BIOSTAGE, INC. (NASDAQ:BSTG) Files An 8-K Entry into a Material Definitive Agreement

Item 1.01.

On June 26, 2017, Biostage, Inc. (the Company) entered into a
binding Memorandum of Understanding (the MOU) with First Pecos,
LLC (Pecos), to which the Company will issue to Pecos in a
private placement (the Private Placement) 9,700,000 shares of its
common stock at a purchase price of $0.315 per share or, to the
extent Pecos, following the transaction, would own more than
19.9% of the Companys common stock, shares of a new class of
preferred stock of the Company (the Preferred Stock) with a
per-share purchase price of $1,000.

Additionally, Pecos will receive warrants (the Warrants) to
purchase 9,700,000 shares of the Companys common stock (or, to
the extent Pecos would more than 19.9% of the Companys common
stock, shares of Preferred Stock). The Warrants will have an
exercise price of $0.315 per share and will not be exercisable
until six months after the closing of the Private Placement.

The Preferred Stock will bear a cumulative annual dividend of
15%, compounding annually, and will be senior to all of the
Companys other common stock, but will generally not have any
voting rights. The Preferred Stock will include an ownership
limitation that will limit Pecos and its affiliates to owning no
more than 19.9% of the Companys common stock. Following approval
by the Companys stockholders, the Preferred Stock will
automatically convert into shares of the Companys common stock.
The Company agreed to include a proposal for such stockholder
approval in the definitive proxy statement for its 2018 annual
meeting of stockholders and, if not approved at such meeting,
will seek approval from its stockholders every six months
thereafter.

In connection with the Private Placement, Pecos agreed to serve
as a backstopping party with respect to two pro rata rights
offerings with aggregate gross proceeds of up to $14.0 million
that the Company may elect to conduct within 24 months following
the closing of the Private Placement. Additionally, the Company
has agreed to grant board representation and nomination rights to
Pecos that will be proportional to the percentage of the Companys
common stock owned by Pecos and its affiliates.

The Private Placement is conditioned on satisfaction of customary
closing conditions and on the Company terminating its Shareholder
Rights Plan, and must be consummated on or prior to August 15,
2017. The definitive agreements relating to the Private Placement
will include customary representations, warranties and covenants.
The Company agreed to file a resale registration statement
promptly after the closing of the Private Placement to register
the resale of the shares of common stock issued in the Private
Placement.

The MOU is intended to be binding upon both the Company and
Pecos. In the event that the Company fails to perform any of its
obligations under the MOU or otherwise breaches the MOU, subject
to certain exceptions, Pecos may terminate the MOU, and the
Company must pay a termination fee of $500,000.

The MOU is filed as Exhibit 10.1 to this Current Report on Form
8-K. The foregoing summary of the MOU is subject to, and
qualified in its entirety by, the text of the MOU, which is
incorporated herein by reference.

The information contained above in Item 1.01 related to the
shares of common stock, the shares of Preferred Stock and the
Warrants is hereby incorporated by reference into this Item 3.02.
The shares of common stock, the Warrants (including shares of
common stock issuable upon exercise of the Warrants) and the
shares of Preferred Stock (including shares of common stock
issuable upon conversion of the Preferred Stock) will be sold and
issued without registration under the Securities Act of 1933 (the
Securities Act) in reliance on the exemptions provided by
Section4(a)(2)of the Securities Act as transactions not involving
a public offering and Rule 506 promulgated under the Securities
Act as sales to accredited investors, and in reliance on similar
exemptions under applicable state laws.

On June 27, 2017, the Company issued a press release announcing
its entry into the MOU with Pecos. The full text of the press
release is attached hereto as Exhibit 99.1 to this Current Report
on Form 8-K.

The information in this Item 8.01 of this Current Report on Form
8-K, including Exhibit 99.1 attached hereto, shall not be deemed
filed for purposes of Section 18 of the United States Securities
Exchange Act of 1934 (the Exchange Act) or otherwise subject to
the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act
or the Exchange Act, except as shall be expressly set forth by
specific reference in such a filing.

Biostage, Inc. Exhibit
EX-10.1 2 v469753_ex10-1.htm EXHIBIT 10.1   Exhibit 10.1     MEMORANDUM OF UNDERSTANDING   This Memorandum of Understanding (“MOU”) is entered into effective as of June 26,…
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About BIOSTAGE, INC. (NASDAQ:BSTG)

Biostage, Inc., formerly Harvard Apparatus Regenerative Technology, Inc., is a biotechnology company. The Company is engaged in developing bioengineered organ implants based on its Cellframe technology. Its Cellframe technology consists of a biocompatible scaffold that is seeded with the recipient’s own cells. It is developing its Cellframe technology to treat life-threatening conditions of the esophagus, trachea or bronchus that are caused due to cancer, infection, trauma or congenital abnormalities. Its Cellframe technology is engineered to stimulate the body’s signaling pathways and natural healing process to regenerate and restore organ function. Its Cellframe technology platform is used to create organ specific Cellspan implants. Its product candidates are in development and have not yet received regulatory approval for sale anywhere in the world.