UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT
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Securities Exchange Act of 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 1.01 | Entry into a Material Definitive Agreement. |
On July 29, 2022, First Wave BioPharma, Inc., a Delaware corporation (“the Company”), entered into a binding term sheet (the “Term Sheet”) with Fortis Advisors LLC, the hired representative (in such capacity, the “Representative”) of the former stockholders of First Wave Bio, Inc. (“FWB”), which is intended to settle the previously disclosed complaint filed by the Representative against the Company in the Court of Chancery in the State of Delaware (the “FWB Action”) and to restructure the Company’s obligations to the former FWB shareholders.
Under the Term Sheet, the Company agreed to pay the former stockholders of FWB $1.5 million in cash on the date of the Term Sheet (the “Upfront Payment”). The Company also agreed to pay the former stockholders of FWB an additional $1.0 million in cash no later than September 29, 2022 (the “Second Payment”) and to pay the former stockholders of FWB an additional $2.0 million on the earlier of November 30, 2022 and the completion by the Company of one or more qualifying equity offerings (collectively with the Upfront Payment and the Second Payment, the “Payments”).
Under the Term Sheet, the former stockholders of FWB are entitled to receive future cash payments conditioned on the achievement of certain development milestones for adrulipase and to a percentage of any consideration received by the Company in the event of a license or sale of adrulipase, subject to a cap. The former stockholders of FWB are also entitled receive a percentage of the consideration received by the Company in the event of a license or sale of niclosamide and will retain their existing milestone payment rights with respect to niclosamide. In the event that the consideration received by the Company in connection with the sale or license of adrulipase or niclosamide consists of securities or other non-cash consideration, the Representative will have the right to elect either to receive payment for the former stockholders of FWB in such form of consideration or to cause the licensee or acquirer to assume the obligations described in this paragraph.
In the event of a “Company Sale” (as defined in the Term Sheet), the former stockholders of FWB are entitled to receive a pro rata share of the total consideration received by the Company or its stockholders up to $4.0 million (plus any unpaid Payments whether or not then due) based on a formula set forth in the Term Sheet. Additionally, in the event of a “Company Sale”, if any of the milestone payments described in the preceding paragraph have not yet occurred or been paid, the obligations of the Company to make such payments upon the subsequent occurrence of such milestone events will survive the “Company Sale” and will be assumed by any successor, acquirer or surviving company in such “Company Sale”. In certain circumstances, the former stockholders of FWB have the right to treat a “Company Sale” as a sale of ardulipase or niclosamide, as applicable, and to treat the Company Sale as a sale of the related asset and the former stockholders of FWB are to receive the consideration with respect thereto described in the preceding paragraph.
In the Term Sheet, the Representative has agreed to stay the FWB Action for a period of 90 days and to eliminate the Company’s obligation to pay a portion of any offering proceeds to the former stockholders of FWB. In addition, the Company’s obligation to use commercially reasonable efforts to develop niclosamide will be deferred for a period of 24 months from the date of the Term Sheet. Effective upon the payment of the Second Payment, the Representative has agreed to dismiss the FWB Action with prejudice and to extinguish the approximately $12.5 million of fixed payment obligations currently owed to the former FWB shareholders.
In the Term Sheet the Company and the Representative have also agreed to enter into a formal settlement agreement embodying the terms described above and containing mutual releases and other customary terms that will become effective upon the payment of the Second Payment. In addition, certain related parties of Fortis will agree to vote their shares of Company common stock for a reverse stock split intended to enable the Company to comply with Nasdaq’s minimum $1.00 bid price requirement.
The foregoing description of the Term Sheet is a summary only, does not purport to be complete and is qualified in its entirely by reference to the full text of the Term Sheet filed herewith as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit No. | Description |
| 10.1 | Form of Term Sheet, by and between the Representative and the Company, dated July 29, 2022. † |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
† Certain portions of this exhibit, that are not material and would likely cause competitive harm to the registrant if publicly disclosed, have been redacted pursuant to Item 601(b)(10) of Regulation S-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| First Wave BioPharma, Inc. | ||
| July 29, 2022 | By: | /s/ James Sapirstein |
| Name: | James Sapirstein | |
| Title: | Chief Executive Officer | |
Exhibit 10.1
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE THAT THE COMPANY TREATS AS PRIVATE OR CONFIDENTIAL. THE REDACTED TERMS HAVE BEEN MARKED WITH THREE ASTERISKS [***]
PRIVILEGED AND CONFIDENTIAL PURSUANT TO DELAWARE RULE OF EVIDENCE 408
BINDING TERM SHEET
This Binding Term Sheet (this “Term Sheet”) is entered into as of July 29, 2022 (the “Term Sheet Date”), by and between First Wave BioPharma, Inc. (the “Company”) and Fortis Advisors LLC, in its capacity as the hired representative and for the benefit of the former stockholders of First Wave Bio, Inc. (in such capacity, “Fortis”).
In consideration of the mutual covenants contained herein and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties hereto hereby agree as follows:
1. On the Term Sheet Date, the Company shall pay, for the benefit of the former stockholders of First Wave Bio, Inc., and in a manner directed by Fortis, $1,500,000 in cash (the “Upfront Payment”). No later than September 29, 2022, the Company shall pay, for the benefit of the former stockholders of First Wave Bio, Inc., and in a manner directed by Fortis, an additional $1,000,000 in cash (the “Second Payment”). The date on which the Company pays the Second Payment in a manner consistent with the preceding sentence is referred to herein as the “Second Payment Date.” Upon the earlier of (i) November 30, 2022 and (ii) two business days after the consummation by the Company of one or more public or private sales of its equity and/or equity related securities resulting in the aggregate gross proceeds generated by such financing(s) from and after the Term Sheet Date of at least $[***], the Company shall pay, for the benefit of the former stockholders of First Wave Bio, Inc., and in a manner directed by Fortis, an additional $2,000,000 in cash.
2. The former stockholders of First Wave Bio, Inc., will be entitled to receive, in a manner directed by Fortis, contingent milestone payments based upon the occurrence of the following events related to Adrulipase, if any (the “Adrulipase Milestones”) up to the Adrulipase Cap (as defined below):
(i) $[***] 90 days after positive readout in pilot study;
(ii) $[***] 90 days after positive readout of Phase 3 pivotal study; and
(iii) In the event of a license or sale of Adrulipase to an unaffiliated third party:
(a) [***]% of the first $[***] of proceeds as and when received by the Company;
(b) [***]% of the proceeds in excess of $[***] and up to $[***] as and when received by the Company; and
(c) [***]% of the proceeds in excess of $[***] as and when received by the Company.
Notwithstanding anything to the contrary set forth above, if the consideration payable to the Company in connection with a license or sale of Adrulipase consists of securities or other non-cash consideration, then, at the election of Fortis, either (I) the Company will pay, for the benefit of the former stockholders of First Wave Bio, Inc., and in a manner directed by Fortis, the applicable percentage of such consideration in accordance with the foregoing clauses 2(iii)(a), (b) and (c), or (II) the Company shall cause the licensee or acquiror of Adrulipase to assume the obligations of the Company under this Section 2 with respect to any subsequent achievement of the Adrulipase Milestones.
For the avoidance of doubt, in no event shall the former stockholders of First Wave Bio, Inc., be entitled to receive more than $[***] in the aggregate from the Adrulipase Milestones (the “Adrulipase Cap”).
The Adrulipase Milestones shall be paid in cash.
3. Niclosamide:
(i) In the event of a license or sale of Niclosamide to an unaffiliated third party, the former stockholders of First Wave Bio, Inc., shall be entitled to receive, in a manner directed by Fortis, [***]% of the proceeds as and when received by the Company; provided however that if the Company has prior to the license or sale initiated a clinical trial for IBD, then in such instance, the former stockholders of First Wave Bio, Inc., shall receive, in a manner directed by Fortis, [***]% of the proceeds from such sale or license. Notwithstanding the above, the Company shall not enter into a sale or license with a third party without prior written consent of Fortis unless the minimum upfront is $[***] and there are at least $[***] in milestone payments. In the event of such sale or license, Company shall be relieved of any of the contingent milestone obligations due Fortis under the Agreement and Plan of Merger, dated as of September 13, 2021, by and among the Company, Alpha Merger Sub, Inc., First Wave Bio, Inc. and Fortis (the “Merger Agreement”).
(ii) In the event that there is no sale or license of Niclosamide to a third-party (excluding any Company Sale), Fortis shall retain its rights to contingent milestone payments related to development of Niclosamide under the Merger Agreement; provided, however, that the Company’s obligations to use CRE to develop Niclosamide shall be deferred 24 months from the Term Sheet Date. For clarity, the successor, acquiror or surviving company in a Company Sale shall fully assume the foregoing obligations.
(iii) Notwithstanding anything to the contrary set forth above, if the consideration payable to the Company in connection with a license or sale of Niclosamide consists of securities or other non-cash consideration, then, at the election of Fortis, either (a) the Company will pay, for the benefit of the former stockholders of First Wave Bio, Inc., and in a manner directed by Fortis, the applicable percentage of such consideration in accordance with the foregoing clause 3(i), or (b) the Company shall cause the licensee or acquiror of Niclosamide to assume the obligations of the Company under this Section 3 with respect to any subsequent license or sale of Niclosamide.
4. Company Sale.
(i) In the event of a Qualifying Company Sale (as defined below), the Company will pay, for the benefit of the former stockholders of First Wave Bio, Inc., and in a manner directed by Fortis, an additional $4,000,000 in cash plus any amounts not previously paid pursuant to Section 1 above, whether or not the conditions to such payments have been satisfied.
(ii) In the event of a Company Sale that is not a Qualifying Company Sale, at the election of Fortis, either (a) the Company will pay, for the benefit of the former stockholders of First Wave Bio, Inc., and in a manner directed by Fortis, an amount in cash equal to the sum of (I) $4,000,000 multiplied by a fraction, the numerator of which is equal to the total consideration received by the Company or the Company’s stockholders in such Company Sale, and the denominator of which is equal to $[***], plus (II) any amounts not previously paid pursuant to Section 1 above, whether or not the conditions to such payments have been satisfied or (b) as a condition to such Company Sale, the Company shall cause its successor, acquiror or surviving company in such Company Sale to assume the obligations of the Company under Section 4(i) and Section 4(ii) with respect to any subsequent Company Sale involving any such successor, acquiror or surviving company.
(iii) If, at the time of a Company Sale, any of the milestone payment events set forth in Section 2 or Section 3 have not yet occurred or been paid, the obligations of the Company hereunder to make such payments upon the subsequent occurrence of such milestone events shall survive such Company Sale and shall be assumed by any successor, acquiror or surviving company in such Company Sale.
(iv) For purposes of this Term Sheet, a “Company Sale” means (a) a transaction or series of related transactions in which any person (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than any person who immediately prior to the consummation of such transaction or transactions owns more than a majority of the Company’s outstanding voting securities, acquires more than 50% of the combined voting power of the voting securities of the Company, (b) a consolidation or merger of the Company with or into another entity, unless the stockholders of the Company immediately prior to the consummation of such consolidation or merger own, directly or indirectly, a majority of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such consolidation or merger, or (c) the sale or other disposition of all or substantially all of the assets of the Company. For purposes of this definition, the term “Company” shall refer to the Company and any successor, acquiror or surviving company of the Company.
(v) Notwithstanding anything to the contrary set forth herein, in the event of the sale of Adrulipase or Niclosamide in a transaction or series of related transactions which would also qualify as a Company Sale under clause (c) of the definition thereof, Fortis shall have the right, at its election, to treat such transaction either (a) as a Company Sale, such that the former stockholders of First Wave Bio, Inc., would receive the amounts payable in connection with such Company Sale pursuant to Section 4(i) and the other provisions of Section 4 shall apply, or (b) as a sale of Adrulipase, such that the former stockholders of First Wave Bio, Inc., would receive the Adrulipase Milestone payable in a manner directed by Fortis pursuant to Section 2(iii), or a sale of Niclosamide, such that the former stockholders of First Wave Bio, Inc. would receive the amounts payable in a manner directed by Fortis pursuant to Section 3(i), as applicable, and, in each case, using the aggregate proceeds generated by such transaction as the “proceeds” when calculating the foregoing amounts in accordance with Section 2(iii) or Section 3(i), as applicable.
(vi) As defined herein a “Qualifying Company Sale” means any Company Sale in which the Company or the Company’s stockholders receive total consideration of at least $[***].
5. Existing obligation to pay 10% of any future capital raises shall be terminated as of the Term Sheet Date. The Upfront Payment shall reduce the Company’s existing $12.5M in fixed payment obligations to the former stockholders of First Wave Bio, Inc. on a dollar-for-dollar basis. The remainder of such fixed payment obligations shall be deemed to be extinguished effective as of the Second Payment Date.
6. Litigation to be stayed for a period of 90 days effective as of the Term Sheet Date. Effective on the Second Payment Date, the existing litigation shall be dismissed with prejudice.
7. Settlement Agreement (as defined below) to contain mutual releases with non-disparagement clauses, which releases and clauses shall become effective as of the Second Payment Date.
8. Glick, Hoffman and Oremland to agree in the Settlement Agreement to vote in favor of management proposal regarding reverse split or provide Company with proxy.
9. Parties to use their respective commercially reasonable efforts to negotiate a settlement agreement among the parties embodying the terms set forth herein (the “Settlement Agreement”) in good faith as promptly as practicable after the Term Sheet Date.
10. Company shall have the right to disclose the terms hereof to the extent required based on the advice of counsel pursuant to applicable securities laws or the rules and regulations of any securities exchange or trading market on which its securities are listed or quoted for trading; provided that, to the extent practicable, the Company shall provide Fortis a reasonable opportunity to review and comment prior to making such disclosure.
11. This Term Sheet may be amended only by a written instrument signed by the Company and Fortis.
12. This Term Sheet contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and thereof and supersede all prior discussions, negotiations, commitments, agreements and understandings, both written and oral, relating to such subject matter.
13. Sections 8.5 (Enforcement), 8.6(a) (Amendment and Waiver), 8.9 (Counterparts), 8.10 (Governing Law), 8.11 (Severability) and 8.12 (Joint Drafting) of the Merger Agreement shall apply to this Term Sheet, mutatis mutandis, as if incorporated herein in their entirety, and shall also apply to and be incorporated into the Settlement Agreement.
14. Except as expressly modified or terminated by this Term Sheet, all terms, conditions and provisions of the Merger Agreement and the settlement agreement, dated November 15, 2021, by and between the Company and Fortis shall continue in full force and effect.
[Signature Page Immediately Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Term Sheet to be duly executed by the undersigned, thereunto duly authorized, as of the date first written above.
FIRST WAVE BIOPHARMA, INC.
By:_______________________
Title: Authorized Signatory
FORTIS ADVISORS LLC
By:_______________________
Title: Authorized Signatory
Cover |
Jul. 29, 2022 |
|---|---|
| Cover [Abstract] | |
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | Jul. 29, 2022 |
| Entity File Number | 001-37853 |
| Entity Registrant Name | First Wave BioPharma, Inc. |
| Entity Central Index Key | 0001604191 |
| Entity Tax Identification Number | 46-4993860 |
| Entity Incorporation, State or Country Code | DE |
| Entity Address, Address Line One | 777 Yamato Road |
| Entity Address, Address Line Two | Suite 502 |
| Entity Address, City or Town | Boca Raton |
| Entity Address, State or Province | FL |
| Entity Address, Postal Zip Code | 33431 |
| City Area Code | 561 |
| Local Phone Number | 589-7020 |
| Written Communications | false |
| Soliciting Material | false |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Title of 12(b) Security | Common Stock, par value $0.0001 per share |
| Trading Symbol | FWBI |
| Security Exchange Name | NASDAQ |
| Entity Emerging Growth Company | false |