Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report: (Date of earliest event reported): March 16, 2007
CLEVELAND
BIOLABS, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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001-12465
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20-0077155
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(State
or other jurisdiction
of
incorporation or organization)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
Number)
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11000
Cedar Ave., Suite 290
Cleveland,
Ohio 44106
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (216) 229-2251
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item 1.01.
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Entry
into a Material Definitive
Agreement
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On
March
16, 2007, Cleveland BioLabs, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase
Agreement”)
with
various accredited investors (the “Buyers”),
pursuant to which the Company agreed to sell to the Buyers, in a private
placement, an aggregate of approximtely 4,288,712 shares of Series B Convertible
Preferred Stock, par value $0.005 per share (the “Series
B Preferred”),
and
Series B Warrants (the “Series
B Warrants”)
to
purchase approximtely 2,144,356 shares of the Company’s Common Stock, par value
$0.005 per share (“Common
Stock”).
The
transactions contemplated by the Purchase Agreement (collectively, the
“Transactions”)
were
consummated on March 16, 2007. A copy of the Purchase
Agreement is attached hereto as Exhibit 10.1 and the Form of Series B Warrant
is
attached hereto as Exhibit 4.1. A description of the
material terms of the Transactions is set forth below and is qualified in its
entirety by reference to the documents attached hereto as exhibits 3.1, 4.1,
4.2
and 10.1 through 10.3, which are incorporated herein by reference.
The
aggregate purchase price paid by the Buyers for the Series B Preferred and
Series B Warrants was approximately $30,000,000. After related
fees and expenses, the Company will receive net proceeds of approximately
$29,000,000. The Company intends to use the proceeds for general corporate
and
working capital purposes, including without limitation preparing its response
to
a Request for Proposal recently issued by the Department of Defense (see Press
Release dated March 19, 2007, attached hereto as Exhibit 99.1).
Series
B Preferred
To
designate and establish the shares of Series B Preferred, the Company filed
its
Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock of Cleveland BioLabs, Inc. (“Certificate
of Designations”)
on
March 16, 2007 with the Secretary
of
State
of the State of Delaware. The Certificate of Designations is attached hereto
as
Exhibit 3.1.
The
holders of Series B Preferred are entitled to a cash dividend of 5% of the
outstanding Series B Preferred amount payable in semi-annual installments.
Shares of the Series B Preferred are convertible at the holder's election into
shares of Common Stock at the conversion rate, which is the quotient of (1)
the
amount subject to conversion, divided by (2) the conversion price; provided,
however, that approximately 2,203,010 of the 4,579,010 shares of Series B
Preferred issued in the Transactions are not convertible in any event until
stockholder approval, as required by the NASDAQ Capital Market (and described
below), is obtained. The Series B Preferred has an initial conversion price
of
$7.00 per share, but it is subject to adjustment in the event of certain
corporate transactions, including certain issuances of Common Stock at a price
below the conversion price of the Series B Preferred. Shares of the Series
B
Preferred are convertible at the Company's election into shares of Common Stock
at the conversion rate at any time after the six month anniversary of the
effectiveness of a registration statement filed pursuant to the Registration
Rights Agreement if, among other things, the closing sale price of the Company's
Common Stock exceeds $20.00 per share for 30 consecutive trading days and the
average daily trading volume of the Company’s Common Stock during that
30-trading day period exceeds 100,000 shares.
The
Series B Preferred mature on September 16, 2009; upon maturity, the Company
has
the option, if certain conditions are satisfied, to elect either to redeem
any
outstanding Series B Preferred (plus accrued dividends) in cash or to convert
any outstanding Series B Preferred into shares of Common Stock at the existing
conversion rate.
Any
holder of the Series B Preferred may require the Company to redeem all or a
portion of its Series B Preferred shares if the Company: (1) fails to convert
Series B Preferred within 10 business days of the request for conversion or
provides written notice to a Series B Preferred holder of its refusal to comply
with a request for conversion, (2) fails to pay any Series B Preferred holder
any amounts payable in connection with the Transactions within 10 business
days
of the due date for payment, (3) declares or files for bankruptcy or similar
event or one of its significant subsidiaries (as defined by Securities and
Exchange Commission (“SEC”)
rules
and regulations) declares or files for bankruptcy or similar event, (4) incurs
a
final judgment against it or any of its subsidiaries in excess of $250,000,
which is not bonded, discharged or stayed pending appeal within 90 days after
entry, or (5) breaches any representation, warranty or covenant in any of the
documents entered into in connection with the Transactions contemplated by
the
Purchase Agreement unless the breach or the event or condition giving rise
to
the breach would not have a material adverse effect or if the breach is cured
within 20 days after notice of the breach. A holder who elects redemption in
this situation is entitled to receive the greater of (a) up to 110% of the
stated amount of the shares to be redeemed plus accrued dividends and (b) (i)
the closing sale price of the Common Stock on (x) the day before the event
giving rise to the redemption right, (y) the day after the event giving rise
to
the redemption or (z) the day the holder gives notice of redemption (whichever
of the three is greatest) multiplied by (ii) the conversion rate at the time
of
such notice.
A
holder
of the Series B Preferred may also require the Company to redeem all or a
portion of its shares if the Company enters into a change of control
transaction. A holder who
elects
redemption in this situation is entitled to receive the greater of (a) up to
110% of the stated amount of the shares to be redeemed plus accrued dividends
and (b) (i) the quotient of (x) the closing sale price of the Common Stock
on
(A) the day before announcement of the proposed change of control, (B) the
day
after announcement of the proposed change of control or (C) the day immediately
prior to consummation of the change of control (whichever of the three is
greatest) divided by (y) the conversion price, multiplied by (ii) the dollar
amount to be converted.
Series
B Warrants
The
Series B Warrants have a five-year term and an exercise price of $10.36, the
closing bid price on the day prior to the Purchase Agreement. The exercise
price
and shares issuable pursuant to the Series B Warrants are subject to adjustment
in the event of certain corporate transactions, including certain issuances
of
Common Stock at a price below the exercise price of the Series B Warrants.
The
Series B Warrants are exercisable in cash, provided, however, that if the
registration statement to be filed pursuant to the Registration Rights Agreement
described below is not effective and available to a holder of Series B Warrants
when required to be effective and available, the Series B Warrants may be
exercised via cashless exercise.
The
holders of Series B Warrants may exercise at any time after September 16, 2007
until expiration; provided, however, that approximately 1,177,528 of the
2,365,528 Series B Warrants issued in the Transactions are not exercisable
in
any event until stockholder approval, as required by the NASDAQ Capital Market,
is obtained. The Company may require any or all of the holders of Series B
Warrants to exercise their Series B Warrants if the closing sale price of the
Common Stock exceeds $30.00 per share for 30 consecutive trading days.
Notwithstanding
the conversion rights of the Series B Preferred holders and the Company, and
the
exercise rights of the holders of Series B Warrants and the Company, the Company
may not issue any shares of Common Stock in conversion of the Series B Preferred
or in exercise of any Series B Warrant if the conversion or exercise would
either (1) cause the applicable holder to beneficially own a number of shares
of
Common Stock that exceeds 9.99% of the number of shares of Common Stock
outstanding after giving effect to the conversion or exercise or (2) cause
the
Company to issue a number of shares of Common Stock that would exceed the number
of shares of Common Stock that the Company could issue under the rules and
regulations of the exchange on which those shares are traded (which currently,
under the rules of the NASDAQ Capital Market, is 20% of the Company's
outstanding shares of Common Stock) until such time as the Company receives
the
approval of its stockholders for the issuances in accordance with the rules
of
the NASDAQ Capital Market.
Registration
Rights Agreement
In
connection with the Purchase Agreement, the Company also entered into a
Registration Rights Agreement with the Buyers, dated as of March 16, 2007 (the
“Registration
Rights Agreement”).
Under
the Registration Rights Agreement, the Company granted the Buyers certain
registration rights with respect to Common Stock issuable upon conversion of
the
Series B Preferred or exercise of the Series B Warrants or the Series C Warrants
(described below and together with the Series B Warrants the
“Warrants”). On or prior to June 14, 2007, the Company is
required to prepare and file with the SEC a registration statement on Form
S-3,
or on another appropriate form, covering the resale of all of the shares of
Common Stock issuable upon conversion of the Series B Preferred and upon
exercise of the Warrants, subject to any limitations imposed by the SEC. A
copy
of the Registration Rights Agreement is attached hereto as Exhibit
10.2.
Stockholder
Approval and Voting Agreements
As
discussed above, NASDAQ Marketplace Rule 4350(i)(1)(D)(ii) requires that, for
the sale, issuance or potential issuance by the Company of Common Stock (or
securities convertible
into
or
exercisable for Common Stock) equal to 20% or more of the Common Stock
outstanding before the issuance, for less than the greater of book or market
value of the Common Stock, the Company must obtain stockholder approval for
the
issuance. Accordingly, as set forth above, the conversion of the Series B
Preferred and the exercise of the Warrants into Common Stock by their respective
holders are each limited by and subject to obtaining stockholder approval.
The
Company’s Board of Directors has resolved to seek this approval at the Company’s
2007 annual stockholders meeting, and to recommend to its stockholders that
such
approval be given. In connection therewith, the Company has rescheduled its
2007
annual meeting to June 12, 2007 for stockholders of record as of April 17,
2007.
In
connection with obtaining stockholder approval of the foregoing issuances,
on
March 16, 2007, the Company entered into Voting Agreements with Michael
Fonstein, Andrei Gudkov, Yakov Kogan, The Cleveland Clinic Foundation,
ChemBridge Corporation, Sunrise Equity Partners L.P. (“SEP”),
and
Sunrise Securities Corp. ("SSC"), each of whom agreed to vote
in favor of authorizing the issuance of the shares of Common Stock underlying
all of the Series B Preferred and the Warrants. In the aggregate, these parties
to the Voting Agreement hold approximately 59% of the Company’s outstanding
Common Stock. A copy of the Voting Agreement is attached hereto as Exhibit
10.3.
Placement
Agents and Series C Warrants
SSC,
Reedland Capital Partners, an Institutional Division of Financial West Group
(“Reedland”),
and
Basic Investors, Inc. (“Basic”),
served as placement agents (collectively, the “Agents”)
for
the Transactions. In consideration for their services, each Agent (and or
its
designees) received compensation as follows: SSC received an aggregate of
290,298 shares of Series B Preferred, Series B Warrants to purchase an aggregate
of 145,149 shares of Common Stock, and Series C Warrants,
to
purchase 267,074 shares of Common Stock; Reedland received Series B Warrants
to
purchase an aggregate of 63,543 shares of Common Stock and cash compensation
(in
lieu of shares of Series B Preferred and additional Series B Warrants) of
approximately $444,800; Basic received Series B Warrants to purchase an
aggregate of 12,480 shares of Common Stock and cash compensation (in lieu
of
shares of Series B Preferred and additional Series B Warrants) of approximately
$87,360. In the aggregate, the Series B Preferred and the Warrants issued
in the
Transactions are convertible for, and exercisable into, as of the date hereof,
a
maximum of approximately 6,944,538
shares
of
Common Stock (subject to adjustments for stock splits, anti-dilution,
etc.).
The
Series C Warrants have a five-year term and an exercise price of $11.00.
The
exercise price and shares issuable pursuant to the Series C Warrants are
subject
to adjustment in the event of certain corporate transactions, including
certain
issuances of Common Stock at a price below the exercise price of the Series
C
Warrants. The Series C Warrants are exercisable in cash or via cashless
exercise
at the discretion of the holder of the Series C Warrants.
The
holders of Series C Warrants may exercise at any time after September 16,
2007
until expiration, provided, however, that the holders of the Series C Warrants
may not exercise until stockholder approval, as required by the NASDAQ Capital
Market, is obtained. Unlike in the case of the Series B Warrants, the Company
does not have the right to require the holders of Series C Warrants to exercise
the Series C Warrants.
Notwithstanding
the exercise rights of the holders of Series C Warrants, the Company may
not
issue any shares of Common Stock in exercise of any Series C Warrant if the
conversion or exercise would cause the applicable holder to beneficially
own a
number of shares of Common Stock that exceeds 9.99% of the number of shares
of
Common Stock outstanding after giving effect to the exercise.
The
Series C Warrants also contain registration rights separate and apart from
those
set forth in the Registration Rights Agreement. These rights entitle the
holders
of Series C Warrants, among other things, to demand two registrations of
the
underlying shares after the later of (a) 15 months from the Closing Date
and (b)
effectiveness of the last registration statement to be filed pursuant to
the
Registration Rights Agreement. In connection with the exercise of the foregoing
demand rights, the holders of the Series C Warrants may require that the
Company
effectuate the sale of the shares underlying the Series C Warrants through
an
underwritten public offering using underwriters selected by the holders of
the
Series C Warrants making the demand and at the Company's expense. If, however,
during the 90 day period between the 12 month anniversary of the Closing
Date
and the 15 month anniversary of the Closing Date, the average daily trading
volume of the Company’s Common Stock on the market on which it is primarily
traded is equal to or greater than 100,000 shares, the foregoing demand
registration rights shall terminate. The Series C Warrants also provide their
holders with certain "piggyback" registration rights in the event the Company
files a registration statement for resale of shares by its stockholders or
in
connection with an underwritten public offering. The Form of Series C Warrant
issued to SSC (and/or its designees) is attached here to at Exhibit
4.2.
Related
Party Transactions
Prior
to
the Transactions, SEP, one of the Buyers, together with SSC, may have been
deemed a holder of more than 10% of the Company’s outstanding Common Stock. In
the Transactions, SEP purchased 600,000 shares of Series B Preferred and
received Series B Warrants to purchase 300,000 shares of Common Stock. As
mentioned above, the Company also issued 290,298 shares of Series B Preferred,
Series B Warrants to purchase an aggregate of 145,149 shares of Common Stock,
and Series C Warrants to purchase 267,074 shares of Common Stock to SSC and/or
its designees in consideration for its services as placement agent. None of
the
securities issued to SEP or SSC (or its designees) are convertible into, or
exercisable for, Common Stock prior to the Company's receipt of stockholder
approval. The Company has also engaged SSC as its exclusive management agent
regarding all exercises of the Warrants, for which the Company will pay SSC
a
fee equal to 3.5% of the aggregate exercise price of each Warrant, payable
in
cash if the exercise is in cash, or in shares of Common Stock if the exercise
is
cashless.
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Item 3.02.
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Unregistered
Sales of Equity Securities
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The
information contained in Item 1.01 is hereby incorporated by reference. The
issuance of the Series B Preferred and the Warrants was not registered, in
reliance on Section 4(2) of the Securities Act of 1933, as amended, and Rule
506
of Regulation D, because the Series B Preferred and the Warrants were only
offered to accredited investors.
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Item
5.03
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Amendments
to Articles of Incorporation or Bylaws; Changes in Fiscal
Year
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The
information contained in Item 1.01 is hereby incorporated by reference. The
Certificate of Designations was effective upon filing, and was filed on March
16, 2007.
On
March
19, 2007, the Company issued a press release announcing (1) the Transactions
described in Item 1.01 and (2) that it planned to submit a response to the
Department of Defense’s Request for Proposal for the advanced development of
medical radiation countermeasures to treat gastrointestinal effects of acute
radiation syndrome. A copy of the press release is attached as Exhibit
99.1.
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Item 9.01.
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Financial
Statements and Exhibits
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(d) Exhibits
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Exhibit
No.
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Exhibit
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3.1
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Certificate
of Designations, Preferences and Rights of Series B Convertible Preferred
Stock of Cleveland BioLabs, Inc., dated March 16, 2007.
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| 4.1 |
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Form
of Series B Warrant. |
| 4.2 |
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Form
of Series C Warrant. |
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10.1
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Securities
Purchase Agreement, dated March 16, 2007.
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10.2
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Registration
Rights Agreement, dated March 16, 2007.
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10.3
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Voting
Agreement, dated March 16, 2007.
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99.1
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Press
Release dated March 19, 2007.
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SIGNATURE
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.
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CLEVELAND
BIOLABS, INC. |
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| Date: March
19, 2007 |
By: |
/s/ Michael
Fonstein |
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Name:
Michael Fonstein
Title: President and Chief Executive
Officer
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EXHIBIT
INDEX
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Exhibit
No.
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Exhibit
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3.1
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Certificate
of Designations, Preferences and Rights of Series B Convertible
Preferred
Stock of Cleveland BioLabs, Inc., dated March 16, 2007.
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| 4.1 |
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Form
of Series B Warrant. |
| 4.2 |
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Form
of Series C Warrant. |
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10.1
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Securities
Purchase Agreement, dated March 16, 2007.
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10.2
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Registration
Rights Agreement, dated March 16, 2007.
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10.3
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Voting
Agreement, dated March 16, 2007.
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99.1
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Press
Release dated March 19, 2007.
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