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Item 1.01
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Entry into a Material Definitive Agreement.
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Effective as of September 28, 2018 (the “Effective Date”),
Precision Therapeutics Inc. (the “Company,” “we,” or “our”) entered into a Securities Purchase
Agreement with each of L2 Capital, LLC (“L2”) and Peak One Opportunity Fund, LP (“Peak One” and, together
with L2, the “Investors”) (together, the “Securities Purchase Agreements”). Pursuant to the Securities
Purchase Agreements, as of September 28, 2018, the Company issued a convertible promissory note to each of the Investors (together,
the “Notes”) in the original principal amount of an aggregate $2,297,727.50 in exchange for an investment of $2,000,000,
less commissions, with net proceeds to the Company of $1,815,000. Pursuant to a Security Agreement between the Company and each
of the Investors (the “Security Agreements”), the Company has granted to each of the Investors a security interest
in its assets to secure repayment of the Notes. The Company has agreed to loan one-half of the net proceeds to Helomics Holding
Corporation. Due to the timing of certain aspects of the closing, the Company expects that the transaction will be reported in
its financial statements for the fourth quarter of 2018. The Securities Purchase Agreements also provide for a second investment
of an aggregate of $500,000 by the Investors at the consummation of the Company’s pending merger transaction with Helomics
Holding Corporation, at which point the aggregate principal amounts of the Notes will become $2,865,909.00.
As additional consideration for the investment, the Company issued
an aggregate 650,000 shares of its common stock (the “Inducement Shares”) to the Investors or their affiliates plus
warrants (the “Warrants”) to acquire up to an aggregate 1,071,776 shares of the Company’s common stock (the “Warrant
Shares”) at an exercise price of $1.155 per share. Upon the closing of the second tranche investment, the Warrants will be
increased to cover an aggregate total of 1,336,805 shares. Each Warrant is exercisable by the Investor beginning on the sixth month
anniversary of the Effective Date through the fifth year anniversary thereof.
The maturity date of the Notes is twelve months from the Effective
Date. The Notes accrue interest at a rate of 8% per annum (with twelve months of interest guaranteed). The Notes may be prepaid
in any amount, subject to the following prepayment penalties: (1) during the first 30 days after the Effective Date, any amount
prepaid will be subject to a 5% prepayment penalty; (2) during the next 30 days thereafter, any amount prepaid will be subject
to a 10% prepayment penalty; (3) during the next 30 days thereafter, any amount prepaid will be subject to a 15% prepayment penalty;
(4) during the next 30 days thereafter, any amount prepaid will be subject to a 20% prepayment penalty; and (5) any amount prepaid
after the 120
th
calendar day after the Effective Date will be subject to a 25% prepayment penalty.
Upon the earlier to occur of an Event of Default (as defined in
the Notes) or the filing of certain registration statements, each Investor will have the right at any time thereafter to convert
all or any part of its Note into shares of the Company’s common stock at a conversion price which is equal to the lesser
of: (i) $1.00 and (ii) 70% of the lowest volume-weighted average price of the Company’s common stock during the 20-trading
day period ending on either the last complete trading day prior to the conversion date, or the conversion date (“Conversion
Shares”). The number of Conversion Shares that may be issued is subject to an exchange cap such that the sum of (a) the total
number of Conversion Shares plus (b) the number of Inducement Shares is limited to an aggregate 2,678,328 shares.
Pursuant to a Registration Rights Agreement between the Company
and each of the Investors (the “Registration Rights Agreements”), the Company has agreed, among other things, to file
with the SEC a registration statement covering the Inducement Shares and any other shares issuable under the transaction documents
and to use its reasonable best efforts to cause such registration statement to become effective before November 15, 2018. No later
than January 31, 2019, the Company must also cause the Conversion Shares to be registered on a registration statement with the
SEC.
The foregoing description of each of the Securities Purchase Agreements,
the Notes, the Warrants, the Registration Rights Agreements and the Security Agreements is qualified in its entirety by reference
thereto, which are filed as Exhibits 4.1, 4.2, and 10.1 through 10.8 to this Current Report, and are incorporated herein by reference.