On August 23, 2019, Seelos Therapeutics, Inc. (the "Company") reported that it has entered into a securities purchase agreement (the "Securities Purchase Agreement") with certain accredited investors identified on the signature pages thereto (the "Purchasers") pursuant to which the Company agreed to issue and sell an aggregate of 4,475,000 shares (the "Shares") of its common stock, par value $0.001 per share (the "Common Stock"), in a registered direct offering (the "Registered Direct Offering") (Filing, 8-K, Apricus Biosciences, AUG 23, 2019, View Source [SID1234539043]). The Shares were offered by the Company pursuant to its shelf registration statement on Form S-3 (File No. 333-221285) filed with the Securities and Exchange Commission (the "Commission") on November 2, 2017, as amended by Amendment No. 1 thereto filed with the Commission on December 1, 2017 and declared effective on December 7, 2017 (as amended, the "Registration Statement").
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In a concurrent private placement, the Company also agreed, pursuant to the Securities Purchase Agreement, to issue and sell to each of the Purchasers a warrant to purchase half of a share of Common Stock (the "Warrants") for each share of Common Stock purchased by a Purchaser in the Registered Direct Offering (the "Private Placement" and, together with the Registered Direct Offering, the "Offerings"). The exercise price of the Warrants is $1.78 per share, subject to adjustment as provided therein, and will be exercisable beginning on February 27, 2020 through August 28, 2023. Each holder of a Warrant will not have the right to exercise any portion of its Warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the 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 61 days’ prior notice to the Company, the holder may increase the Beneficial Ownership Limitation, but not to above 9.99%. The exercise price and number of shares of Common Stock issuable upon the exercise of the Warrants will be subject to adjustment in the event of any stock dividend, stock split, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants. After February 27, 2020, if a registration statement covering the issuance or resale of the shares of Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") is not available for the issuance or resale, as applicable, the holders may exercise the Warrants by means of a "cashless exercise."
The Warrants are not and will not be listed for trading on any national securities exchange. The Warrants and the Warrant Shares are not being registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the Registration Statement.
The combined purchase price for one Share and one Warrant to purchase half of a share of Common Stock in the Offerings was $1.50. The closing of the Offerings occurred on August 27, 2019. The Company expects the aggregate net proceeds from the Offerings, after deducting the placement agent’s fees and other estimated offering expenses, to be approximately $5.9 million. The Company intends to use the aggregate net proceeds for general corporate purposes and to advance the development of its product candidates.
The Company also agreed, pursuant to the Securities Purchase Agreement, to file a registration statement on Form S-1 by November 21, 2019 to provide for the resale of the Warrant Shares, and will be obligated to use commercially reasonable efforts to keep such registration statement effective from the date the Warrants initially become exercisable until the earlier of (i) the date on which the Warrant Shares may be sold without registration pursuant to Rule 144 under the Securities Act during any 90 day period, and (ii) the date on which no purchaser owns any Warrants or Warrant Shares.
The Securities Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. Under the Securities Purchase Agreement, the Company has agreed, subject to certain exceptions, not to enter into any agreement to issue or announce the issuance or proposed issuance of any Common Stock or Common Stock equivalents for a period of 90 days following the closing of the Offerings.
Roth Capital Partners, LLC (the "Placement Agent") acted as the placement agent for the Offering. On August 23, 2019, the Company entered into a Placement Agency Agreement with the Placement Agent (the "Placement Agency Agreement"), pursuant to which the Placement Agent agreed to serve as the placement agent for the issuance and sale of the Shares and the Warrants, and the Company agreed to pay the Placement Agent an aggregate fee equal to 7.0% of the gross proceeds received by the Company in the Offerings. The Placement Agency Agreement includes indemnity and other customary provisions for transactions of this nature. Subject to certain conditions, the Company
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also agreed to reimburse all expenses of the Placement Agent actually incurred in connection with the Offerings, which expenses shall be limited to, in the aggregate, $80,000.
In addition, each institutional investor in the Offering has entered into a Leak-Out Agreement with the Company (each, a "Leak-Out Agreement" and collectively, the "Leak-Out Agreements") wherein each investor who is party to a Leak-Out Agreement (together with certain of its affiliates) has agreed to not sell, dispose or otherwise transfer, directly or indirectly (including, without limitation, any sales, short sales, swaps or any derivative transactions that would be equivalent to any sales or short positions), on any trading day from the public announcement of the Offering and ending at 4:00 pm (New York City time) on September 20, 2019, shares of Common Stock, or shares of Common Stock underlying any Common Stock equivalents held by such investor on the date of the Leak-Out Agreements, including the Warrant Shares, in an amount more than its pro rata portion of 35% of the trading volume of the Common Stock, subject to certain exceptions. This restriction will not apply to any actual "long" (as defined in Regulation SHO promulgated under the Securities Exchange Act of 1934, as amended) sales by such investor (together with certain of its affiliates) at or above $3.00 or to any actual "long" sales of shares of Common Stock purchased in open market transactions by such investor (together with certain of its affiliates) during the restricted period. Further, this restriction will not apply to sales or transfers of any such shares of Common Stock in transactions which do not need to be reported on the Nasdaq consolidated tape so long as the purchaser or transferee executes and delivers a Leak-Out Agreement. After such sale or transfer, future sales of the securities covered by the Leak-Out Agreement by the original owner (together with certain of its affiliates) and the purchaser or transferee will be aggregated to determine compliance with the terms of the Leak-Out Agreements.
The foregoing summaries of the Securities Purchase Agreement, the Warrants, the Placement Agency Agreement and the Leak-Out Agreements do not purport to be complete and are qualified in their entirety by reference to the full texts of the Form of Warrant, the Form of Securities Purchase Agreement, the Placement Agency Agreement and the Form of Leak-Out Agreement that are filed herewith as Exhibits 4.1, 10.1, 10.2 and 10.3, respectively.
The representations, warranties and covenants contained in the Securities Purchase Agreement, the Warrants, the Placement Agency Agreement and the Leak-Out Agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to the Securities Purchase Agreement, the Warrants, the Placement Agency Agreement and the Leak-Out Agreement, respectively, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Securities Purchase Agreement, the Warrants, the Placement Agency Agreement and the Leak-Out Agreements are incorporated herein by reference only to provide investors with information regarding the terms of the Securities Purchase Agreement, the Warrants, the Placement Agency Agreement and the Leak-Out Agreements, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the Commission.
The legal opinion, including the related consent, of Brownstein Hyatt Farber Schreck, LLP relating to the issuance and sale of the Shares is filed as Exhibit 5.1 hereto.
This report does not constitute an offer to sell, or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction.