Item 1.01 Entry into a Material Definitive Agreement
On October 3, 2022, Timber Pharmaceuticals, Inc. (the “Company” or “Timber”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with several institutional accredited investors (the “Investors”) to sell, in a registered direct offering (the “Registered Offering”) (i) 13,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and (ii) Series 1 common warrants to purchase up to an aggregate of 13,000,000 shares of Common Stock (the “Series 1 Warrants”). The Series 1 Warrants are immediately exercisable at an exercise price of $0.10 per share and will expire two and one-half years following the initial exercise date. The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Investors, and customary indemnification rights and obligations of the parties. Total gross proceeds from the Registered Offering, before deducting the placement agent's fees and other estimated offering expenses, is $1.3 million. The Registered Offering closed on October 3, 2022.
The Company filed a prospectus supplement (the “Prospectus Supplement”) on October 3, 2022, with the Securities and Exchange Commission (the “SEC”) in connection with the Registered Offering. The shares of Common Stock and Series 1 Warrant Shares were offered pursuant to a “shelf” registration statement on Form S-3 (Registration No. 333-255743) (the “Registration Statement”), which was declared effective by the SEC on May 11, 2021, the accompanying base prospectus dated May 11, 2021 contained within the Registration Statement, and the Prospectus Supplement.
In a concurrent private placement (the “Concurrent Private Placement Offering” and, together with the Registered Offering, the “Offerings”) the Company has also agreed to issue (i) Series 2 common warrants (the “Series 2 Warrants,” and together with the Series 1 Warrants, the “Warrants”) to purchase up to an aggregate of 13,000,000 shares of underlying Common Stock (the “Series 2 Warrant Shares”), and (ii) 13,000 shares of Series B Mirroring Preferred Stock (the “Series B Preferred Stock”). Each share of Series B Preferred Stock has a stated value of $0.001 per share. The Series 2 Warrants are exercisable on the date six (6) months following the date of issuance at an exercise price of $0.12 per share and will expire two and one-half years following the initial exercise date. The Series B Preferred Stock, Series 2 Warrants and Series 2 Warrant Shares issuable upon exercise of the Series 2 Warrants are not being registered under the Securities Act of 1933, as amended (the “Securities Act”), are not being offered pursuant to this prospectus supplement and the accompanying prospectus and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder.
As compensation to H.C. Wainwright & Co., LLC (the “Placement Agent”), as the exclusive placement agent in connection with the Registered Offering, the Company paid the Placement Agent a cash fee of 6% of the aggregate gross proceeds raised in the Registered Offering, and reimbursed the Placement Agent for legal fees and expenses up to $40,000, non-accountable expenses of $25,000 and $15,950 for clearing expenses.
The Purchase Agreement, form of Series 1 Warrant and form of Series 2 Warrant are attached as Exhibits 10.1, 4.1 and 4.2 hereto, respectively, and the description of the terms of the Purchase Agreement and the Warrants are qualified in their entirety by reference to such exhibits. A copy of the opinion of Lowenstein Sandler LLP relating to the legality of the issuance and sale of the securities in the Registered Offering is attached as Exhibit 5.1 hereto.
The Company expects to call a special meeting of stockholders for the approval of an amendment to the Company’s certificate of incorporation to effect a reverse split of the Common Stock (the “Reverse Split Amendment”). The Series B Preferred Stock has super voting rights on the Reverse Split Amendment equal to 10,000,000 votes per share of Series B Preferred Stock. The voting rights of the Series B Preferred Stock were established in order to maintain the Company’s NYSE American listing by raising the average minimum bid price of the Common Stock to over $0.20 for 30 consecutive trading days.
Neither the disclosures on this Form 8-K nor the attached press releases shall constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.