the closing date of
the Public Offering, (i) the volume weighted average price of the Common Stock for each of 30 consecutive trading days (the “Measurement Period”), which Measurement Period commences after the date that is 180 days after the closing date, exceeds
300% of the exercise price (subject to adjustments for stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such Measurement Period exceeds $500,000 per trading day and (iii)
certain other equity conditions are met, and subject to a beneficial ownership limitation, then the Company may call for cancellation of all or any portion of the Warrants then outstanding for consideration equal to $0.0001 per share.
The Underwriting Agreement contains representations, warranties and covenants made by the Company that are customary for transactions of this type. Under
the terms of the Underwriting Agreement, the Company has agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933, as amended. In addition, pursuant to the terms of the Underwriting
Agreement, the Company and its executive officers and directors have entered into agreements providing that the Company and each of these persons may not, without the prior written approval of the Underwriter, subject to limited exceptions,
offer, sell, transfer or otherwise dispose of the Company’s securities for a period of 90 days following the date of the Underwriting Agreement.
On March 12, 2019, the Company also entered into a warrant agency agreement with the Company’s transfer agent,
American Stock Transfer & Trust Company LLC, who will act as warrant agent for the Company, setting forth the terms and conditions of the Warrants sold in the Public Offering (the “Warrant Agency Agreement”).
The foregoing summaries of the Underwriting Agreement, the Warrants and the Warrant Agency Agreement do not purport to be complete and are subject to, and
qualified in their entirety by, such documents attached as Exhibits 1.1, 4.1 and 4.2, respectively, to this Current Report on Form 8-K (this “Current Report”), which are incorporated herein by reference. The Underwriting Agreement is attached
hereto as an exhibit to provide interested persons with information regarding its terms, but is not intended to provide any other factual information about the Company. The representations, warranties and covenants contained in the Underwriting
Agreement were made only for purposes of the Underwriting Agreement as of specific dates indicated therein, were solely for the benefit of the parties to the Underwriting Agreement, and may be subject to limitations agreed upon by the parties,
including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Underwriting Agreement.