Item 1.01 Entry into a Material Definitive Agreement.
On August 12, 2022, Palisade Bio, Inc., a Delaware corporation (the “Company”), entered into an Underwriting Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Underwriter”), pursuant to which the Company agreed to issue and sell, in a registered public offering by the Company (the “Public Offering”), (a) 42,160,000 Class A Units, with each Class A Unit consisting of one share of the Company’s common stock, par value $0.01 per share (the “Common Stock”), a series 1 warrant with a term of one year (a “Series 1 Warrant”) to purchase one share of Common Stock at an exercise price per share of $0.25, and a series 2 warrant with a term of five years (a “Series 2 Warrant”, and together with the Series 1 Warrants, the “Warrants”) to purchase one share of Common Stock at an exercise price per share of $0.25, with each Class A Unit to be offered to the public at an offering price of $0.25 per Class A Unit and (b) 1,460 Class B Units (the “Class B Units”, and collectively with the Class A Units, the “Units”), with each Class B Unit consisting of one share of Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), convertible into 4,000 shares of Common Stock and Warrants, a Series 1 Warrant to purchase 4,000 shares of Common Stock, and a Series 2 Warrant to purchase 4,000 shares of Common Stock, with each Class B Unit offered to the public at an offering price of $1,000 per Class B Unit. Each Series 1 Warrant and Series 2 Warrant included in the Class B Units entitles its holder to purchase 4,000 shares of Common Stock at an exercise price per share of $0.25.
In addition, pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option (the “Overallotment Option”) to purchase up to (i) 7,200,000 additional shares of Common Stock, (ii) 7,200,000 additional Series 1 Warrants and/or (iii) 7,200,000 additional Series 2 Warrants, solely to cover over-allotments. The Underwriter fully exercised the Overallotment Option on August 12, 2022.
The Units were offered by the Company pursuant to (i) the registration statement on Form S-1 (File No. 333-265769), as amended, which was initially filed with the Securities and Exchange Commission (the “Commission”) on June 22, 2022 and declared effective by the Commission on August 11, 2022 (the “Initial Registration Statement”), and the registration statement on Form S-1MEF (File No. 333-266808) (the “462(b) Registration Statement”), filed by the Company with the Commission on August 11, 2022 (the 462(b) Registration Statement together with the Initial Registration Statement, the “Registration Statements”).
On August 16, 2022, the Public Offering closed, and the Company issued and sold (i) 49,360,000 shares of Common Stock (which includes 7,200,000 shares of Common Stock sold pursuant to the exercise of the Overallotment Option), (ii) 1,460 shares of Series B Preferred Stock, (iii) 55,200,000 Series 1 Warrants (which includes 7,200,000 Series 1 Warrants sold pursuant to the exercise of the Overallotment Option), and (iv) 55,200,000 Series 2 Warrants (which includes 7,200,000 Series 2 Warrants sold pursuant to the exercise of the Overallotment Option). The net proceeds to the Company, after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company, were approximately $12.2 million.
The Warrants will be exercisable beginning on the date of stockholder approval of the exercisability of the warrants under Nasdaq rules, and are exercisable at a price per share of Common Stock of $0.25. The Series 1 Warrants will expire on the one-year anniversary of the date of issuance. The Series 2 Warrants will expire on the five-year anniversary of the date of issuance. Additionally, subject to certain exceptions, if, after the closing date of the Public Offering, (i) the volume weighted average price of the Common Stock for any 30 consecutive trading days (the “Measurement Period”), which Measurement Period commences on the initial exercise date, exceeds 300% of the exercise price of the Warrants issued in the Public Offering (subject to adjustments for stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such Measurement Period exceeds $500,000 per trading day and (iii) certain other equity conditions are met, and subject to a beneficial ownership limitation, then the Company may call for cancellation of all or any portion of the Warrants then outstanding.
The Underwriting Agreement contains representations, warranties and covenants made by the Company that are customary for transactions of this type. Under the terms of the Underwriting Agreement, the Company has agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933, as amended. In addition, pursuant to the terms of the Underwriting Agreement, the Company and its executive officers and directors have entered into lock-up agreements providing that the Company and each of these persons may not, without the prior written approval of the Underwriter, subject to limited exceptions, offer, sell, transfer or otherwise dispose of the Company’s securities for a period of 90 days following the date of the Underwriting Agreement.
On August 16, 2022, the Company entered into a warrant agency agreement with the Company’s transfer agent, American Stock Transfer & Trust Company, LLC, which will also act as the warrant agent for the Company, setting forth the terms and conditions of the Warrants sold in the Public Offering (the “Warrant Agency Agreement”).
The foregoing summaries of the Underwriting Agreement, the form of Series 1 Warrant, the form of Series 2 Warrant and the Warrant Agency Agreement do not purport to be complete and are subject to, and qualified in their entirety by, such documents attached as Exhibit 1.1, 4.1, 4.2 and 4.3 respectively, to this Current Report on Form 8-K, which are incorporated herein by reference.