UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Item 2.01. Completion of Acquisition or Disposition of Assets.
On February 1, 2022 (the “Closing Date”), Sorrento Therapeutics, Inc. (the “Company”) completed its previously announced acquisition of Virex Health, Inc., a Delaware corporation (“Virex”), pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 14, 2022, among the Company, Virex, VH Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), VH Merger Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger LLC”), and Fortis Advisors LLC, as representative of the equityholders of Virex (the “Stockholders’ Representative”). Pursuant to the terms of the Merger Agreement, Merger Sub was merged with and into Virex (the “Initial Merger”), with Virex continuing as the surviving corporation in such merger, and subsequent to the Initial Merger, Virex was merged with and into Merger LLC, with Merger LLC surviving as a wholly owned subsidiary of the Company (the “Subsequent Merger” and together with the Initial Merger, the “Merger”). At the effective time of the Subsequent Merger, the name of Merger LLC as the surviving company in the Subsequent Merger was changed to Virex Health, LLC.
Upon completion of the Initial Merger, the equityholders of Virex (the “Virex Equityholders”) became entitled to receive the following amounts (to be paid in cash and stock as further described below): (i) $12,000,000, as such amount was adjusted to $11,566,275 (and may be further adjusted post-closing) pursuant to the terms of the Merger Agreement for indebtedness, transaction expenses and cash (the “Closing Consideration”) and (ii) subject to achievement of certain regulatory milestones, up to $10,000,000 in additional consideration (the “Milestone Payment” and together with the Closing Consideration, the “Merger Consideration”).
Pursuant to the Merger Agreement, the Merger Consideration shall be paid as follows: (i) 59% in cash; and (ii) 41% in shares of common stock of the Company, par value $0.0001 per share (“Common Stock”). Upon completion of the Initial Merger, Virex Equityholders became entitled to receive an aggregate of $6,824,126 in cash and an aggregate of 1,281,662 shares of Common Stock (the “Shares”) based on a price per share equal to $3.70 (representing the volume weighted average closing price per share of the Common Stock, as reported on The Nasdaq Stock Market LLC (“Nasdaq”) for the eleven consecutive trading days ending on the date that is three trading days prior to the Closing Date). As provided for in the Merger Agreement, in the event the Company determines in its reasonable discretion that a Virex Equityholder is not an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), the Company may pay the portion of the Merger Consideration payable to such Virex Equityholder in the form of cash only and shall be entitled to proportionately decrease the amount of cash, and increase the number of shares of Common Stock, payable to the “accredited investors” so as to maintain the 59% cash and 41% stock allocation referenced above. Ten percent of the Closing Consideration was deposited into an escrow account (in the form of cash and stock) as partial security for the indemnification obligations of the Virex Equityholders under the Merger Agreement and $150,000 was set aside for expenses that may be incurred by the Stockholders’ Representative.
At any time shares of Common Stock are issued in respect of a Milestone Payment, the number of shares to be issued will be based on a price per share equal to the volume weighted average closing price per share of the Common Stock, as reported on Nasdaq for the eleven consecutive trading days ending on the date that is three trading days prior to the applicable issuance date. The aggregate number of shares of Common Stock issuable pursuant to the Merger Agreement as Merger Consideration shall not exceed 19.99% of the total number of shares of Common Stock issued and outstanding at the Closing Date.
Pursuant to the terms of the Merger Agreement (and subject to the limitations set forth therein), the Company also agreed to prepare and file one or more registration statements with the Securities and Exchange Commission (the “SEC”) for the purpose of registering for resale the shares of Common Stock issued as Merger Consideration. Under the Merger Agreement, the Company is required to file such registration statement with the SEC within 30 days of the issuance of such shares of Common Stock.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement that was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 19, 2022, and is incorporated herein by reference.
Item 3.02. Unregistered Sale of Securities.
The information set forth in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference into this Item 3.02 in its entirety. The Shares were offered and sold on the Closing Date, and any shares of Common Stock issued to Virex Equityholders in respect of any Milestone Payment will be issued, in a transaction exempt from registration under the Securities Act, in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder. Each Virex Equityholder that receives any shares of Common Stock as Merger Consideration shall have represented that such equityholder is an “accredited investor,” as defined in Regulation D, and is acquiring such shares of Common Stock for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.
Except for the registration rights contemplated by the Merger Agreement, the Shares have not been, and any shares of Common Stock to be issued in respect of any Milestone Payment will not be, at the time of issuance, registered under the Securities Act and such shares of Common Stock may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws. Neither this Current Report on Form 8-K nor the exhibits attached hereto is an offer to sell or the solicitation of an offer to buy shares of Common Stock or any other securities of the Company.
Item 8.01. Other Events.
On February 1, 2022, the Company issued a press release announcing the closing of the Merger. A copy of the press release is filed herewith as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description | |
| 99.1 | Press Release dated February 1, 2022. | |
| 104 | Cover Page Interactive Data File, formatted in Inline Extensible Business Reporting Language (iXBRL). |
SIGNATURES
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.
| SORRENTO THERAPEUTICS, INC. | ||
| Date: February 1, 2022 | By: | /s/ Henry Ji, Ph.D. |
| Name: Henry Ji, Ph.D. | ||
| Title: Chairman of the Board, President and Chief Executive Officer | ||