Annual report pursuant to Section 13 and 15(d)

Capital Structure

v3.20.4
Capital Structure
12 Months Ended
Dec. 31, 2020
Equity [Abstract]  
Capital Structure Capital Structure
 
Pursuant to the Company's amended and restated certificate of incorporation, the Company is authorized to issue two classes of stock; common stock and preferred stock. At December 31, 2020, the total number of shares of capital stock the Company was authorized to issue was 205,000,000 of which 200,000,000 was common stock and 5,000,000 was preferred stock. All shares of common and preferred stock have a par value of $0.001 per share.

On December 26, 2018, the Company filed a Certificate of Designation of Preferences of Series B Non-Voting Convertible Preferred Stock (“Series B Convertible Preferred Stock”) of Cerecor Inc. (the “Certificate of Designation of the Series B Preferred Stock”) classifying and designating the rights, preferences and privileges of the Series B Convertible Preferred Stock. The Certificate of Designation of the Series B Preferred Stock authorized the issuance of 2,857,143 shares of convertible preferred stock to Armistice with a par value of $0.001 per share. The Series B Convertible Preferred Stock is convertible into shares of common stock on a 1-for-5 ratio and has the same rights, preferences, and privileges as common stock other than it holds no voting rights.

Common Stock

Q1 2021 Financing

In January 2021, the Company closed an underwritten public offering of 13,971,889 shares of its common stock and 1,676,923 pre-funded warrants for net proceeds of approximately $37.6 million. Armistice participated in the offering by purchasing 2,500,000 shares of common stock, on the same terms as all other investors. Certain affiliates of Nantahala Capital Management LLC (collectively, “Nantahala”), which beneficially owned greater than 5% of the Company’s outstanding common stock at the time of the offering and, therefore, were considered a related party pursuant to the Company’s written related person transaction policy, purchased 1,400,000 shares of common stock, on the same terms as all other investors. Nantahala also purchased the pre-funded warrants. Refer to the “Common Stock Warrants” section below for more information regarding the pre-funded warrants.

Q2 2020 Financing

On June 11, 2020, the Company closed an underwritten public offering of 15,180,000 shares of its common stock for net proceeds of approximately $35.4 million. Armistice participated in the offering by purchasing 2,000,000 shares of common stock on the same terms as all other investors. Additionally, certain of the Company's officers participated in the offering by purchasing an aggregate of 110,000 shares of common stock, on the same terms as all other investors.

Q1 2020 Financings

On March 17, 2020, the Company entered into a securities purchase agreement with Armistice pursuant to which the Company sold 1,951,219 shares of its common stock for net proceeds of approximately $3.9 million.
On February 6, 2020, the Company closed a registered direct offering with certain institutional investors for the sale by the Company of 1,306,282 shares of its common stock for net proceeds of approximately $5.1 million. Armistice participated in the offering by purchasing 1,256,282 shares of common stock from the Company.

Aevi Merger

On February 3, 2020, under the terms of the Aevi Merger discussed in Note 5, the Company issued 3.9 million shares of its common stock.

Q3 2019 Armistice Private Placement

On September 4, 2019, the Company entered into a securities purchase agreement with Armistice, pursuant to which the Company sold 1,200,000 shares of its common stock for net proceeds of approximately $3.7 million.

Q1 2019 Common Stock Offering

On March 8, 2019, the Company closed on an underwritten public offering of common stock for 1,818,182 shares of common stock of the Company for net proceeds of approximately $9.0 million. Armistice participated in the offering by purchasing 363,637 shares of common stock of the Company from the underwriter at the public price.

Description of Common Stock

Voting
 
Common stock is entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders, including the election of directors, and does not have cumulative voting rights. Accordingly, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election.
 
Dividends
 
The holders of common stock are entitled to receive dividends, if any, as may be declared from time to time by the board of directors out of legally available funds.
 
Liquidation
 
In the event of the Company’s liquidation, dissolution or winding up, holders of the Company’s common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders, including any preferred stock outstanding, after the payment of all debts and other liabilities.
 
Rights and Preferences
 
Holders of the Company’s common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the Company’s common stock.

Common Stock Warrants
 
At December 31, 2020, the following common stock warrants were outstanding: 
Number of shares Exercise price Expiration
underlying warrants per share date
2,380 $ 8.68  May 2022
4,000,000 $ 12.50  June 2024
4,002,380    

As mentioned above in the section “Q1 2021 Financing,” in January 2021, as part of an underwritten public offering, the Company sold Pre-Funded warrants to Nantahala to purchase 1,676,923 shares of Cerecor’s common stock at a public offering price
of $2.599 per Pre-Funded Warrant. The Pre-Funded Warrants have an initial exercise price of $0.001 per share and are exercisable at any time after their original issuance at the option of each holder, in such holder’s discretion.

Convertible Preferred Stock

December 2018 Armistice Private Placement

On December 27, 2018, the Company entered into a series of transactions as part of a private placement with its largest stockholder, Armistice, whose Chief Investment Officer, Steve Boyd, is a Cerecor director, in order to generate cash to continue to develop its pipeline assets and for general corporate purposes. The transactions are considered one transaction for accounting purposes. As part of the transaction, the Company exchanged common stock warrants issued on April 27, 2017 to Armistice for the purchase of up to 14,285,714 shares of the Company’s common stock at an exercise price of $0.40 per share for like-kind warrants to purchase up to 2,857,143 shares of the Company's newly designated Series B Convertible Preferred Stock with an exercise price of $2.00 per share (the “Exchanged Warrants”). Armistice immediately exercised the Exchanged Warrants and acquired an aggregate of 2,857,143 shares of the convertible preferred stock. Net proceeds of the transaction were approximately $5.7 million for the year ended December 31, 2018. In order to provide Armistice an incentive to exercise the Exchanged Warrants, the Company also entered into a securities purchase agreement with Armistice in December 2018 pursuant to which the Company issued warrants for 4,000,000 shares of common stock of the Company with a term of 5.5 years and an exercise price of $12.50 per share.

During the first quarter of 2020, Armistice converted 1.6 million of Series B Convertible Preferred Stock (of its approximate 2.9 million shares of convertible preferred stock) into 8.0 million shares of Cerecor's common stock.

Description of Preferred Stock

Voting
 
Holders of the Company's convertible preferred stock are not entitled to vote.

Dividends
 
The holders of convertible preferred stock are entitled to receive dividends, if any, as may be declared from time to time by the board of directors out of legally available funds.
 
Liquidation
 
In the event of the Company’s liquidation, dissolution or winding up, holders of the Company’s convertible preferred stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all debts and other liabilities.
 
Rights and Preferences
 
Each share of convertible preferred stock is convertible to shares of common stock on a 1-for-5 ratio. There are no other preemptive or subscription rights and there are no redemption or sinking fund provisions applicable to the Company’s common stock.