UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to
Section 13 or 15(d) of
the Securities
Exchange Act of 1934
Date of report
(Date of earliest event reported): April 29, 2020
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EMERALD BIOSCIENCE,
INC.
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(Exact Name of
Registrant as Specified in Its Charter)
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Nevada
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000-55136
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45-0692882
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(State or Other
Jurisdiction of
Incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification
Number)
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130 North
Marina Drive, Long Beach, CA 90803
(Address of principal
executive offices)
(949)
396-0330
(Registrant’s telephone
number, including area code)
(Former name or
former address, if changed since last report)
Check the appropriate box below if the Form
8-K filing is intended to simultaneously satisfy the filing
obligations of the registrant under any of the following
provisions.
☐ Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐ Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14d-2(b)
☐ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b)
☐ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c)
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the
Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of
the Securities Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging growth company
¨
If an emerging growth
company, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. ¨
Section 1 - Registrant’s Business and
Operations
Item 1.01. Entry into a Material
Definitive Agreement.
Amended and Restated Multi-Draw Credit
Agreement
On April 29, 2020, Emerald Bioscience, Inc. (the “Company”) entered
into an Amended and Restated Multi-Draw Credit Agreement (the
“Amended Credit Agreement”) with Emerald Health Sciences, Inc. (the
“Lender”), which amends and restates that certain Multi-Draw Credit
Agreement, dated as of October 5, 2018 (the “Existing Credit
Agreement”), by and between the Company and the Lender.
The Amended Credit Agreement provides for a credit facility to the
Company in the principal amount of up to $20,000,000, which
includes, without limitation, advances of at least $150,000 for
each of May, June and July 2020. As of the date of the Amended
Credit Agreement, the Company has made three drawdowns in an
aggregate principal amount of $6,000,000, and has issued to the
Lender warrants to purchase an aggregate of 7,500,000 shares of
common stock of the Company (the “Common Stock”) at an exercise
price of $0.50 per share of Common Stock, in accordance with the
terms of the Existing Credit Agreement.
On December 20, 2019, the Company entered into a Warrant Exercise
Agreement with the Lender (the “Warrant Exercise Agreement”),
pursuant to which the Lender has exercised 40,800,000 of such
warrants and paid the aggregate exercise price of approximately
$4,080,000 for the related warrant shares in the form of a
reduction in the corresponding outstanding principal amount under
the Existing Credit Agreement. Upon consummation of the
transactions under the Warrant Exercise Agreement, the total
outstanding principal amount excluding discounts under the Existing
Credit Agreement was $2,014,500.
In connection with each advance under the Amended Credit Agreement,
the Company shall, absent of the Lender’s notice not to issue any
warrant, issue to the Lender a warrant to purchase up to the number
of shares of the Common Stock of the Company equal to the dollar
amount of such advance divided by 0.50, at an exercise price of
$0.35 per share of Common Stock. Warrants issued prior to the date
of the Amended Credit Agreement shall not be modified, amended or
altered by the terms of the Amended Credit Agreement and shall
remain in full force and effect.
The Lender will, in its sole discretion, at the time of an advance,
determine as to whether such advance will or will not be
convertible into shares of Common Stock in the future. The Lender
may, at its option, convert all or a part of the outstanding
convertible advances made under the Amended Credit Agreement into
shares of Common Stock at a fixed conversion price of $0.25 per
share of Common Stock. However, all advances outstanding under the
Existing Credit Agreement as of the date of the Amended Credit
Agreement shall be deemed convertible by the Lender at a conversion
price of $0.40 per share of Common Stock as set forth in the
Existing Credit Agreement in the future.
Pursuant to the Amended Credit Agreement, the Company and the
Lender have agreed to terminate that certain Registration Rights
Agreement, dated as of October 5, 2018, by and between the Company
and the Lender, and the Lender has agreed to defer all interest
accrued and/or due under the Amended Credit Agreement, beginning
the quarter ended June 30, 2020, until the Company completes a
capital raise of at least $5,000,000. All other material terms of
the Existing Credit Agreement, including, without limitation, the
maturity date and interest rate, remain the same in the Amended
Credit Agreement.
The foregoing description of the Amended Credit Agreement is not
complete and is qualified in its entirety by reference to the text
of the Amended Credit Agreement, a copy of which is attached hereto
as Exhibit 10.1 and incorporated herein by reference.
The
disclosure under Item 2.03 “Fourth Drawdown under Amended Credit
Agreement” below is incorporated by reference in this Item
1.01.
Paycheck Protection
Program Promissory Note
On April 22, 2020, the Company entered into a Paycheck Protection
Program Promissory Note (the “PPP Note”) in the principal amount of
$116,700 (the “PPP Loan”) from City National Bank (the “PPP Loan
Lender”). The PPP Loan was obtained pursuant to the Paycheck
Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and
Economic Security Act (the “CARES Act”) administered by the U.S.
Small Business Administration (“SBA”). The PPP Loan was disbursed
by the PPP Loan Lender to the Company on April 24, 2020 (the
“Disbursement Date”), and will mature two years from the
Disbursement Date. The PPP Loan bears an interest at 1.00% per
annum and is payable monthly commencing seven months from the
Disbursement Date. The PPP Loan may be prepaid at any time prior to
maturity with no prepayment penalties. Funds from the PPP Loan may
only be used by the Company for payroll costs, costs for continuing
group healthcare benefits, mortgage interest payments, rent,
utility and interest on any other debt obligations that were
incurred before February 15, 2020.
All or a portion of principal of the PPP Loan may be forgiven by
the SBA and the PPP Loan Lender upon application by the Company
within 60 days but not later than 120 days after loan approval and
upon documentation of expenditures in accordance with the SBA
requirements. Under the CARES Act, loan forgiveness is available
for the sum of documented payroll costs, covered rent payments, and
covered utilities during the eight week period commencing on the
date of loan approval. For purposes of the CARES Act, payroll costs
exclude compensation of an individual employee in excess of
$100,000, prorated annually. Not more than 25% of the forgiveness
amount may be for non-payroll costs. Forgiveness is reduced if
full-time headcount declines, or if salaries and wages of employees
with salaries of $100,000 or less annually are reduced by more than
25%. After approval of the forgiveness amount and 6 month deferral
period, the PPP Loan Lender will provide the Company with written
notification of re-amortization of the PPP Loan and the remaining
balance.
Separation
and Release Agreement
The
disclosure under Item 5.02 “Separation of Chief Financial Officer”
below is incorporated by reference in this Item 1.01.
Item 2.03 Creation of a Direct Financial Obligation or an
Obligation Under an Off-Balance Sheet Arrangement of a
Registrant.
Paycheck Protection
Program Promissory Note
The disclosure under Item 1.01 “Paycheck Protection Program
Promissory Note” above is incorporated by reference in this Item
2.03.
Fourth Drawdown
under Amended Credit Agreement
Immediately upon entering into of the Amended Credit Agreement, the
Company effected a fourth drawdown in the amount of $150,000 (the
“Drawdown”) pursuant to the Amended Credit Agreement. The Drawdown
bears an interest at 7% per annum and matures on October 5, 2022.
The Company intends to use the net proceeds of the Drawdown for
general corporate and working capital purposes.
In accordance with the terms of the Amended Credit Agreement, the
Lender has elected that the Drawdown will not be convertible into
shares of Common Stock and gave notice to the Company that no
warrant will be issued in connection with the Drawdown at this
time. Upon the occurrence of an Event of Default, as defined in the
Amended Credit Agreement, the Lender may declare the entire
outstanding principal amount of the loan, together with all accrued
and unpaid interest thereon, immediately due and payable.
Item 5.02.
Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
Separation
of Chief Financial Officer
On April 29, 2020, the Company entered into a separation and
release agreement (the “Separation Agreement”) with Doug Cesario.
Mr. Cesario’s separation will be effective May 15, 2020 (the
“Separation Date”), and he will remain the Company’s principal
financial officer until the Separation Date.
Pursuant to the Separation Agreement, Mr. Cesario has agreed to
certain ongoing cooperation obligations and to provide certain
releases and waivers as contained in the Separation Agreement. As
consideration under the Separation Agreement, the Company has
agreed to provide Mr. Cesario compensation and benefits as follows:
(i) through the Separation Date, an annualized base salary at the
rate in effect for him as of the date of the Separation Agreement;
(ii) a gross payment of $125,000 in consideration for the
restrictive covenants contained in the Separation Agreement; and
(iii) a continuation of health insurance benefits for reimbursement
for a period of six months following the Separation Date.
The foregoing summary of the Separation Agreement does not purport
to be complete and is qualified in its entirety by the full text of
the Separation Agreement, a copy of which is filed hereto as
Exhibit 10.2, and which is incorporated herein by reference.
Appointment of New
Chief Financial Officer
Ms.
Elena Traistaru will serve as the primary financial and accounting
officer and Secretary of the Company, effective May 15, 2020, until
the Company appoints a new permanent CFO.
Ms. Traistaru currently serves as the Chief Financial Officer of
Emerald Health Bioceuticals Inc., a Delaware corporation (“EHB”)
and an affiliate of the Company. She was appointed as Chief
Financial Officer of EHB in October 2019. Ms. Traistaru has also
served as the Corporate Controller for EHB and Emerald Health USA
since November 2018. Ms. Traistaru has 30 years of diversified
accounting finance experience in the biotechnology and
pharmaceutical industries and telecommunications. Prior to joining
EHB, Ms. Traistaru served as President and Chief Financial Officer
of ET Accounting Consulting Service from February 2017 to October
2018, providing accounting consulting services to various
businesses. Ms. Traistaru previously served as the U.S. Controller
for Enigma Diagnostics, a developer of innovative molecular
diagnostic technology, from February 2010 to February 2017, where
she managed all aspects of accounting, finance, and human resources
functions and supported the company’s operations department. Ms.
Traistaru holds a bachelor’s degree in Accounting and Finance from
Academy of Economic Studies, Bucharest, Romania.
Section 9 – Financial Statements and
Exhibits
Item 9.01. Financial Statements and
Exhibits.
(d) Exhibits
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Exhibit No.
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Exhibit
Description
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10.1
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Amended and
Restated Multi-Draw Credit Agreement, dated April 29, 2020, by and
between Emerald Bioscience, Inc. and Emerald Health Sciences, Inc.
Sciences, Inc.
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10.2
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Separation and
Release Agreement, dated April 29, 2020, between Emerald
Bioscience, Inc. and Doug Cesario
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SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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EMERALD BIOSCIENCE, INC. |
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| Dated: April 29, 2020 |
By: |
/s/ Dr. Brian
Murphy |
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Dr. Brian Murphy |
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Chief Executive Officer |
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