Item 1.01 Entry into a Material Definitive Agreement.
On February 28, 2020, DermTech, Inc., or the Company, entered into a securities purchase agreement, or the Purchase Agreement, with certain institutional
investors, or the Investors, for a private placement of the Companys equity securities, or the Private Placement. Cowen and Company, LLC served as lead placement agent for the Private Placement, with William Blair & Company, L.L.C.
acting as joint placement agent. Lake Street Capital Markets, LLC acted as co-placement agent.
The Private
Placement will consist of 2,467,724 shares of common stock, or the Common Shares, at a price of $10.50 per share, 3,198.9419 shares of Series B-1 Convertible Preferred Stock, or the Series B-1 Shares, at a price of $10,500 per share, and 523.8094 shares of Series B-2 Convertible Preferred Stock, or the Series B-2
Shares, at a price of $10,500 per share, for aggregate gross proceeds of approximately $65.0 million, and net proceeds to the Company of approximately $60.0 million, after deducting estimated offering expenses payable by the Company.
The closing of the Private Placement is expected to take place on or about March 4, 2020, and is subject to customary closing conditions. The Series B-1 Shares and Series
B-2 Shares are collectively referred to herein as the Preferred Shares.
Prior to the closing of the Private
Placement, the Company plans to designate (i) 3,200 shares of its authorized and unissued preferred stock as Series B-1 Convertible Preferred Stock by filing the Series
B-1 Certificate of Designation with the Delaware Secretary of State and (ii) 525 shares of its authorized and unissued preferred stock as Series B-2 Convertible
Preferred Stock by filing the Series B-2 Certificate of Designation with the Delaware Secretary of State.
Each
Series B-1 Share will be convertible into 1,000 shares of Company common stock, subject to adjustment as provided in the Certificate of Designation of Preferences, Rights and Limitations of Series B-1 Convertible Preferred Stock, or the Series B-1 Certificate of Designation. Each Series B-1 Share will automatically convert into
Company common stock on the first trading day after the approval of the Private Placement by the stockholders of the Company, or the Stockholder Approval, which the Company has agreed to seek at a stockholder meeting to be held on or before
June 30, 2020. The Company will not undertake any conversion of the Series B-1 Convertible Preferred Stock, and no stockholder will have the right to convert any portion of its Series B-1 Convertible Preferred Stock, until after the Company obtains the Stockholder Approval.
Each Series B-2 Share will be convertible into 1,000 shares of Company common stock, subject to adjustment as provided in the Certificate of Designation of Preferences, Rights and Limitations of Series B-2 Convertible Preferred Stock, or the Series B-2 Certificate of Designation. Each Series B-2 Share will be convertible into Company
common stock at the option of the holder, provided that conversion will be prohibited (i) until the first trading day after the Stockholder Approval and (ii) following the Stockholder Approval, if, as a result of any such conversion, the
holder would beneficially own in excess of 9.99% of the total number of shares of Company common stock outstanding immediately after giving effect to such conversion. We refer to the conversion limitation described in clause (ii) of the
preceding sentence as the Beneficial Ownership Limitation. A holder of Series B-2 Shares may reset the Beneficial Ownership Limitation to a higher or lower number upon providing written notice to the Company.
Any such notice providing for an increase to such Holders Beneficial Ownership Limitation will be effective on the 61st day after its delivery to the Company.
The Preferred Shares will have no voting rights, except as required by law and except that (i) the consent of the holders of a majority of the then
outstanding Series B-1 Shares is required to amend the terms of the Series B-1 Certificate of Designation and (ii) the consent of the holders of a majority of the
then outstanding Series B-2 Shares is required to amend the terms of the Series B-2 Certificate of Designation. The holders of the Preferred Shares are entitled to
receive dividends on an as-converted basis with the holders of the Companys common stock, when, as and if such dividends are paid on the Companys common stock. In the event of any liquidation,
dissolution or winding-up of the Company, the holders of the Preferred Shares will participate pari passu with the holders of the Companys common stock, on an
as-converted basis.
The Common Shares will be identical to all other shares of Company common stock, but the
Purchase Agreement prohibits the Investors and any transferees from voting the Common Shares on any proposal for the Stockholder Approval.
The Purchase
Agreement provides that the Company will enter into a registration rights agreement, or the Registration Rights Agreement, with the Investors at the closing of the Private Placement that requires the Company to register the resale of the Common
Shares and the shares of Company common stock underlying the Preferred Shares. The Registration Rights Agreement provides that the Company shall prepare and file a registration statement with the Securities and Exchange Commission, or the SEC,
within 60 days of the closing of the Private Placement, and use commercially reasonable efforts to have such registration statement declared effective within 90 days if there is no review by the SEC, or within 120 days in the event of such a review.