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Item 1.01.
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Entry into a Material Definitive Agreement.
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On October 4, 2018,
Moleculin Biotech, Inc. (the “Company”) entered into a purchase agreement, dated as of October 4, 2018 (the “Purchase
Agreement”), and a registration rights agreement, dated as of October 4, 2018 (the “Registration Rights Agreement”),
with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed to purchase up to
$20.0 million worth of the Company’s common stock, $0.001 par value per share (the “Common Stock”).
Under the terms and
subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park,
and Lincoln Park is obligated to purchase up to $20.0 million worth of shares of the Company’s common stock. Such sales of
common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company’s
sole discretion, over the 36-month period commencing on the date that a registration statement covering the resale of shares of
Common Stock that have been and may be issued under the Purchase Agreement, which the Company agreed to file with the Securities
and Exchange Commission (the “SEC”) pursuant to the Registration Rights Agreement is declared effective by the SEC
and a final prospectus in connection therewith is filed and the other conditions set forth in the purchase agreement are satisfied,
all of which are outside the control of Lincoln Park (such date on which all of such conditions are satisfied, the “Commencement
Date”).
Thereafter, under the
Purchase Agreement, on any business day selected by us, we may direct LPC to purchase up to 100,000 shares of our common stock
on such business day (each, a “Regular Purchase”), provided, however, that (i) the Regular Purchase may be increased
to up to 200,000 shares, provided that the closing sale price of our common stock is not below $2.25 on the purchase date (subject
to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction
as provided in the Purchase Agreement) and (ii) the Regular Purchase may be increased to up to 250,000 shares, provided that the
closing sale price of our common stock is not below $2.75 on the purchase date (subject to adjustment for any reorganization, recapitalization,
non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement). In each
case, Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $1,000,000. In addition, upon the first
business day after the Commencement Date, the Company may direct a one-time tranche purchase of $1,000,000 worth of shares to Lincoln
Park. The purchase price per share for each such Regular Purchase and the one-time tranche purchase will be based off of prevailing
market prices of our common stock immediately preceding the time of sale without any fixed discount. In addition to Regular Purchases
and the tranche purchase, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional
accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the purchase
agreement.
Under applicable rules of The NASDAQ Capital Market, in no event may the Company issue or sell to Lincoln
Park under the Purchase Agreement more than 19.99% of the shares of the Company’s common stock outstanding immediately prior
to the execution of the Purchase Agreement (which is 5,369,613 shares based on 26,861,497 shares outstanding immediately prior
to the execution of the Purchase Agreement) (the “Exchange Cap”), unless (i) the Company obtains stockholder approval
to issue shares of common stock in excess of the Exchange Cap or (ii) the average price of all applicable sales of common stock
to Lincoln Park under the Purchase Agreement equals or exceeds $1.6235, such that issuances and sales of the common stock to Lincoln
Park under the Purchase Agreement would be exempt from the Exchange Cap limitation under applicable NASDAQ rules. In any event,
the Purchase Agreement specifically provides that the Company may not issue or sell any shares of its common stock under the Purchase
Agreement if such issuance or sale would breach any applicable NASDAQ rules.
Lincoln Park
has
no right to require the Company to sell any shares of common stock to LPC, but LPC is obligated to make purchases as we direct,
subject to certain conditions.
In all instances, the Company may not sell shares of its common stock to Lincoln Park under
the purchase agreement if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock. There are no
upper limits on the price per share that Lincoln Park must pay for shares of common stock.
The Company has agreed
with Lincoln Park that it will not enter into any “variable rate” transactions with any third party for a period defined
in the Purchase Agreement. The Company issued to Lincoln Park 243,013 shares of Common Stock as commitment shares in consideration
for entering into the Purchase Agreement and may issue an additional 121,507 shares pro-rata when and if Lincoln Park purchases
(at the Company’s discretion) the $20,000,000 aggregate commitment.
Lincoln Park represented
to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)), and the Company sold the securities
in reliance upon an exemption from registration contained in Section 4(a)(2) of the Securities Act and Regulation D promulgated
thereunder.
The Purchase Agreement
and the Registration Rights Agreement contain customary representations, warranties, agreements and conditions to completing future
sale transactions, indemnification rights and obligations of the parties. The Company has the right to terminate the Purchase Agreement
at any time, at no cost or penalty. During any “event of default” under the Purchase Agreement, all of which are outside
of Lincoln Park’s control, Lincoln Park does not have the right to terminate the purchase agreement; however, the Company
may not initiate any regular or other purchase of shares by Lincoln Park, until such event of default is cured. In addition, in
the event of bankruptcy proceedings by or against the Company, the purchase agreement will automatically terminate.
Actual sales of shares
of common stock to Lincoln Park under the purchase agreement will depend on a variety of factors to be determined by the Company
from time to time, including, among others, market conditions, the trading price of the common stock and determinations by the
Company as to the appropriate sources of funding for the Company and its operations. Lincoln Park has no right to require any sales
by the Company, but is obligated to make purchases from the Company as it directs in accordance with the purchase agreement. Lincoln
Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s
shares.
The net proceeds under
the purchase agreement to the Company will depend on the frequency and prices at which the Company sells shares of its stock to
Lincoln Park. The Company expects that any proceeds received by the Company from such sales to Lincoln Park will be used for working
capital and general corporate purposes.
This current report
on Form 8-K shall not constitute an offer to sell or a solicitation of an offer to buy any shares of common stock, nor shall there
be any sale of shares of common stock in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such state or other jurisdiction.
The foregoing descriptions
of the purchase agreement and the registration rights agreement are qualified in their entirety by reference to the full text of
such agreements, copies of which are attached hereto as Exhibit 10.1 and 10.2, respectively, and each of which is incorporated
herein in its entirety by reference. The representations, warranties and covenants contained in such agreements were made only
for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements, and may
be subject to limitations agreed upon by the contracting parties.