Item
1.
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Entry
into a Material Definitive Agreement.
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On May 25, 2018, the
Company entered into an agreement with an accredited investor to whom the Company sold 792,952 shares of the Company’s Common
Stock, par value $0.001 per share (the “Common Stock”), at a purchase price of $2.27 per share for $1.80 million
of gross proceeds. The $1.80 million private placement will be applied to funding the Phase 2 Necrobiosis Lipoidica
Trial which will begin in the fourth quarter of 2018. The investor will also receive warrants to purchase one share of Common
Stock for each share of Common Stock purchased at an exercise price equal to $2.724.
A
placement agent received as fees approximately $108,000 and a warrant to purchase up to 47,578 shares of Common Stock at an exercise
price equal to $2.724.
The
Securities were sold in a private placement pursuant to exemptions from the registration requirements of the Securities Act of
1933, as amended (the “Securities Act”), afforded by Rule 506 of Regulation D promulgated thereunder.
In addition, as reported
in previous SEC filings, the Company is converting all $2.58 million of its mandatory convertible 8% Senior Note into 1,323,704
shares of the Company’s Common Stock, at a price of $2.043 per share. The noteholders will also receive warrants to purchase
one share of Common Stock for each share of Common Stock purchased at an exercise price equal to $2.452.
A
placement agent received as fees approximately $144,955 and a warrant to purchase up to 79,423 shares of Common Stock at an exercise
price equal to $2.724.
With the two private
placements of $1.8M and $2.58M described above and the $2.5 million first tranche private placement reported in the Company’s
2018 1
st
Quarter Form 10Q, the total private placement raised by the Company has been $6.88 million.
The
terms of the above warrants are as set forth in the exhibits to this current report on Form 8-K.
The
Company currently intends to use the above proceeds to fund research and development of its lead product candidate, PCS-499, including
clinical trial activities, and for general corporate purposes. Pursuant to the Purchase Agreements, the Company may periodically
conduct additional closings until the earlier of June 29, 2018 or the Company has sold the Maximum Offering Amount.
Anti-Dilution
Protection
The
Common Stock, but not the warrants, will have full ratchet anti-dilution protection. Except as provided, until the Company has
issued equity securities or securities convertible into equity securities for a total of an additional $20.0 million in cash or
assets, including the proceeds from the exercise of the warrants issued above, in the event the Company issues additional equity
securities or securities convertible into equity securities at a purchase price less than $2.27 per share of Common Stock, the
above purchase price shall be adjusted and new shares of Common Stock issued as if the purchase price was such lower amount (or,
if such additional securities are issued without consideration, to a price equal to $0.01 per share).
The
following issuances shall not trigger anti-dilution adjustment: (i) shares of Common Stock issued in the on-going private placement
and securities issuable upon exercise of the warrants; (ii) securities issued upon the conversion of any outstanding debenture,
warrant, option, or other convertible security; (iii) Common Stock issuable upon a stock split, stock dividend, or any subdivision
of shares of Common Stock, provided that such securities have not been amended since May 25, 2018 to increase the number of such
securities or to decrease the exercise price, exchange price or conversation price of such securities (other than in connection
with stock splits or combinations) or to extend the term of such securities; (iv) shares of Common Stock (or options to purchase
such shares of Common Stock) issued or issuable to employees or directors of, or consultants to, the Company pursuant to any plan
approved by the Company’s Board of Directors and (v) securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors of the Company, provided that such issuance shall only be to a person (or
to the equity holders of a person) which is, itself or through its subsidiaries, believed by the Company to be an operating company
or an owner of an asset in a business synergistic with the business of the Company.
Exhibit
No.
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Exhibit
Description
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99.1
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Press Release dated May 31, 2018
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99.2
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Agreement dated May 25, 2018 by and between Processa Pharmaceuticals, Inc. and PoC Capital, LLC
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99.3
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Warrant issued to PoC Capital, LLC
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99.4
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Warrant issued to PoC Capital, LLC
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99.5
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Warrant issued to PoC Capital, LLC
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99.6
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Placement Agency Agreement, dated July 17, 2017 by and between Processa Pharmaceuticals, Inc., and Boustead Securities (incorporated by reference to exhibit 99.1 accompanying Form 10-Q filed on May 21, 2018)
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99.7
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Warrant issued to Boustead Securities
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