Item 1.01 Entry into a Material Definitive Agreement.
On January 29, 2016, Echo Therapeutics, Inc. (the "Company") entered into a
securities purchase agreement (the "Purchase Agreement") with certain
institutional and other accredited investors (the "Investors") pursuant to which
the Company agreed to issue up to $5,145,000 principal amount of 10% senior
secured convertible notes of the Company (the "Notes") and related common stock
purchase warrants (the "Warrants") in two tranches. The Notes are secured by
substantially all of the assets of the Company pursuant to a Security Agreement,
dated January 29, 2016 (the "Security Agreement"). The initial closing of
$1,787,000 occurred on January 29, 2016. Bridge notes in the principal amount of
$680,000 were surrendered to the Company as payment by certain Investors. Fees
aggregating approximately $275,000 were paid out of the proceeds of the initial
closing to the placement agent and others. Additional fees will be paid,
primarily to the placement agent, for the second closing when funded. The second
closing of $3,358,000 is subject to the Company obtaining shareholder approval.
The Notes are initially convertible into 1,191,333 shares of common stock, par
value $.01 per share, of the Company (the "Common Stock"), at $1.50 per share.
The Company has the right to redeem the Notes under certain
circumstances. Interest is payable quarterly or, subject to receipt of
stockholder approval, at the Company's option, in shares of Common Stock. In
connection with the initial closing, the Company issued five-year Warrants to
purchase 1,191,333 shares of Common Stock at an exercise price of $1.50 per
share, which are not exercisable for six months. Upon receipt of shareholder
approval, the Company expects to issue Notes in an aggregate principal amount of
$3,358,000 initially convertible into 2,238,667 shares of Common Stock at $1.50
per share and 1-1/2 year warrants to purchase 2,238,667 shares of Common Stock
at $1.50 per share. The Notes and Warrants are subject to customary antidilution
provisions. If stockholder approval is obtained, the conversion price for the
Notes is subject to a reset to eighty percent (80%) of the average of the ten
lowest closing prices of the Common Stock less than $1.50 (subject to equitable
adjustment), if any, as reported by Bloomberg LP for the principal market on
which the Common Stock then trades during the ninety (90) days following the
first effective date of a registration statement filed pursuant to the
Registration Rights Agreement, but in no event less than $.80, subject to
The Purchase Agreement contains customary representations, warranties and
affirmative and negative covenants. The Purchase Agreement also requires
management and certain shareholders to lock-up certain of their shares for the
earlier of six months after the effective date of a registration statement, the
first anniversary of the initial closing (January 29, 2017), or the date, if
applicable, such holder of securities is no longer an officer or directors of
the Company, subject to certain exceptions. In addition, for up to one year
following the effective date of a registration statement, the Investors have the
right to participate, on a pro rata basis, in certain subsequent financings by
the Company, subject to certain limitations. In connection with the transaction,
the Company entered into a registration rights agreement (the "Registration
Rights Agreement") that requires the Company to file one or more registration
statements in respect of the shares of Common Stock underlying the Notes and
Warrants. If the Company fails to make its filing deadlines or fails to maintain
the registration statement for required periods of time, the Company will be
subject to certain liquidated damages provisions. Newbridge Securities
Corporation/Life Tech Capital (the "Placement Agent") acted as the sole
placement agent for the financing. The Placement Agent will receive five-year
warrants to purchase approximately 275,000 shares of Common Stock at $1.50 per
share upon the completion of the full offering.
The above is a summary of the material terms and conditions of the Purchase
Agreement, the Notes, the Warrants, the Registration Rights Agreement and the
Security Agreement and is qualified in its entirety by the full terms and
conditions of such agreements which are attached hereto as Exhibits 10.1 through
10.5 and are hereby incorporated by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference with respect to the issuance of $1,787,000 of
principal amount of Notes.
Item 3.02 Unregistered Sale of Equity Securities.
As described in Item 1.01 of this Current Report on Form 8-K which is
incorporated herein by reference, on January 29, 2016, the Company issued Notes
and Warrants which are convertible or exercisable into the Company's shares of
The Notes and Warrants were issued pursuant to the exemption from registration
requirements of the Securities Act of 1933, as amended ("Securities Act"),
provided under Section 4(a)(2) thereof and pursuant to Rule 506 of Regulation D
only to "accredited investors" (as defined under Rule 501(a) of the Securities
Act) based in part on the representations and warranties of the Investors.
Item 9.01 Financial Statements and Exhibits.
10.1 Securities Purchase Agreement
10.2 Form of Note
10.3 Form of Warrant
10.4 Registration Rights Agreement
10.5 Security Agreement
© Edgar Online, source Glimpses