Item 1.01 Entry into a Material Definitive Agreement.
On January 10, 2020 and January 15, 2020, Novus Therapeutics, Inc. (the “Company”) entered into warrant exercise agreements
(the “Exercise Agreements”) with the holders (the “Holders”) of its Series A Warrants and Series B Warrants to purchase shares of the Company’s common stock (collectively, the “Warrants”), previously issued in a
private placement by the Company in May 2019, pursuant to which the Holders agreed to exercise in cash their Warrants to purchase an aggregate of 6,898,224 shares of the Company’s common stock at a reduced exercise price of $0.715 per share,
plus an additional $0.125 per share for the issuance of the Private Placement Warrants (defined below) for gross proceeds (before placement agent fees and expenses) to the Company of approximately $5.8 million (the “Exercise
Transaction”).
The Company intends to use the net proceeds from the Exercise Transaction to fund the ongoing phase 2a clinical trial
in acute otitis media, as well as for working capital and other general corporate purposes.
Under the Exercise Agreements, the Company
also agreed to issue to the Holders new warrants to purchase up to 6,898,224 shares of the Company’s common stock at an exercise price of $0.72 per share, with an exercise period of five and a half years (the “Private Placement
Warrants”). The Private Placement Warrants transaction subsequently closed and the Private Placement Warrants were issued on January 14, 2020 with respect to the Warrants exercised on January 10, 2020 and on or about January 17,
2020, with respect to the Warrants exercised on January 15, 2020.
The shares of common stock underlying the Warrants are registered
for offer and sale under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s effective registration statement on Form S-1 (File No. 333-232011).
The Private Placement Warrants and the shares of common stock underlying the
Private Placement Warrants were sold and issued without registration under the Securities Act in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and Rule 506
promulgated under the Securities Act as sales to accredited investors.
The foregoing descriptions of the Exercise Agreements and the
Private Placement Warrants are not complete and are qualified in their entirety by references to the full text of Form of Exercise Agreement and the Form of Private Placement Warrant, which are filed as exhibits to this report and are incorporated
by reference herein. For further discussion of the terms of the Warrants, see the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 2, 2019, which is
incorporated herein by reference.
H.C. Wainwright & Co., LLC (“Wainwright”) acted as exclusive placement agent for the
Exercise Transaction. The Company will pay Wainwright a cash fee equal to 7.0% of the gross proceeds that the Company receives from the cash exercise of the Warrants in the Exercise Transaction. The Company will also pay Wainwright a management fee
equal to 1.0% of the gross proceeds that the Company receives from the cash exercise of the Warrants in the Exercise Transaction and $85,000 for non-accountable expenses.
The Company also granted to Wainwright and its designees warrants to purchase up to 344,911 shares of common stock representing 5.0% of the
aggregate number of shares of common stock issued in the Exercise Transaction (the “Placement Agent Warrants”). The Placement Agent Warrants will have substantially the same terms as the Private Placement Warrants, except that the
Placement Agent Warrants will have an exercise price equal to $1.05. The Placement Agent Warrants and the shares of common stock issuable upon exercise of the Placement Agent Warrants are being issued in reliance on the exemption from registration
provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering.