Item 8.01 Other Events.
As previously disclosed in the August 17
Form 8-K, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Pecos on August
11, 2017, pursuant to which the Company agreed to sell to Pecos, and Pecos agreed to purchase from the Company, 9,700,000 shares
of the Company’s common stock at a purchase price of $0.315 per share or, to the extent Pecos, following the transaction,
would own more than 19.99% of the Company’s common stock, shares of a new class of preferred stock of the Company (the “Preferred
Stock”) with a per-share purchase price of $1,000. Additionally, Pecos would receive a warrant (the “Warrant”)
to purchase 9,700,000 shares of the Company’s common stock (or, to the extent Pecos would own more than 19.99% of the Company’s
common stock, shares of Preferred Stock). The aggregate gross proceeds from the private placement of common stock, Preferred Stock
and the Warrant (the “Private Placement”) would be $3,055,500 (the “Purchase Price”). As of October 4,
2017, the Company has not received the Purchase Price from Pecos.
On October 5, 2017, the Company delivered
a notice (the “Notice”) to Pecos and its manager, Leon “Chip” Greenblatt III, stating that Pecos is in
breach of the Purchase Agreement as a result of its failure to deliver the Purchase Price to the Company following satisfaction
of all closing conditions in the Purchase Agreement. None of the shares of common stock, shares of Preferred Stock or Warrants
have been issued to Pecos.
On August 25, 2017, the last date on which
Pecos should have delivered the Purchase Price, counsel to Pecos instead delivered a letter to the Company alleging that the Company
was in breach of its obligations pursuant to the Agreement. Such notice requested that the Company agree to additional conditions
to closing that were not included in the Purchase Agreement, including, among others, the appointment of Saverio La Francesca,
MD as co-Chief Executive Officer of the Company.
The Company believes that it is not, and
was not, in breach of the Purchase Agreement, and that Pecos’ notice was unjustified and without any legal merit or factual
basis, and was delivered as a result of Pecos being either unwilling or unable to deliver the Purchase Price. However, in order
to ensure receipt of the Purchase Price and preserve shareholder value, the Company notified counsel to Pecos in writing on September
1, 2017 that it intended to comply with the new conditions demanded by Pecos. Despite that, on September 29, 2017, Pecos requested
that the Company enter into a Supplemental Agreement that introduced additional new demands. The Company again indicated its willingness
to meet the new demands of Pecos. Despite the Company’s timely efforts to meet each new demand of Pecos, Pecos has not met
its obligation to deliver the Purchase Price. The Company believes that Pecos has acted in bad faith and, despite the satisfaction
of all closing conditions, has no intention of delivering the Purchase Price as required by the Purchase Agreement. The Company
is reviewing all of its rights and remedies against Pecos that may be available to the Company.
As a result of Pecos’ refusal to
deliver the Purchase Price, the Company is facing significant capital issues, as its current financial obligations exceed its cash
on hand, and is exploring financing and other strategic alternatives. The Company is in discussions with its advisors regarding
these alternatives. The Company cannot provide any assurance that it will be able to obtain sufficient financing.
Forward-Looking
Statements:
Certain statements in this Current Report
on Form 8-K constitute forward-looking statements that involve a number of known and unknown risks, uncertainties and other factors
that may cause such forward-looking statements not to be realized. These "forward-looking" statements in this Current
Report on Form 8-K include, but are not limited to, statements relating to the potential quotation of the Company’s shares
on the OTCQB Market, the availability of strategic alternatives, development expectations and regulatory approval of any of the
Company’s products, including those utilizing the Company’s Cellframe technology, by the U.S. Food and Drug Administration,
the European Medicines Agency or otherwise, which expectations or approvals may not be achieved or obtained on a timely basis or
at all; or success with respect to any collaborations, clinical trials and other development and commercialization efforts of the
Company’s products, including those utilizing the Company’s Cellframe technology, which such success may not be achieved
or obtained on a timely basis or at all. These statements involve risks and uncertainties that may cause results to differ materially
from the statements set forth in this Current Report on Form 8-K, including, among other things, the Company’s ability to
obtain and maintain regulatory approval for the Company’s products, changes to the listing standards, requirements, policies
or procedures of the OTCQB Market, fluctuations in the Company’s general financial and operating results, changes in the
Company’s liquidity and capital resources, fluctuations in the market price of the Company’s securities, changes in
the capital markets; plus other factors described under the heading "Item 1A. Risk Factors" in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2016 or described in the Company’s other public filings. The Company’s
results may also be affected by factors of which the Company is not currently aware. The forward-looking statements in this Current
Report on Form 8-K speak only as of the date of this report. Biostage expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to such statements to reflect any change in its expectations with regard thereto or any changes
in the events, conditions or circumstances on which any such statement is based.