Item 1.01
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Entry into a Material Definitive Agreement
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Registered Direct Offering
On November 4, 2019, CHF Solutions, Inc. (the “Company”) entered into a placement agency agreement (the “Placement Agency Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Placement Agent”). Pursuant to the
terms of the Placement Agency Agreement, the Placement Agent has agreed to use its reasonable best efforts to arrange for the sale of an aggregate of 1,219,076 shares of the Company’s common stock (the “Shares”) and/or Pre-Funded Warrants (as
defined below). The Company will pay to the Placement Agent a cash fee equal to 8% of the gross proceeds from the sale of the Shares and Pre-Funded Warrants and reimburse the Placement Agent for certain of its expenses in an amount not to exceed
$85,000. The Company intends to use the net proceeds of this offering for working capital purposes.
The Placement Agency Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, other obligations of the
parties, and termination provisions.
The offering of the Shares and the Pre-Funded Warrants (the “Registered Offering”) is being made pursuant to the Company’s effective shelf registration statement (the “Registration Statement”) on Form S-3
(Registration No. 333-224881), including the prospectus dated May 23, 2018 contained therein, and a prospectus supplement that the Company intends to file on November 4, 2019.
On November 4, 2019, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with the purchasers of the Shares and Pre-Funded Warrants. The Purchase Agreement provides for the sale and
issuance by the Company of an aggregate of 1,219,076 Shares and/or Pre-Funded Warrants, at an offering price of $1.12 per share for gross proceeds of approximately $1.36 million before deducting the Placement Agent’s fees and related offering
expenses. The Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, other obligations of the parties and termination provisions.
The Purchase Agreement also provides for the issuance of pre-funded warrants, which do not expire until exercised in full (“Pre-Funded Warrants”). These Pre-Funded Warrants were issued in lieu of additional shares to the extent an applicable
investor's total purchase commitment exceeded the Beneficial Ownership Limitation. Additionally, the Purchase Agreement provides that the Company will use its best efforts to reduce the exercise price of each of the previously issued and
outstanding warrants to purchase common stock of the Company issued in April 2017, November 2017, July 2018 and March 2019, as applicable, held by a Purchaser of the Shares to the then-current market price of the Common Stock at the time of such
reduction.
Private Placement
The Purchase Agreement also provides for a concurrent private placement (the “Private Placement”) of warrants to purchase the Company’s common stock (the “Warrants”) with the purchasers in the Registered Offering.
The Warrants will be exercisable for an aggregate of 1,219,076 shares of common stock. The Warrants will have an exercise price of $0.9942 per share, will be exercisable on the issuance date (the “Initial Exercise Date”), and will expire on the
fifth anniversary following the Initial Exercise Date. Subject to limited exceptions, a holder of a Warrant will not have the right to exercise any portion of its Warrants if the holder, together with its affiliates, would beneficially own in
excess of 4.99% (or, at the election of a holder prior to the date of issuance, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however,
that upon prior notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, provided further that in no event shall the Beneficial Ownership Limitation exceed 9.99% and any increase in the beneficial ownership
limitation will not be effective until 61 days following notice to us.
In connection with the Private Placement, the Company has agreed to file a registration statement registering for resale the shares of Common Stock issuable upon exercise of the Warrants within sixty days of the closing of the Private
Placement.
The Placement Agency Agreement, Purchase Agreement and form of Warrant and Pre-Funded Warrant are filed as Exhibits 1.1, 10.1, 4.1 and 4.2, respectively, to this Current Report on Form 8-K and are incorporated herein
by reference. The above descriptions of the terms of the Placement Agency Agreement, Purchase Agreement, Warrants and Pre-Funded Warrant are qualified in their entirety by reference to such exhibits.