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In connection with the announced proposed merger
(the “Merger”) of the Issuer and AcelRx Pharmaceuticals, Inc. (“AcelRx”), on March 15, 2020, the Master
Fund entered into a voting agreement (the “Voting Agreement”) with: (i) AcelRx; and (ii) Consolidation Merger Sub,
Inc. (the “Merger Sub”), a wholly-owned subsidiary of AcelRx. Pursuant to the Voting Agreement, the Master Fund agreed
to, among other things: (i) vote all of its Shares and warrants of the Issuer entitled to be voted in favor of (A) adopting the
Agreement and Plan of Merger dated March 15, 2020 by and among the Issuer, AcelRx and the Merger Sub (the “Merger Agreement”),
and (B) any matter that would reasonably be expected to facilitate the Merger; (ii) certain restrictions on its ability to take
actions with respect to the Issuer and its Shares; and (iii) the amount of shares of AcelRx’s common stock and other consideration
it will receive in exchange for its warrants of the Issuer upon consummation of the Merger. The Voting Agreement will terminate
upon the first to occur of: (i) the termination of the Merger Agreement; (ii) the effective time of the Merger; (iii) any amendment
to the Merger Agreement that reduces the amount, or changes the form, of consideration payable to the Master Fund in the transactions
contemplated by the Merger and related agreements; (iv) a Company Adverse Change in Recommendation (as such term is defined in
the Merger Agreement); or (v) the mutual written consent of the Master Fund and AcelRx.
The foregoing was a summary of certain material
terms of the Voting Agreement. The foregoing description is not, and does not purport to be, complete and is qualified in its entirety
by reference to the full text of the form of Voting Agreement, which has been filed as Exhibit B hereto and is incorporated herein
by reference.
Mr. Boyd and Keith Maher, a Managing Director
at Armistice Capital, currently serve as members of the Issuer’s board of directors (the “Board”).
The Reporting Persons purchased the Shares
for investment in the ordinary course of their investment activities based on the Reporting Persons’ belief that the Shares,
when purchased, were undervalued and represented an attractive investment opportunity. The Reporting Persons intend to review their
investment in the Issuer on a continuing basis. Depending on various factors including, without limitation, the Issuer’s
financial position, the price levels of the Shares, conditions in the securities markets and general economic and industry conditions,
the Reporting Persons may in the future take such actions with respect to their investment in the Issuer as they deem appropriate
including, without limitation, engaging in communications with management and/or the Board, engaging in discussions with stockholders
of the Issuer and others about the Issuer and the Reporting Persons’ investment, reshaping the Issuer's corporate strategy,
revitalizing the Issuer’s promising Research and Development pipeline, restructuring the Issuer’s expense base, recommending
business development transactions including mergers and acquisitions, proposing changes to management, operations and the structure
of the Board (including the composition of the Board), purchasing additional Shares, selling some or all of their Shares, engaging
in short selling of or any hedging or similar transaction with respect to the Shares, or changing their intention with respect
to any and all matters referred to in subparagraphs (a) - (j) of Item 4 of Schedule 13D.
Except as otherwise set forth herein, the Reporting
Persons do not have any present plans or proposals which would relate to, or result in, the matters set forth in subparagraphs
(a) – (j) of Item 4 of Schedule 13D. However, subject to market conditions and in compliance with applicable securities laws,
the Reporting Persons reserve the right, at a later date, to effect one or more of such changes or transactions in the number of
Shares they may be deemed to beneficially own in open-market or privately negotiated transactions, on such terms and at such times
as the Reporting Persons may deem advisable.
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