Item
1.01 Entry into a Material Definitive Agreement.
On
October 30, 2018, Ritter Pharmaceuticals, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Securities
Purchase Agreement”) with the purchasers named therein (the “Purchasers”), pursuant to which the Company agreed
to sell 6,000 shares of its newly designated Series B convertible preferred stock, with a stated value of $1,000 per share (the
“Series B Shares”), together with common stock purchase warrants (the “Warrants”) to purchase 2,307,692
shares of its common stock (representing 50% of the aggregate number of shares of common stock into which the Series B Shares
are convertible) to the Purchasers for aggregate gross proceeds of $6 million to the Company (the “Offering”). The
initial conversion price of the Series B Shares is $1.30 per share, which is above the $1.23 per share closing price of the Company’s
common stock as reported on the Nasdaq Capital Market on October 30, 2018. The initial conversion price of the Series B Shares
is subject to customary adjustment in the event of future stock dividends and stock splits. The Warrants are immediately exercisable
for a period of five years and have an initial exercise price of $1.30 per share, subject to customary adjustment in the event
of future stock dividends and stock splits.
Pursuant
to the terms of the Securities Purchase Agreement, certain Purchasers who owned shares of the Company’s Series A
convertible preferred stock were also permitted to exchange (the “Exchange”) at the closing of the Offering, on a
1-for-1 share basis, their shares of Series A convertible preferred stock for shares of the Company’s newly designated Series
C convertible preferred stock, with a stated value of $1,000 per share and convertible into shares of the Company’s common
stock at an initial conversion price per share of $1.64 (the “Series C Shares” and, together with the Series B Shares,
the Warrants and the shares of common stock issuable upon conversion of the Series B Shares and the Series C Shares and upon exercise
of the Warrants, the “Securities”). The initial conversion price of the Series C Shares is subject to customary adjustment
in the event of future stock dividends and stock splits. The maximum aggregate number of shares of common stock that may be issued
by the Company upon conversion of the Series C convertible preferred stock is limited to 1,146,354 shares (the “Exchange
Cap”), representing 19.99% of the shares of the Company’s common stock outstanding immediately prior to execution
of the Securities Purchase Agreement, unless the Company obtains stockholder approval to issue shares in excess of the Exchange
Cap in accordance with the applicable rules of the Nasdaq Capital Market.
The
Company also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers
on October 30, 2018, pursuant to which it agreed to file a registration statement covering the resale of the common stock issuable
upon conversion of the Series B Shares and the Series C Shares and upon exercise of the Warrants acquired by the Purchasers in
the Offering and the Exchange, as applicable.
The
Offering closed on November 5, 2018. A.G.P./Alliance Global Partners (the “Placement Agent”) served as the exclusive
placement agent and Roth Capital Partners acted as a financial advisor for the Offering. Pursuant to the terms and conditions
of the Placement Agency Agreement, entered into by the Company and the Placement Agent on October 30, 2018, the Company agreed
to pay the Placement Agent an aggregate cash fee equal to 7% of the aggregate gross proceeds raised in the Offering (less $750,000
paid by one of the Purchasers) and to reimburse the Placement Agent for up to $35,000 of certain of its expenses with respect
to the Offering.
The
Offering and the Exchange are intended to be exempt from registration pursuant to the exemption for transactions by an issuer
not involving any public offering under Section 4(a)(2) the Securities Act of 1933, as amended (the “Securities Act”),
and Regulation D promulgated thereunder. The Securities were not registered under the Securities Act or any state securities laws
and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or an applicable
exemption from the registration requirements.
The
foregoing description of the Offering and the Exchange is qualified in its entirety by reference to the Securities Purchase Agreement,
the Warrants, the Registration Rights Agreement and the Placement Agency Agreement (the “Transaction Documents”),
copies of which will be filed as exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2018. The representations, warranties and covenants contained in Transaction Documents were made only for purposes of such
agreements and as of specific dates, were solely for the benefit of the parties to the Transaction Documents, and may be subject
to limitations agreed upon by the contracting parties. Accordingly, the Transaction Documents are incorporated herein by reference
only to provide investors with information regarding the terms of the Transaction Documents, and not to provide investors with
any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in
the Company’s periodic reports and other filings with the Commission.