Item
1.01 Entry into a Material Definitive Agreement.
On
February 21, 2023, MyMD Pharmaceuticals, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with certain accredited investors (the “Investors”), pursuant to which it agreed to sell to the Investors
in a registered direct offering (the “Offering”) (i) an aggregate of 15,000 shares of the Company’s newly-designated
Series F Convertible Preferred Stock with a stated value of $1,000 per share, initially convertible into up to 6,651,885 shares of the
Company’s common stock, no par value (the “Common Stock”), at a conversion price of $2.255 per share (the “Preferred
Shares”), and (ii) warrants to acquire up to an aggregate of 6,651,885 shares of Common Stock (the “Warrants”).
The
closing of the Offering is expected to occur on February 23, 2023, subject to the satisfaction of customary closing conditions. The aggregate
gross proceeds from the Offering are expected to be $15 million. The Company expects to use the net proceeds from the Offering for general
corporate purposes.
The
Purchase Agreement contains certain representations and warranties, covenants and indemnities customary for similar transactions. 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. Among other covenants, the Purchase Agreement
requires the Company to hold a meeting of its stockholders not later than June 15, 2023, to seek approval under Nasdaq Stock Market Rule
5635(d) (the “Stockholder Approval”) for the issuance of shares of Common Stock at prices below the “Minimum Price”
(as defined in Rule 5635 of the Rules of the Nasdaq Stock Market) on the date of the Purchase Agreement pursuant to the terms of the
Preferred Stock and the Warrants (the “Stockholder Approval Matters”). Stockholders holding approximately 17.2 million shares
of Common Stock, representing approximately 44% of the Company’s issued and outstanding Common Stock, have executed agreements
to vote their shares in favor of the Stockholder Approval Matters.
In
connection with the Offering, pursuant to an Engagement Letter (the “Engagement Letter”), between the Company and Katalyst
Securities LLC (the “Placement Agent”), the Company has agreed to pay the Placement Agent a cash fee equal to 6% of the gross
proceeds from any sale of securities in the Offering.
Preferred
Shares
The
terms of the Preferred Shares are as set forth in the form of Certificate of Designations, attached as Exhibit 3.1 to this Current Report
on Form 8-K (the “Certificate of Designations”), which will be submitted for filing with the Secretary of State for the State
of New Jersey prior to the closing of the Offering. The Preferred Shares will be convertible into Common Stock (the “Conversion
Shares”) at the election of the holder at any time at an initial conversion price of $2.255 (the “Conversion Price”).
The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject
to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable
or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions). The Company
will be required to redeem the Preferred Shares in 12 equal monthly installments, commencing on July 1, 2023. The amortization payments
due upon such redemption are payable, at the company’s election, in cash, or subject to certain limitations, in shares of Common
Stock valued at the lower of (i) the Conversion Price then in effect and (ii) the greater of (A) 80% of the average of the three lowest
closing prices of the Company’s Common Stock during the thirty trading day period immediately prior to the date the amortization
payment is due or (B) the Floor Price (as defined below). For purposes of the Certificate of Designation, the “Floor Price”
means the lower of (x) $0.4014 and (y) 20% of the “Minimum Price” (as defined in Rule 5635 of the Rules of the Nasdaq Stock
Market) on the date of the Stockholder Approval (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations
or other similar events) or, in any case, such lower amount as permitted, from time to time, by the Nasdaq Stock Market. The Company
may require holders to convert their Preferred Shares into Conversion Shares if the closing price of the Common Stock exceeds $6.765
per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events)
for 20 consecutive trading days and the daily dollar trading volume of the Common Stock exceeds $3,000,000 per day during the same
period and certain equity conditions described in the Certificate of Designation are satisfied.
The
holders of the Preferred Shares will be entitled to dividends of 10% per annum, compounded monthly, which will be payable in cash or
shares of Common Stock at the Company’s option, in accordance with the terms of the Certificate of Designations. Upon the occurrence
and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Preferred Shares will accrue dividends
at the rate of 15% per annum. Upon conversion or redemption, the holders of the Preferred Shares are also entitled to receive a dividend
make-whole payment. The holders of Preferred Shares have no voting rights on account of the Preferred Shares, other than with respect
to certain matters affecting the rights of the Preferred Shares.
Notwithstanding
the foregoing, the Company’s ability to settle conversions and make amortization and dividend make-whole payments using shares
of Common Stock is subject to certain limitations set forth in the Certificate of Designations, including a limit on the number of shares
that may be issued until the time, if any, that the Company obtains the Stockholder Approval. Further, the Certificate of Designations
contains a certain beneficial ownership limitation after giving effect to the issuance of shares of Common Stock issuable upon conversion
of, or as part of any amortization payment or dividend make-whole payment under, the Certificate of Designations or Warrants.
The
Certificate of Designations includes certain Triggering Events (as defined in the Certificate of Designations), including, among other
things, the Company’s failure to pay any amounts due to the holders of the Preferred Shares when due. In connection with a Triggering
Event, each holder of Preferred Shares will be able to require the Company to redeem in cash any or all of the holder’s Preferred
Shares at a premium set forth in the Certificate of Designations.
The
Company will be subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, acquisition and investment
transactions, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends (other than dividends
pursuant to the Certificate of Designations), distributions or redemptions, and the transfer of assets, among other matters.
There
is no established public trading market for the Preferred Shares and the Company does not intend to list the Preferred Shares on any
national securities exchange or nationally recognized trading system.
Warrants
The
Warrants are exercisable for shares of Common Stock (the “Warrant Shares”) immediately at an exercise price of $2.255 per
share (the “Exercise Price”) and expire five years from the date of issuance. The Exercise Price is subject to customary
adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full
ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common
Stock, at a price below the then-applicable Exercise Price (subject to certain exceptions). There is no established public trading market
for the Warrants and the Company does not intend to list the Warrants on any national securities exchange or nationally recognized trading
system.
The
foregoing descriptions of the Purchase Agreement, the Warrants, the Certificate of Designations and the Engagement Letter do not purport
to be complete and are qualified in their entirety by reference to the full text of the Purchase Agreement, Warrant, Certificate of Designations
and Engagement Letter, forms of which are filed as Exhibits 10.1, 4.1, 3.1 and 10.2, respectively, to this Current Report on Form
8-K and incorporated herein by reference.