ACRX AcelRX Pharmaceuticals Inc

 

 

On August 3, 2022, AcelRx Pharmaceuticals, Inc., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (the “Purchaser”), pursuant to which the Company issued on August 3, 2022 (the “Closing Date”), in a private placement transaction (the “Transaction”), an aggregate of 3,000 shares (the “Shares”) of Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred”), together with a warrant (the “Warrant”) to purchase up to an aggregate of 1,623,008 shares (the “Warrant Shares”) of common stock of the Company (the “Common Stock”) at an exercise price of $0.2033 per share (subject to adjustment as provided in the Warrant, the “Exercise Price”), for an aggregate subscription amount equal to $300,000. The Warrant is immediately exercisable and has a term ending on February 3, 2028.

 

The Company previously filed a preliminary proxy statement with the Securities and Exchange Commission (the “SEC” or the “Commission”) relating to its upcoming special meeting of stockholders (the “Special Meeting”). As disclosed in the preliminary proxy statement, the item to be considered by the Company’s stockholders at the Special Meeting is a proposal to adopt and approve a proposed amendment to the Company’s Amended and Restated Certificate of Incorporation and authorize the Board of Directors of the Company (the “Board”), in its sole discretion, to effect a reverse stock split of the outstanding shares of Common Stock at any time on or before the one year anniversary of the Special Meeting, at a reverse stock split ratio ranging from 1-for-10 to 1-for-30, as determined by the Board at a later date. The Purchase Agreement requires that the Company convene, no later than November 1, 2022 (assuming no review of the Company’s proxy statement by the Commission), an annual meeting or special meeting of stockholders for the purpose of presenting to the Company’s stockholders a proposal (the “Proposal”) to approve a reverse stock split of its outstanding Common Stock (the “Reverse Stock Split”), with the recommendation of the Board that the Proposal be approved, and that the Company use reasonable best efforts to obtain approval of the Proposal.

 

Pursuant to the Purchase Agreement, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of Delaware designating the rights, preferences and limitations of the Series A Preferred. The Certificate of Designation provides, among other things, that except as otherwise provided in the Certificate of Designation or as otherwise required by law, the Series A Preferred will have no voting rights (other than the right to vote as a class on certain matters as provided in the Certificate of Designation). However, pursuant to the Certificate of Designation, each share of Series A Preferred entitles the holder thereof (i) to vote on the Proposal and any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Proposal, and (ii) to 1,000,000 votes per share of Series A Preferred on the Proposal and any such adjournment proposal. The Series A Preferred shall, except as required by law, vote together with the Common Stock (and other issued and outstanding shares of preferred stock entitled to vote), as a single class; provided, however, that such shares of Series A Preferred shall, to the extent cast on the Proposal or any such adjournment proposal, be automatically and without further action of the holders thereof voted in the same proportion as the shares of Common Stock (excluding any shares of Common Stock that are not voted) and any other issued and outstanding shares of preferred stock of the Company entitled to vote (other than the Series A Preferred or shares of such other preferred stock, if any, not voted) are voted on the Proposal. The Purchaser has agreed in the Purchase Agreement to vote the shares of Series A Preferred purchased in the Transaction in favor of the Proposal, in the manner and to the extent set forth in the Certificate of Designation, in a manner that “mirrors” the proportions on which the shares of Common Stock (excluding any shares of Common Stock that are not voted) and any other issued and outstanding shares of preferred stock of the Company entitled to vote (excluding the Series A Preferred and shares of such other preferred stock, if any, not voted) are voted on the Proposal.

 

The Purchase Agreement contains customary representations, warranties and agreements of the Company and the Purchaser, and customary indemnification rights and obligations of the parties.

 

The Company expects to use the net proceeds from the Transaction for general corporate purposes, which may include without limitation working capital, capital expenditures, research and development expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of or investments in new companies, technologies or products, and payment of indebtedness or obligations.

 

 

The representations, warranties and covenants contained in the Purchase Agreement were made solely for the benefit of the parties to the Purchase Agreement and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Purchase Agreement is filed as an exhibit to this Current Report on Form 8-K to provide investors with information regarding the terms of the Purchase Agreement, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the Commission.

 

 

On August 3, 2022, the Company filed the Certificate of Designation with the Secretary of State of the State of Delaware designating 3,000 shares out of the authorized but unissued shares of its preferred stock as Series A Preferred with a stated par value of $0.001 per share. The Series A Preferred will be entitled to customary dividends and distributions when and if paid on shares of the Common Stock and will be entitled to vote on an as-converted basis on any matter presented to the stockholders of the Company or at any meeting of stockholders, subject to certain beneficial ownership limitations. The Series A Preferred will have preference over the Common Stock with respect to distribution of assets or available proceeds, as applicable, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or any other deemed liquidation event.

 

Each share of Series A Preferred is convertible at the option of the holder, at any time and from time to time after the effective date of a Reverse Stock Split, into that number of shares (the “Conversion Shares” and, together with the Shares, the Warrant and the Warrant Shares, the “Securities”) of Common Stock (subject to the Beneficial Ownership Limitation and the Exchange Cap described below) determined by dividing the stated value of such share of Series A Preferred by the Conversion Price then in effect, rounded down to the nearest whole share (with cash paid in lieu of any fractional shares). The “Conversion Price” for the Series A Preferred equals 90% of the lesser of (i) the closing sale price of the Common Stock on the trading day immediately prior to the Closing Date and (ii) the average of the closing sale prices for the Common Stock on the five trading days immediately prior to the Closing Date, subject to adjustment as provided in the Certificate of Designation; provided, that the Conversion Price may not fall below the par value per share of the Common Stock and may not exceed $0.35 per share. Based on the initial Conversion Price of $0.1848 per share, the 3,000 Shares of Series A Preferred are initially convertible into approximately 1,623,008 shares of Common Stock. The Conversion Price is subject to adjustment as set forth in the Certificate of Designation for stock dividends, stock splits, reverse stock splits, and similar events. Upon conversion, the shares of Series A Preferred shall resume the status of authorized but unissued shares of preferred stock of the Company.

 

Subject to the Purchaser’s right to elect to convert all or a portion of the Series A Preferred at any time during the 15 business days following the effective date of the Reverse Stock Split (the “Company Redemption Period”), the Company may, with prior notice to the holders of the Series A Preferred specified in the Certificate of Designation, redeem all or a portion of the Series A Preferred held by such holders at any time at 105% of the stated value; provided, however, that a Company redemption request shall not be effective if received by a holder of Series A Preferred before the date of the Reverse Stock Split. Each holder of Series A Preferred will have the right, with the prior notice to the Company as specified in the Certificate of Designation, to require the Company to redeem all or a portion of the Series A Preferred held by such holder following the expiration of the Company Redemption Period at 110% of the stated value. In addition, the Company will automatically redeem all of the Series A Preferred within five business days following a delisting event as specified in the Certificate of Designation at 100% of the stated value.

 

 

The Warrant is immediately exercisable and has a term ending on February 3, 2028. The Warrant is exercisable by means of cash. However, if at the time of exercise there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares by the holder, then a holder may also exercise a Warrant at the holder’s election, in whole or in part, at such time by means of a net exercise of the Warrant on a cashless basis. The Warrant provides for proportional adjustment of the number and kind of securities purchasable upon exercise of the Warrant and the per share Exercise Price upon the occurrence of certain events such as stock splits, combinations, reverse stock splits and similar events. In addition, until 12 months after the Closing Date, if the Company issues or sells (or is deemed to have issued or sold) any Common Stock, Convertible Securities or Options (as defined in the Warrant), but excluding shares of Common Stock deemed to have been issued or sold by the Company in an Exempt Issuance (as defined in the Warrant) or to extend the term of such securities, for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale (each of the foregoing, a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal to the New Issuance Price.

 

 

 

Pursuant to a Registration Rights Agreement entered into with the Purchaser, the Company has agreed to file a registration statement with the SEC by (i) if all Series A Preferred has not been fully redeemed, the 30^th day after the effective date of the Reverse Stock Split, or (ii) if all of the Series A Preferred has been fully redeemed, 120 days after the Closing Date, to register for resale from time to time the shares of Common Stock that are issuable upon conversion of the Series A Preferred and that are issuable upon exercise of the Warrant, and to use commercially reasonable efforts to have the registration statement declared effective by the time periods set forth in the registration statement and to remain continuously effective for the time periods set forth in the Registration Rights Agreement. The Company agreed to indemnify the other party and certain affiliates against certain liabilities related to the registration statement or violation of federal securities laws in connection with the Company’s performance of its obligations under the agreement.

 

The foregoing summaries of the Purchase Agreement, the Registration Rights Agreement, the Warrant, and Certificate of Designation do not purport to be a complete description of the rights, preferences, privileges and obligations of the parties thereunder and are subject to, and qualified in their entirety by, forms of such documents attached as Exhibits 10.1, 10.2, 4.1, and 3.1, respectively, to this Current Report on Form 8-K, which are incorporated herein by reference.