Item
1.01.
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Entry
into a Material Definitive Agreement.
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On
May 4, 2017, Ritter Pharmaceuticals, Inc. (the “Company”) entered into a common stock purchase agreement (the “Purchase
Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”). The Purchase Agreement provides the Company, at
its sole discretion, the ability to access up to an aggregate of $6.5 million through the sale of shares of the Company's common
stock. The term of the Purchase Agreement is 30 months from the execution of the Purchase Agreement, subject to the conditions
and limitations set forth therein. In consideration for entering into the Purchase Agreement, the Company has agreed to issue
to Aspire Capital 137,324 shares of the Company’s common stock with an aggregate dollar value equal to $97,500 (the “Commitment
Shares”). Concurrently with entering into the Purchase Agreement, the Company entered into a registration rights agreement
with Aspire Capital.
Concurrently
with entering into the Purchase Agreement, the Company entered into a registration rights agreement with Aspire Capital (the “Registration
Rights Agreement”), in which the Company agreed to file with the Securities and Exchange Commission (the “Commission”)
a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (File No. 333-213087),
registering all of the shares of common stock that may be offered to Aspire Capital from time to time, including the Commitment
Shares.
Under
the Purchase Agreement, on any trading day selected by the Company, following the filing of the prospectus supplement and the
satisfaction of other closing conditions, the Company has the right, in its sole discretion, to present Aspire Capital with a
purchase notice (each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 100,000 shares
of the Company’s common stock per trading day (which may be increased by as much as an additional 2,000,000 shares per trading
day by mutual agreement), up to an aggregate of $6.5 million of the Company’s common stock that may be sold under the Purchase
Agreement, at a per share price (the “Purchase Price”) equal to the lesser of:
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the
lowest sale price of the Company’s common stock on the sale date; or
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the
arithmetic average of the three (3) lowest closing sale prices for the Company’s common stock during the ten (10) consecutive
trading days ending on the trading day immediately preceding the sale date.
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The
aggregate purchase price payable by Aspire Capital on any one purchase date may not exceed $500,000, unless otherwise mutually
agreed.
In
addition, on any date on which the Company submits a Purchase Notice to Aspire Capital in an amount equal to 100,000 shares and
our stock price is not less than $0.25 per share, the Company also has the right, in its sole discretion, to present Aspire Capital
with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to
purchase an amount of common stock equal to up to 30% of the aggregate shares of the Company’s common stock traded on its
principal market on the next trading day (the “VWAP Purchase Date”), as determined by the Company. The purchase price
per share pursuant to such VWAP Purchase Notice is generally 97% of the volume-weighted average price for the Company’s
common stock traded on its principal market on the VWAP Purchase Date.
The
Company may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of
the Purchase Agreement, so long as the most recent purchase has been completed.
The
Purchase Agreement provides that the Company and Aspire Capital will not effect any sales under the Purchase Agreement
on any purchase date where the closing sale price of the Company’s common stock is less than $0.25. There are no trading
volume requirements or restrictions under the Purchase Agreement, and the Company will control the timing and amount of sales
of the Company’s common stock to Aspire Capital.
The
Purchase Agreement provides that the number of shares that may be sold pursuant to the Purchase Agreement will be limited to 2,842,417
(the “Exchange Cap”), which represents 19.99% of the Company’s outstanding shares of common stock as of May
2, 2017, unless stockholder approval or an exception pursuant to the rules of the NASDAQ Capital Market is obtained to issue more
than 19.99%. This limitation will not apply if, at any time the Exchange Cap is reached and at all times thereafter, the average
price paid for all shares issued under the Purchase Agreement is equal to or greater than $0.68, which was the consolidated closing
bid price of the Company’s common stock on May 4, 2017. The Company is not required or permitted to issue any shares of
common stock under the Purchase Agreement if such issuance would breach its obligations under the rules or regulations of the
NASDAQ Capital Market.
Aspire
Capital has no right to require any sales by the Company, but is obligated to make purchases from the Company as directed by the
Company in accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants,
restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase
Agreement.
The
Purchase Agreement may be terminated by the Company at any time, at its discretion, without any cost to the Company. The Purchase
Agreement may be terminated by Aspire Capital following specified events of default of the Company, including the lack of availability
of a registration statement to register under the Securities Act sales of shares to Aspire Capital under the Purchase Agreement,
the suspension from trading or delisting of the Company’s common stock, specified breaches by the Company of the terms of
the Purchase Agreement and specified Company bankruptcy events.
Aspire
Capital has agreed that neither it nor any of its agents, representatives and affiliates will engage in any direct or indirect
short-selling or hedging of the Company’s common stock during any time prior to the termination of the Purchase Agreement.
Any
proceeds the Company receives under the Purchase Agreement are expected to be used for working capital and general corporate purposes.
The
foregoing is a summary description of certain terms of the Purchase Agreement and the Registration Rights Agreement and, by its
nature, is incomplete. Copies of the Purchase Agreement and Registration Rights Agreement are filed herewith as Exhibits 10.1
and 4.1, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. All readers are encouraged
to read the entire text of the Purchase Agreement and the Registration Rights Agreement.
The
Purchase Agreement is being filed herewith solely to provide investors and security holders with information regarding its terms.
It is not intended to be a source of financial, business or operational information about the Company or any of its affiliates.
The representations, warranties and covenants contained in the Purchase Agreement are made solely for purposes of the Purchase
Agreement and are made as of specific dates; are solely for the benefit of the parties; may be subject to qualifications and limitations
agreed upon by the parties in connection with negotiating the terms of the Purchase Agreement, including being qualified by confidential
disclosures made for the purpose of allocating contractual risk between the parties instead of establishing matters as facts;
and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors
or security holders. Investors and security holders should not rely on the representations, warranties and covenants or any description
thereof as characterizations of the actual state of facts or condition of the Company or any of its affiliates. Moreover, information
concerning the subject matter of the representations, warranties and covenants may change after the date of the Purchase Agreement,
which subsequent information may or may not be fully reflected in public disclosures.
The
legal opinion of Reed Smith LLP, counsel to the Company, relating to the shares of common stock being offered to Aspire Capital
is filed as Exhibit 5.1 to this Current Report on Form 8-K.