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| Item 1.01 | Entry into a Material Definitive Agreement.
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On March 24, 2022, Evofem Biosciences, Inc., (the “Company”), entered into an Exchange Agreement (the “Exchange Agreement”) with the holder (the “Stockholder”) of its Series B-2 Convertible Preferred Stock, par value $0.0001 per share (the “Series B-2 Preferred Stock”), pursuant to which the Stockholder agreed to exchange (the “Exchange”) 1,700 shares of the Series B-2 Preferred Stock beneficially owned by the Stockholder in consideration for 1,700 shares of the Company’s Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”).
In connection with the Exchange and in accordance with the Exchange Agreement, the Company plans to request that its shareholders consider an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of the Company’s outstanding shares of common stock, par value $0.0001 (the “Common Stock”) by a ratio to be determined by the Board of Directors of the Company, the implementation and timing of which shall be subject to the discretion of the Company’s Board of Directors (the “Reverse Split Proposal”) at its annual meeting.
Pursuant to the Exchange Agreement, the Company has filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State of the State of Delaware designating the rights, preferences and limitations of the shares of Series C Preferred Stock. The Certificate of Designation provides, in particular, that the Series C Preferred Stock will have no voting rights, other than the right to vote as a class on certain matters, and that each share of Series C Preferred Stock will have the right to cast 50,000 votes per share of Series C Preferred Stock on the Reverse Split Proposal, voting together with the Common Stock as a single class; and, in accordance with Nasdaq Stock Market LLC Listing Rules, the votes cast by holders of the Series C Preferred Stock must be counted by the Company in the same proportion as the aggregate shares of Common Stock voted on the Reverse Split Proposal.
Except with respect to these voting provisions, the shares of Series C Preferred Stock and shares of Series B-2 Preferred Stock have substantially similar terms. Each share of Series C Preferred Stock is convertible (subject to a customary 19.99% exchange cap limitation and a customary 4.99%/9.99% beneficial ownership limitation), at the holder’s option, into shares of the Company’s common stock at a conversion ratio equal (i) $1,000.00 (the “Stated Value”) divided by (ii) a conversion price equal to the greater of (a) the Series C Fixed Conversion Price and (b) the Series C Variable Conversion Price. The “Series C Fixed Conversion Price” means $0.34191, the then current Fixed Conversion Price for shares of Series B-2 Preferred Stock. The “Series C Variable Conversion Price” means the price computed as the product of (X) 0.85, multiplied by (Y) the arithmetic average of the closing prices as reported by the Nasdaq Capital Market per share of common stock during the 5 consecutive trading-day period ending on and including the trading day immediately preceding the conversion date. These conversion ratios are subject to adjustments for stock splits, cash or stock dividends, reorganizations, reclassifications other similar events as set forth in the Certificates of Designation. Each holder of shares of Series C Preferred Stock is entitled to receive dividends on a pari passu basis, when and if declared, on an as-converted-basis with the holders of shares of the Company’s common stock, and each share of Series C Preferred Stock carries a liquidation preference, on a pari passu basis, equal to the Stated Value for any voluntary or involuntary liquidation or winding up of the Company as well as for certain deemed liquidation events described in the Certificates of Designation.
Commencing on October 12, 2025 and unless prohibited by Delaware law, the Company will be required to redeem the issued and outstanding shares of Series C Preferred Stock within 60 days following the request of the holders of a majority of the then issued and outstanding shares of Series C Preferred Stock at a price per share equal to the Stated Value. If Delaware law then prohibits the Company from completing a redemption of all the then outstanding shares of Series C Preferred Stock, the Company will be required to ratably redeem the maximum number of shares of Series C Preferred Stock on a pro rata basis as permitted by Delaware law.
There is no established trading market for the Series C Preferred Stock, and the Company does not intend to list the Series C Preferred Stock on any securities exchange or nationally recognized trading system. Without a trading market, the liquidity of the Series C Preferred Stock may be extremely limited.
The foregoing summaries of the Exchange Agreement and the Certificate of Designation do not purport to be complete and are subject to, and qualified in their entirety by, the forms of such documents attached as Exhibits 10.1 and 3.1, respectively, to this Current Report on Form 8-K (the “Report”), which are incorporated herein by reference.