Item 1.01 Entry into a Material Definitive Agreement.
(a) Series D Warrant Amendment
On June 3, 2020 (the "Amendment Execution Date"), the Company entered into that
certain Amendment to Series D Warrants to Purchase Common Stock, dated as of the
Amendment Execution Date, with Ana Parker, the holder of Series D Warrants
exercisable for up to 4,500,000 shares of the Company's common stock, $0.001 par
value per share ("Common Stock"), and another holder of Series D Warrants (such
holder, together with Ms. Parker, the "Consenting Warrant Holders"), to (i)
terminate the beneficial ownership limitation provision in Section 1(f) of the
Series D Warrants; and (ii) lower the per share exercise price from $0.25 to
$0.18 (the "Amendment"). In accordance with Section 9 of the Series D Warrants,
the Amendment applies to all Series D Warrants and is binding upon all
registered holders of such Series D Warrants.
In addition, under the Amendment, the Company agreed to issue the Consenting
Warrant Holders Series J Warrants exercisable in the aggregate for up to
3,545,474 shares of Common Stock at an exercise price of $0.25, continent upon
each Consenting Warrant Holder's exercise of their respective Series D Warrant
in full. Each Series J Warrant has a term of one (1) year, and provides the
holder with "piggy back" registration rights under certain circumstances. On
June 4, 2020, (i) the Consenting Warrant Holders exercised their respective
Series D Warrant in full and paid the Company the aggregate exercise price of
$850,909.14; and (ii) the Company issued the Consenting Warrant Holders
4,727,273 shares of Common Stock upon the exercise of their Series D Warrants
and Series J Warrants exercisable for 3,545,474 shares of Common Stock in the
aggregate.
Ms. Parker, her husband Michael Parker and their respective affiliates
(collectively, the "Parkers"), are the Company's largest external shareholders,
and the Parkers previously participated in the Company's 2015 and 2016 private
placements, and June 2018, May 2019 and September 2019 registered direct
offerings.
The issuance and sale of the Series J Warrant and the shares of Common Stock
(the "Warrant Shares") issuable thereunder (collectively, the "Securities") has
not been, and will not upon issuance be, registered under the Securities Act of
1933, as amended (the "Securities Act"), and the Securities may not be offered
or sold in the United States absent registration under or exemption from the
Securities Act and any applicable state securities laws. The Securities will be
issued and sold in reliance upon an exemption from registration afforded by
Section 4(a)(2) of the Securities Act based on the following facts: (A) each
Consenting Warrant Holder has represented that (i) she is an accredited investor
as defined in Rule 501 promulgated under the Securities Act; (ii) she is
acquiring the Securities for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof in violation
of applicable securities laws; (iii) she has sufficient investment experience to
evaluate the risks of the investment; and (B)(1) the Company used no advertising
or general solicitation in connection with the issuance and sale of the
Securities to the Consenting Warrant Holders and (2) the Securities will be
issued as restricted securities. This Current Report on Form 8-K is not and
shall not be deemed to be an offer to sell or the solicitation of an offer to
buy any of the Securities.
(b) Convertible Notes Offering
On June 4, 2020, Arch Therapeutics, Inc. (the "Company") issued Series 1
Unsecured Convertible Promissory Notes (each a "Convertible Note" and
collectively, the "Convertible Notes") to several acrredited investors who are
current stockholders of the Company (collectively, the "Investors") in the
aggregate principal amount of $550,000. The Convertible Notes were issued under
a convertible note offering authorized by the Company's board of directors (the
"Convertible Notes Offering").
The Convertible Notes become due and payable on June 30, 2023 (the "Maturity
Date") and may be prepaid, in whole or in part, at any time. The Convertible
Notes bear interest on the unpaid principal balance at a rate equal to ten
percent (10.0%) (computed on the basis of the actual number of days elapsed in a
365-day year) per annum until either (a) converted into shares of Common Stock
(such shares of Common Stock, the "Conversion Shares"); or (b) the outstanding
principal and accrued interest on the Convertible Notes is paid in full by the
Company; provided, however, if the Convertible Notes are converted or prepaid
prior to the twelve month anniversary of their issuance, interest accrued with
respect to such prepaid or converted portion of the Convertible Note will equal
ten percent (10.0%) of the principal that is prepaid or converted. Interest on
the Convertible Notes becomes due and payable upon their conversion or the
Maturity Date and may become due and payable upon the occurrence of an event of
default under the Convertible Notes. The Convertible Notes contain customary
events of default, which include, among other things, (i) the Company's failure
to pay when due any principal or interest payment under the Convertible Note
within the specified cure period; (ii) the insolvency of the Company; or (iii)
the Company's failure to pay other indebtedness of $100,000 or more within the
specified cure period for such breach.
The holders of the Convertible Notes have the right to convert some or all of
such Convertible Notes into the number of Conversion Shares determined by
dividing (a) the aggregate sum of the (i) principal amount of the Convertible
Note to be converted; and (ii) amount of any accrued but unpaid interest with
. . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
Reference is made to the disclosure set forth in Item 1.01(b)of this Current
Report on Form 8-K, which disclosure is incorporated by reference into this Item
2.03.
Item 3.02 Unregistered Sales of Equity Securities.
Reference is made to the disclosure set forth in Item 1.01(a) and Item 1.01(b)
of this Current Report on Form 8-K, which disclosure is incorporated by
reference into this Item 3.02.
Item 8.01 Other Events
On June 5, 2020, the Company issued a press release announcing the Amendment and
Convertible Notes Offering. The text of the press release is attached hereto as
Exhibit 99.1 and is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits
(d) The following exhibits are being filed herewith:
Exhibit Description
10.1 Form of Amendment to Series D Warrants to Purchase Common Stock
10.2 Form of Series J Warrant
10.3 Form of Convertible Notes
99.1 Press Release issued by Arch Therapeutics, Inc. on June 5, 2020
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