| Item 1.01 | Entry into a Material Definitive Agreement |
On June 6, 2023, eFFECTOR Therapeutics, Inc. (“eFFECTOR” or the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”), pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market (the “Registered Offering”), (i) an aggregate of 5,950,000 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), at a purchase price of $1.125 per share (the “Shares”), and (ii) pre-funded warrants exercisable for up to 1,814,445 shares of Common Stock (the “Pre-Funded Warrants”) at a purchase price of $1.124 per Pre-Funded Warrant, for aggregate gross proceeds from the Registered Offering of approximately $8.7 million, before deducting the placement agent fee (as described in greater detail below) and estimated offering expenses.
The Pre-Funded Warrants were sold, in lieu of shares of Common Stock, to the Investor whose purchase of shares of Common Stock in the Registered Offering would otherwise result in such Investor, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at such Investor’s option upon issuance, 9.99%) of the Company’s outstanding Common Stock immediately following the consummation of the Registered Offering. Each Pre-Funded Warrant represents the right to purchase one share of Common Stock at an exercise price of $0.001 per share. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until the Pre-Funded Warrants are exercised in full.
The Shares, the Pre-Funded Warrants and the shares of Common Stock issuable upon the exercise of the Pre-Funded Warrants were offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-267221) that was filed with the Securities and Exchange Commission (the “SEC”) on September 1, 2022 and became effective on September 9, 2022, including the base prospectus contained therein, and a related prospectus supplement dated as of June 6, 2023 to be filed with the SEC.
In a concurrent private placement (the “Private Placement” and, together with the Registered Offering, the “Offering”), the Company agreed to issue to the Investor warrants (the “Common Warrants”) to purchase up to 7,764,445 shares of Common Stock. The Common Warrants have an exercise price of $1.00 per share, are exercisable immediately upon issuance and will expire five and one-half years from the issuance date. The Common Warrants and the shares of our Common Stock issuable upon the exercise of the Common Warrants are not being registered under the Securities Act of 1933, as amended (the “Securities Act”), were not offered pursuant to the Registration Statement and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act, and Rule 506(b) promulgated thereunder.
The closing of the Offering is expected to occur on or about June 8, 2023, subject to the satisfaction of customary closing conditions. The Company intends to use the net proceeds from the Offering, together with its existing cash and cash equivalents and short-term investments, for general corporate and working capital purposes, including funding its research and development.
A holder (together with its affiliates) may not exercise any portion of the Pre-Funded Warrants or Common Warrants to the extent that the holder would own more than 4.99% (or, at the purchaser’s option upon issuance, 9.99%) of the Company’s outstanding Common Stock immediately after exercise (the “Beneficial Ownership Limitation”). However, upon at least 61 days’ prior notice from the holder to the Company, a holder may increase or decrease the Beneficial Ownership Limitation in accordance with the terms of the Pre-Funded Warrant or Common Warrant, provided that it does not exceed 9.99%.
The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Investor and customary indemnification rights and obligations of the parties. Pursuant to the terms of the Purchase Agreement, the Company has agreed to certain restrictions on the issuance and sale of its Common Stock or Common Stock Equivalents (as defined in the Purchase Agreement) during the 60-day period following the closing of the Offering.
In connection with the Offering, the Company entered into an engagement letter (the “Engagement Letter”) with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which Wainwright agreed to serve as the exclusive placement agent for the issuance and sale of securities of the Company pursuant to the Purchase Agreement. As compensation for such placement agent services, the Company has agreed to pay Wainwright an aggregate cash fee equal to 7.0% of the gross proceeds received by the Company from the Offering, a management fee equal to 1.0% of the gross proceeds received by the Company from the Offering, a non-accountable expense of $50,000 and a clearing fee of $15,950. The Company has also agreed to issue to Wainwright or its designees warrants to purchase up to 543,511 shares of Common Stock (the “Wainwright Warrants” and, together with the Pre-Funded Warrants and the Common Warrants, the “Warrants”), representing 7.0% of the Shares and Pre-Funded Warrants issued in the Offering. The Wainwright Warrants have a term of five years from the commencement of sales in the Offering, and have an exercise price of $1.4063 per share, representing 125% of the purchase price in the Offering. In addition, Wainwright is entitled to certain tail rights for a period of 12 months following the expiration of the Engagement Letter and a right of first refusal for certain transactions for a period of 10 months from the date of the closing of the Offering.
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