13D Filing: Armistice Capital and Cerecor Inc (CERC)

Item 4.

Purpose of Transaction.

On April 27, 2017, the Issuer and the Master Fund entered into a securities purchase agreement (the “Securities Purchase Agreement”), pursuant to which the Master Fund agreed to purchase $5 million of the Issuer’s securities, consisting of (i) 2,345,714 Shares at a purchase price of $0.35 per share, (ii) 4,179 shares of the Issuer’s newly-created Series A Convertible Preferred Stock, which are convertible into 11,940,000 Shares, and (iii) warrants to purchase up to 14,285,714 Shares at an exercise price of $0.40 per share.  The Securities Purchase Agreement also provides the Master Fund with certain participation rights in respect of future financings conducted by the Issuer.  Pursuant to NASDAQ Capital Market rules and regulations, the Series A Preferred Stock will only be convertible into Shares, and the warrants will only become exercisable, upon the shareholders of the Issuer voting to approve the private placement.  The Master Fund will not be entitled to vote the Shares issued pursuant to Securities Purchase Agreement.

In addition, pursuant to the terms of the Issuer’s Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Certificate”), (i) as long as the Master Fund maintains beneficial ownership of at least 13% of the Shares, the Master Fund exclusively and as a separate class, will be entitled to elect two directors to the Issuer’s board of directors (the “Board of Directors”), and (ii) as long as the Master Fund maintains beneficial ownership of at least 10% of the Shares, the Master Fund exclusively and as a separate class, will be entitled to elect one director to the Board of Directors.

In connection with the private placement, the Issuer and the Master Fund also entered into a Registration Rights Agreement on April 27, 2017 (the “Registration Rights Agreement”), pursuant to which the Issuer has agreed to file one or more registration statements registering for resale the Shares sold in the private placement and the Shares issuable upon exercise of the warrants and conversion of the Series A Preferred Stock.

On April 28, 2017, the Issuer issued a press release (the “Press Release”) to announce the closing of the $5 million private placement.  Among other things, the Press Release summarizes the material terms of the Securities Purchase Agreement, sets forth how the proceeds of the transaction are anticipated to be used, and announces the rescheduling of the Issuer’s annual meeting of shareholders to June 30, 2017.

The foregoing was a summary of the Press Release and certain material terms of the Securities Purchase Agreement, the Certificate, and the Registration Rights Agreement.  The foregoing descriptions are not, and do not purport to be, complete and are qualified in their entirety by reference to the full text of those documents, which have been filed as Exhibits C, D, E and F, respectively, and are incorporated herein by reference.

The Reporting Persons intend to review their investment in the Issuer on a continuing basis.  Depending on various factors including, without limitation, the Issuer’s financial position, the price levels of the Shares, conditions in the securities markets and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investment in the Issuer as they deem appropriate including, without limitation, participating on the Board of Directors, engaging in discussions with stockholders of the Issuer and others about the Issuer and the Reporting Persons’ investment, proposing changes to the Issuer’s development plans for CERC-501, CERC-301 and CERC-611, reshaping the Issuer’s corporate strategy, recommending business development transactions, proposing changes to management, operations and the structure of the Board of Directors (including the composition of the Board of Directors), purchasing additional Shares, selling some or all of their Shares, engaging in short selling of or any hedging or similar transaction with respect to the Shares, or changing their intention with respect to any and all matters referred to in subparagraphs (a) – (j) of Item 4 of Schedule 13D.

Except as otherwise set forth herein, the Reporting Persons do not have any present plans or proposals which would relate to, or result in, the matters set forth in subparagraphs (a) – (j) of Item 4 of Schedule 13D.  However, subject to market conditions and in compliance with applicable securities laws, the Reporting Persons reserve the right, at a later date, to affect one or more of such changes.  The Reporting Persons may change the number of Shares they may be deemed to beneficially own in open-market transactions or privately negotiated transactions.  The Reporting Persons may also communicate with the Issuer’s management, Board of Directors and other holders of Shares from time to time.