Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on December 10, 2020, Aytu BioScience, Inc. ("Aytu"),
Neutron Acquisition Sub, Inc., a wholly owned subsidiary of Aytu and Neos
Therapeutics, Inc. (the "Company" or "Neos") entered into an Agreement and Plan
of Merger (the "Merger Agreement"), whereby Neutron Acquisition Sub, Inc. will
merge with and into Neos, with Neos surviving as a wholly owned subsidiary of
Aytu (the "Merger"). Completion of the Merger is anticipated to occur as early
as the end of the first quarter of 2021 and remains subject to customary closing
conditions, including the adoption of the Merger Agreement by a majority of the
holders of the outstanding shares of Neos common stock and the approval of the
issuance of Aytu common stock by a majority of the votes cast by Aytu
stockholders on the matter, and certain other conditions. The details of the
Merger and the Merger Agreement were previously disclosed in, and the Merger
Agreement was filed with, the Company's Form 8-K filed on December 11, 2020.
Capitalized terms not defined herein shall have the meanings ascribed to them in
the Merger Agreement.
In connection with the execution of the Merger Agreement, Neos concurrently
entered into a commitment letter for an unsecured convertible note (the
"Promissory Note") for Aytu BioScience, Inc. ("Aytu") to provide financing to
Neos in an aggregate amount of up to $5,000,000, subject to receipt of approval
from The Nasdaq Stock Market ("Nasdaq") with respect to the convertible note and
the transactions contemplated therein.
Following receipt of the aforementioned approval from Nasdaq, on February 8,
2021, the Company issued the Promissory Note to Aytu without incurring any
indebtedness thereunder. If indebtedness is incurred, interest will accrue on
any principal amount outstanding under the note at a rate of 6.0% per annum,
compounding monthly beginning in February 2021. If an event of default has
occurred and is continuing, the interest rate then in effect will be increased
by 2.0% per annum, and all overdue obligations under the note will bear interest
at the interest rate in effect at such time plus the additional 2.0% per annum.
Aytu's rights under the note, including rights to payment, are subordinated to
the rights of Neos's existing senior lenders. The maturity date of the note is
the earlier of the acceleration of the obligations evidenced thereby and
November 7, 2022.
If drawn down on, the convertible note will be cancelled in the event the Merger
is consummated. If the Merger is not consummated and the Merger Agreement is
terminated, at any time beginning 30 days following such termination, Aytu will
have the right to elect to convert principal and accrued interest amounts
outstanding under the note at a conversion price equal to the greater of $0.50
per Neos share or 90% of Neos' then current share price (calculated based on a
volume weighted average price per share for the thirty (30) trading days
immediately preceeding). Aytu's ability to convert the note is subject to a
customary exchange cap, under which no shares may be issued by Neos to the
extent such issuance (together with all previous issuances under the note) would
exceed 19.9% of Neos's outstanding common stock as of the date the note is
issued. Alternatively, at Aytu's option, it may acquire shares in excess of such
exchange cap if it elects to increase the conversion price with respect to any
given conversion such that Nasdaq would deem such conversion price to be at
least the Minimum Price for purposes of Nasdaq listing Rule 5635(d). In
addition, Aytu may not acquire common stock upon conversion of the note to the
extent such acquisition would result in Aytu's beneficial ownership of Neos's
common stock exceeding 9.985% of Neos's total outstanding shares of common stock
at such time.
The issuance of the convertible note occurred, and the conversion of the shares
of Neos's common stock thereunder will occur, as a private placement of
securities. As a result, the shares issuable upon conversion of the note may be
restricted from resale unless such shares have been registered for resale under
the Securities Act of 1933, as amended (the "Securities Act") or an exemption
exists for such resale.
Concurrently with the issuance of the Promissory Note, on February 8, 2021, Neos
and Aytu entered into a registration rights agreement (the "Registration Rights
Agreement") to register the resale of the conversion shares under the notes.
Under the Registration Rights Agreement, within 30 days from the termination of
the Merger Agreement for any reason, Neos will use best efforts to register the
conversion shares for resale and cause such registration statement to be
declared effective by the Securities and Exchange Commission (the "SEC") within
75 days following the filing of such registration statement. If the registration
statement is not declared effective by such deadline or its effectiveness not
maintained, Neos will pay Aytu an additional amount of its common stock (or cash
if such issuance of common stock is not permitted under Nasdaq rules) equal to
3% of the common stock covered under the registration statement for each 30-day
period the registration statement is not declared effective after the deadline.
In addition, if the registration
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statement is not effective or available to use prior to such time that Aytu can
sell all of the common stock covered by the registration statement under Rule
144 without regard to volume limitations, Neos will pay Aytu an additional
amount of common stock (or cash if such issuance common stock is not permitted
under Nasdaq rules) equal to 3% of the remaining unsold amount of common stock
covered under the registration statement for each 30-day period that the
registration statement is not available to use. The Registration Rights
Agreement also includes a covenant prohibiting Neos from issuing equity or
convertible securities from the date the convertible note is issued until 30
days after the date the registration statement is declared effective, subject to
certain exceptions.
In addition, in the event that Neos draws down on the convertible note, the
Exchange Ratio will be adjusted downward by an amount equal to 0.00011 for every
$100,000 of bridge financing funded by Aytu under the convertible note.
The foregoing description of the Promissory Note and the Registration Rights
Agreement is not complete and is qualified in its entirety by reference to the
Promissory Note, which is filed as Exhibit 10.1 hereto, and the Registration
Rights Agreement, which is filed as Exhibit 10.2 hereto, both of which are
incorporated by reference into this Item 1.01.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The disclosure regarding the Promissory Note contained in Item 1.01 of this
Current Report on Form 8-K is hereby incorporated by reference into this Item
2.03.
Item 3.01 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
As previously disclosed, on June 2, 2020, Neos received a letter (the "Letter")
from the Listing Qualifications Department (the "Staff") of Nasdaq indicating
that the closing bid price of the Company's common stock had, for 30 consecutive
business days preceding the date of the Letter, been below the $1.00 per share
minimum required for continued listing on The Nasdaq Global Market under Nasdaq
Listing Rule 5450(a)(1) (the "Minimum Bid Price Rule"). In accordance with
Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided until December 28,
2020 to regain compliance, reflecting a 180-day compliance period and any
temporary relief periods afforded by Nasdaq pursuant to its April 16, 2020
announcement.
On December 29, 2020, Neos received a notice (the "Notice") from the Listing
Qualifications Department of Nasdaq stating that the Company had failed to
regain compliance with the minimum $1.00 closing bid price required by the
Minimum Bid Price Rule prior to December 28, 2020 as required by Nasdaq's
Letter. Upon receipt of the Notice, the Company promptly requested a hearing
before a Hearings Panel to appeal the determination, which stayed the suspension
of Neos' securities and the filing of the Form 25-NSE pending a decision by the
Hearings Panel.
On February 4, 2021, Neos conducted its hearing before the Nasdaq Hearings
Panel. On February 5, 2021, the Hearings Panel granted Neos' request to continue
its listing on Nasdaq during the pendency of the Merger or until June 28, 2021.
To remain listed on Nasdaq beyond such date, Neos must demonstrate compliance
with the Minimum Bid Price Rule on or before such date.
Item 3.02 Unregistered Sales of Equity Securities.
The disclosure regarding the Promissory Note contained in Item 1.01 of this
Current Report on Form 8-K is hereby incorporated by reference into this Item
3.02.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Description
10.1 Unsecured Convertible Promissory Note, by and between Neos and Aytu.
10.2 Registration Rights Agreement, by and between Neos and Aytu.
Subordination Agreement, by and among Neos, Aytu, Deerfield Private
10.3 Design Fund III, L.P. and Deerfield Partners, L.P.
Subordination Agreement, by and among Neos, Aytu, Neos Therapeutics
Brands, LLC, Neos Therapeutics, LP, Neos Therapeutics Commercial, LLC,
10.4 Pharmafab Texas, LLC and Encina Business Credit, LLC.
Cover Page Interactive Data File (embedded within the Inline XBRL
104 document)
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