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As filed with the Securities and Exchange Commission on August 28, 2020
Registration
No. 333-          
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
SPRING BANK PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
52-2386345
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
35 Parkwood Drive, Suite 210
Hopkinton, MA 01748
(508)
473-5993
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
Garrett Winslow, Esq.
General Counsel and Corporate Secretary
Spring Bank Pharmaceuticals, Inc.
35 Parkwood Drive, Suite 210
Hopkinton, MA 01748
(508)
473-5993
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
Copies to:
 
Megan Gates, Esq.
Melanie Ruthrauff Levy, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
(617)
542-6000
 
John D. Hogoboom, Esq.
Lowenstein Sandler LLP
1251 Avenue of the Americas
New York, New York 10020
(212)
262-6700
 
William Hicks, Esq.
Matthew Tikonoff, Esq.
Melissa Frayer, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
(617)
542-6000
 
 
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions under the Exchange Agreement described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act. (Check one):
 
Large accelerated filer      Accelerated filer  
Non-accelerated filer
     Smaller reporting company  
     Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule
13(e)-4(i)
(Cross-Border Issuer Tender Offer)  ☐
Exchange Act Rule
14d-1(d)
(Cross-Border Third-Party Tender Offer)  ☐
 
 
CALCULATION OF REGISTRATION FEE
 
 
Title of Each Class of
Security to be Registered
 
Amount
to be
Registered
(1)
 
Proposed
Maximum
Offering Price
per Share
 
Proposed
Maximum Aggregate
Offering Price
(2)
 
Amount of
Registration Fee
(3)
Common stock, par value $0.0001 per share
 
35,256,571
 
N/A
 
$279,676.19
 
$36.30
 
 
(1)
Represents the maximum number of shares of common stock, $0.0001 par value per share (“Spring Bank common stock”), of Spring Bank Pharmaceuticals, Inc., a Delaware corporation (“Spring Bank”) to be registered based on the estimated maximum number of shares of Spring Bank common stock expected to be issued pursuant to that certain Share Exchange Agreement, dated as of July 29, 2020, by and among Spring Bank,
F-star
Therapeutics Limited, a private company registered in England and Wales
(“F-star”)
and the holders of issued and outstanding capital shares and convertible loan notes of
F-star
party thereto (the “Exchange Agreement”), in exchange for the entire issued and outstanding share capital of
F-star
(the “Exchange”) at an assumed exchange ratio of 0.5577 without giving effect to a reverse stock split of Spring Bank common stock expected to be completed immediately prior to closing of the Exchange.
(2)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f)(2) of the Securities Act of 1933, as amended. F-star is a private company, no market exists for its securities, and F-star has an accumulated capital deficit. Therefore, the proposed maximum aggregate offering price is one-third of the aggregate par value of the F-star securities expected to be exchanged in the transaction. This calculation takes into account a new investment in an assumed amount of $40.0 million in F-star, which is anticipated to occur following the date hereof and prior to the consummation of the Exchange.
(3)
This fee has been calculated pursuant to Section 6(b) of the Securities Act of 1933, as amended.
 
 
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 
 
 

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The information in this proxy statement/prospectus is not complete and may be changed. Spring Bank may not sell its securities pursuant to the proposed transactions until the Registration Statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
Subject to completion, dated
August 28, 2020
 
 
 
 
 
 
PROPOSED BUSINESS COMBINATION
YOUR VOTE IS VERY IMPORTANT
To the Stockholders of Spring Bank Pharmaceuticals, Inc.:
Spring Bank Pharmaceuticals, Inc. (“Spring Bank”),
F-star
Therapeutics Limited
(“F-star”)
and certain holders of issued and outstanding capital shares and convertible loan notes of
F-star
(each a “Seller”; collectively with holders of
F-star
securities who subsequently become parties to the Exchange Agreement, the “Sellers”) have entered into a share exchange agreement (the “Exchange Agreement”), pursuant to which Spring Bank will acquire the entire issued and outstanding share capital of
F-star
(the “Exchange”). The combined company, operating under the name
F-star
Therapeutics, Inc., will seek to advance
F-star’s
immuno-oncology pipeline of multiple tetravalent bispecific antibody programs, as well as Spring Bank’s STING (STimulator of INterferon Gene) agonist, SB 11285, currently in a Phase 1a/1b clinical trial.
At the closing of the Exchange (the “Closing”), each ordinary share of
F-star
will be sold to Spring Bank in exchange for a number of shares of Spring Bank common stock based on the exchange ratio formula in the Exchange Agreement (the “Exchange Ratio”), rounded down to the nearest whole share of Spring Bank common stock after aggregating all fractional shares issuable to each Seller. The Exchange Ratio is subject to adjustment (i) to the extent that Spring Bank’s expected net cash as of Closing is less than $15.0 million or greater than $17.0 million, (ii) to the extent that
F-star
does not raise at least $25.0 million in the
Pre-Closing
Financing (as defined below) at a
pre-money
valuation of at least $35.0 million, and (iii) to account for the actual proceeds raised in the
Pre-Closing
Financing. Should the Closing occur after September 30, 2020, the $15.0 million and $17.0 million thresholds will each be reduced by $250,000 on October 30, 2020 and on the last day of each
30-day
period thereafter until the Closing occurs. These and other potential adjustments to the Exchange Ratio are described further in the enclosed proxy statement/prospectus. Immediately following the Closing and assuming an Exchange Ratio of 0.5338 (which assumes both that Spring Bank’s valuation will not be adjusted as a result of its expected net cash at Closing and that
F-star
raises $25.0 million in the
Pre-Closing
Financing at a
pre-money
valuation of at least $35.0 million), the Spring Bank securityholders and the holders of
F-star’s
share capital (including all
F-star
shares issued in connection with the
F-star
Note Conversion, the
F-star
Share Conversion (each as defined below) and Pre-Closing Financing) are expected to own approximately 38.8% and 61.2%, respectively, of the outstanding capital stock of the combined company.
Concurrently with the execution of the Exchange Agreement, certain existing investors of
F-star,
pursuant to binding equity commitment letters by and between each investor and
F-star,
agreed to purchase ordinary shares of F-star in a private placement to occur immediately prior to the Closing (the
“Pre-Closing
Financing”).
F-star
may continue to seek additional commitments in the
Pre-Closing
Financing until 11:59 p.m., Eastern time on the 10
th
day prior to the Special Meeting (as defined below).
F-star’s
issued share capital currently consists of ordinary shares, Seed Preference Shares and Series A Preference Shares. Immediately prior to the Closing, the Seed Preference Shares and Series A Preference Shares will be converted into
F-star
ordinary shares (the
“F-star
Share Conversion”). Additionally, pursuant to the terms of the Exchange Agreement and immediately prior to the Closing, all issued and outstanding
F-star
convertible loan notes will convert into
F-star
ordinary shares (the
“F-star
Note Conversion”).
All unvested issued and outstanding Spring Bank options and restricted stock units will be accelerated and vested in full immediately prior to the Closing and, following this acceleration, each option that has not previously been exercised will expire on the date of the Closing. All issued and outstanding
F-star
share options granted under
F-star’s
legacy equity incentive plans will become exercisable in full immediately prior to the

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Closing. Upon the Closing, all holders of share options and restricted stock units granted by
F-star
under the
F-star
Therapeutics Limited 2019 Equity Incentive Plan will have those awards replaced by options and awards, on the same terms (including vesting), for Spring Bank common stock, based on the Exchange Ratio.
Shares of Spring Bank common stock are currently listed on the Nasdaq Capital Market under the symbol “SBPH”. Spring Bank intends to file an initial listing application with the Nasdaq Capital Market pursuant to Nasdaq’s rules for companies conducting a business combination that results in a change of control. Upon completion of the Exchange, Spring Bank will be renamed
“F-star
Therapeutics, Inc.” and expects its common stock to trade on the Nasdaq Capital Market under the symbol “FSTX.” On                , 2020, the last trading day before the date of this proxy statement/prospectus, the closing sale price of Spring Bank common stock was $         per share. This closing sale price is not necessarily indicative of the price at which the common stock of the combined company will trade after the Closing.
Spring Bank is holding a special meeting of stockholders (the “Special Meeting”) via live audio webcast to seek the stockholder approvals necessary to complete the Exchange and related matters. You will be able to attend the virtual Special Meeting, vote and submit your questions during the Special Meeting by visiting www.virtualshareholdermeeting.com/SBPH2020SM. You will not be able to attend the virtual Special Meeting in person. At the Special Meeting, which will be held at                , Eastern time, on                , 2020, unless postponed or adjourned to a later date, Spring Bank will ask its stockholders to:
 
  1.
approve the issuance of Spring Bank common stock to the holders of
F-star
share capital in the Exchange, including holders who purchase ordinary shares of
F-star
in the
Pre-Closing
Financing, in accordance with the terms of Exchange Agreement, a copy of which is attached to this proxy statement/prospectus as
Annex A
, in an amount representing more than 20% of the shares of Spring Bank common stock outstanding immediately prior to the Exchange, which will also constitute stockholder approval of a change of control of Spring Bank, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively;
 
  2.
approve an amendment to Spring Bank’s amended and restated certificate of incorporation effecting a reverse stock split of Spring Bank common stock at a ratio mutually agreed to between Spring Bank and
F-star
in the range of one new share for every              shares to one new share for every              shares outstanding (or any number in between);
 
  3.
approve an amendment to Spring Bank’s amended and restated certificate of incorporation changing Spring Bank’s corporate name from “Spring Bank Pharmaceuticals, Inc.” to
“F-star
Therapeutics, Inc.” effective upon the Closing;
 
  4.
approve a postponement or adjournment of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1, 2 or 3; and
 
  5.
consider such other business as may properly come before the stockholders at the Special Meeting or any adjournment or postponement thereof.
As described in the accompanying proxy statement/prospectus, each of the officers and directors and certain stockholders of Spring Bank, holding, in the aggregate, approximately 7.7% of the outstanding Spring Bank common stock as of August 1, 2020, have entered into voting agreements with
F-star,
whereby such stockholders have agreed to vote in favor of the proposals described above.
After careful consideration, the board of directors of Spring Bank has (i) determined that the Exchange is fair to, advisable and in the best interests of Spring Bank and its stockholders, and (ii) approved and declared advisable the Exchange Agreement and the transactions contemplated thereby. Spring Bank’s Board of Directors recommends that its stockholders vote “FOR” Proposal Nos. 1, 2, 3 and 4 described in this proxy statement/prospectus.

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More information about Spring Bank,
F-star
and the Exchange is contained in this proxy statement/prospectus.
We urge
you to read this proxy statement/prospectus carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER THE SECTION TITLED “
RISK FACTORS
” IN THIS PROXY STATEMENT/PROSPECTUS.
We hope you will be able to attend the virtual Special Meeting. Even if you plan to attend the virtual Special Meeting, Spring Bank requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the Special Meeting if you are unable to attend. You may also vote over the internet as well as by telephone or by mail.
We are excited about the opportunities the Exchange brings to both Spring Bank’s and
F-star’s
respective stockholders, and thank you for your consideration and continued support.
 
Martin Driscoll
   Eliot Forster
President and Chief Executive Officer
  
Chief Executive Officer
Spring Bank Pharmaceuticals, Inc.
  
F-star
Therapeutics Limited
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated                 , 2020, and is first being mailed to Spring Bank’s stockholders on or about                 , 2020.

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SPRING BANK PHARMACEUTICALS, INC.
35 Parkwood Drive, Suite 210
Hopkinton, MA
(508)
473-5993
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
Dear Stockholders of Spring Bank Pharmaceuticals, Inc.:
On behalf of the board of directors (the “Spring Bank Board”) of Spring Bank Pharmaceuticals, Inc., a Delaware corporation (“Spring Bank”), we are pleased to deliver this proxy statement/prospectus for the proposed business combination between Spring Bank and
F-star
Therapeutics Limited, a private company registered in England and Wales
(“F-star”),
pursuant to which Spring Bank will acquire the entire issued and outstanding share capital of
F-star
(the “Exchange”). The Special Meeting of stockholders of Spring Bank (the “Special Meeting”) will be held via live audio webcast on the internet at www.virtualshareholdermeeting.com/SBPH2020SM on                , 2020, at                , Eastern time, for the following purposes:
 
  1.
To approve the issuance of Spring Bank common stock to the holders of
F-star
share capital in the Exchange, including holders who purchase ordinary shares of
F-star
in the
Pre-Closing
Financing (as defined in this proxy statement/prospectus) in accordance with the terms of a Share Exchange Agreement (the “Exchange Agreement”), a copy of which is attached to this proxy statement/prospectus as
Annex A
, in an amount representing more than 20% of the shares of Spring Bank common stock outstanding immediately prior to the Exchange, which shall also constitute stockholder approval of a change of control of Spring Bank, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively.
 
  2.
To approve an amendment to Spring Bank’s amended and restated certificate of incorporation to effect a reverse split of all outstanding shares of the Spring Bank common stock at a reverse stock split ratio as mutually agreed to by Spring Bank and
F-star
in the range of one new share for every                  shares to one new share for every                  shares outstanding (or any number in between), in the form attached as
Annex C
to this proxy statement/prospectus.
 
  3.
To approve an amendment to Spring Bank’s amended and restated certificate of incorporation to change the corporate name of Spring Bank from “Spring Bank Pharmaceuticals, Inc.” to
“F-star
Therapeutics, Inc.” effective upon the closing of the Exchange in the form attached as
Annex D
to this proxy statement/prospectus.
 
  4.
To approve a postponement or adjournment of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1, 2 or 3.
 
  5.
To transact such other business as may properly come before the stockholders at the Special Meeting or any adjournment or postponement thereof.
The Spring Bank Board has fixed                , 2020, as the record date (the “Record Date”) for the determination of stockholders entitled to notice of, and to vote at, the Special Meeting and any postponement or adjournment thereof. Only holders of record of shares of Spring Bank’s common stock at the close of business on the Record Date are entitled to notice of, and to vote at, the Special Meeting. At the close of business on the Record Date, there were                shares of Spring Bank’s common stock outstanding and entitled to vote.
Your vote is important. The affirmative vote of a majority of the voting power of the votes cast at the Special Meeting and voting affirmatively or negatively on the matter is required for approval of Proposal Nos. 1 and 4. The affirmative vote of the holders of a majority of shares of Spring Bank’s common stock having voting power outstanding on the Record Date for the Special Meeting is required for approval of Proposal Nos. 2 and 3. The approval of Proposal Nos. 1, 2 and 3 is a condition of the Exchange Agreement.

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Therefore, the Exchange cannot be consummated without the approval of Proposal Nos. 1, 2 and 3. Proposal No. 3 is conditioned upon the consummation of the Exchange Agreement. If the Exchange is not completed, Proposal No. 3 will not be implemented, and Spring Bank’s name will not be changed. Even if you plan to attend the virtual Special Meeting, Spring Bank requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the Special Meeting if you are unable to attend. You may also vote over the internet as well as by telephone or by mail.
By Order of Spring Bank’s Board of Directors,
Martin Driscoll
Spring Bank Pharmaceuticals, Inc.
Hopkinton, Massachusetts
                , 2020
THE SPRING BANK BOARD HAS DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, SPRING BANK AND ITS STOCKHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. THE SPRING BANK BOARD RECOMMENDS THAT SPRING BANK STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

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REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and financial information about Spring Bank that is not included in or delivered with this document. You may obtain this information without charge through the Securities and Exchange Commission (“SEC”) website (www.sec.gov) or upon your written or oral request by contacting Spring Bank’s Corporate Secretary at Spring Bank Pharmaceuticals, Inc., 35 Parkwood Drive, Suite 210, Hopkinton, MA 01748 or by calling (508)
473-5993.
You may also request additional copies from Spring Bank’s proxy solicitor using the following contact information:
The Proxy Advisory Group, LLC
18 East 41st Street, Suite 2000
New York, New York 10017
1-212-616-2181
To ensure timely delivery of these documents, any request should be made no later than                 , 2020, to receive them before the Special Meeting of Spring Bank stockholders.
For additional details about where you can find information about Spring Bank, see the section titled
“Where You Can Find More Information”
in this proxy statement/prospectus.

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     355  
     362  
     365  
     375  
     378  
     382  
     385  
     385  
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     387  
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     F-1  
     A-1  
     B-1  
     C-1  
     D-1  
 
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QUESTIONS AND ANSWERS ABOUT THE EXCHANGE
Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus does not give effect to the proposed reverse stock split described in Proposal No. 2 of this proxy statement/prospectus.
The following section provides answers to frequently asked questions about the Exchange (as defined below). This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.
 
Q:
What is the Exchange?
 
A:
On July 29, 2020, Spring Bank Pharmaceuticals, Inc. (“Spring Bank”),
F-star
Therapeutics Limited
(“F-star”)
and certain holders of issued and outstanding capital shares and convertible loan notes of
F-star
(each a “Seller”; collectively with holders of
F-star
securities who subsequently become parties thereto, the “Sellers”) entered into a share exchange agreement (the “Exchange Agreement”). The Exchange Agreement contains the terms and conditions of the proposed business combination of Spring Bank and
F-star.
Under the Exchange Agreement, Spring Bank will acquire the entire issued and outstanding share capital of
F-star
(including all shares issuable in connection with the
F-star
Note Conversion,
Pre-Closing
Financing and
F-star
Share Conversion (in each case, as defined below)) (the “Exchange”).
F-star’s
issued share capital currently consists of ordinary shares, Seed Preference Shares and Series A Preference Shares. Immediately prior to the closing of the Exchange (the “Closing”), the Seed Preference Shares and Series A Preference Shares will be converted into
F-star
ordinary shares (the
“F-star
Share Conversion”). Additionally, pursuant to the terms of the Exchange Agreement and immediately prior to the Closing, all issued and outstanding
F-star
convertible loan notes will convert into
F-star
ordinary shares (the
“F-star
Note Conversion”).
At the Closing, each ordinary share of
F-star
will be sold to Spring Bank in exchange for a number of shares of Spring Bank common stock, based on the exchange ratio formula in the Exchange Agreement (the “Exchange Ratio”), rounded down to the nearest whole share of Spring Bank common stock after aggregating all fractional shares issuable to each Seller on a holder by holder basis.
Immediately following the Closing and assuming an Exchange Ratio of 0.5338 (which assumes both that Spring Bank’s valuation will not be adjusted as a result of its expected net cash at Closing and that
F-star
raises $25.0 million in the
Pre-Closing
Financing at a
pre-money
valuation of at least $35.0 million), the Spring Bank securityholders and holders of
F-star’s
share capital (including all
F-star
shares issued in connection with the
F-star
Note Conversion, the
F-star
Share Conversion and Pre-Closing Financing) are expected to own approximately 38.8% and 61.2%, respectively, of the outstanding capital stock of the combined company.
The Exchange Ratio is subject to adjustment and the respective ownership percentages for
F-star
and Spring Bank stockholders will change (i) to the extent that Spring Bank’s expected net cash as of Closing is less than $15.0 million or greater than $17.0 million, (ii) to the extent that
F-star
does not raise at least $25.0 million in the
Pre-Closing
Financing at a
pre-money
valuation of at least $35.0 million, and (iii) to account for the actual proceeds raised in the
Pre-Closing
Financing. Should the Closing occur after September 30, 2020, the $15.0 million and $17.0 million thresholds will each be reduced by $250,000 on October 30, 2020 and on the last day of each
30-day
period thereafter until the Closing occurs. These and other adjustments to the Exchange Ratio are described further in this prospectus/proxy statement.
Effective as of the Closing, and assuming Spring Bank’s Stockholders approve Proposal No. 3, Spring Bank will change its corporate name to
“F-star
Therapeutics, Inc.” as required by the Exchange Agreement.
 
Q:
What will happen to Spring Bank if, for any reason, the Exchange does not close?
 
A:
If, for any reason, the Exchange does not close, the board of directors of Spring Bank (the “Spring Bank Board”) may elect to, among other things, continue to operate the business of Spring Bank, attempt to

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  complete another strategic transaction like the Exchange, sell or otherwise dispose of the various assets of Spring Bank or dissolve or liquidate the company. If the Spring Bank Board decides to dissolve and liquidate Spring Bank’s assets, Spring Bank would be required to wind down its clinical trials, pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims. This would be a lengthy and uncertain process, and there can be no assurances as to the amount or timing of available cash, if any, that would be left to distribute to Spring Bank stockholders after paying the debts and other obligations of Spring Bank and setting aside funds for reserves.
 
Q:
Why are the two companies proposing to combine?
 
A:
F-star
and Spring Bank believe that the Exchange will result in a publicly listed company seeking to advance
F-star’s
clinical and preclinical immuno-oncology pipeline of multiple tetravalent bispecific antibody programs, as well as Spring Bank’s STING (STimulator of INterferon Gene) agonist, SB 11285, currently in a Phase 1a/1b clinical trial. For a discussion of Spring Bank’s and
F-star’s
reasons for the Exchange, see the section titled
“The Exchange—Spring Bank Reasons for the Exchange”
and
“The
Exchange—F-star
Reasons for the Exchange”
in this proxy statement/prospectus.
 
Q:
Why am I receiving this proxy statement/prospectus?
 
A:
You are receiving this proxy statement/prospectus because you have been identified as a Spring Bank stockholder as of the Record Date (as defined below), and you are entitled to vote at the Special Meeting to approve the transactions contemplated by the Exchange Agreement, including the issuance of shares of Spring Bank common stock pursuant to the Exchange Agreement. This document serves as:
 
   
a proxy statement of Spring Bank used to solicit proxies for the Special Meeting; and
 
   
a prospectus of Spring Bank used to offer shares of Spring Bank common stock in exchange for
F-star
share capital in the Exchange to
F-star
securityholders.
 
Q:
What is required to consummate the Exchange?
 
A:
To consummate the Exchange, Spring Bank stockholders must approve the issuance of shares of Spring Bank common stock pursuant to the Exchange Agreement (Proposal No. 1), approve and adopt the amendment to the amended and restated certificate of incorporation of Spring Bank effecting a reverse stock split at a ratio as mutually agreed to by Spring Bank and
F-star
in the range of one new share for every              shares to one new share for every              shares outstanding (the “Reverse Stock Split”) (Proposal No. 2) and approve and adopt an amendment to the amended and restated certificate of incorporation of Spring Bank to change the corporate name of Spring Bank from “Spring Bank Pharmaceuticals, Inc.” to
“F-star
Therapeutics, Inc.” effective as of the Closing (the “Spring Bank Name Change”) (Proposal No. 3).
The approval of the issuance of Spring Bank common stock pursuant to the Exchange Agreement (Proposal No. 1) by the Spring Bank stockholders requires the affirmative vote of a majority of the voting power of the votes cast at the Special Meeting and voting affirmatively or negatively on the matter. The approval of the amendments to the amended and restated certificate of incorporation of Spring Bank to effect the Reverse Stock Split (Proposal No. 2) and the Spring Bank Name Change (Proposal No. 3) require the affirmative vote of the holders of a majority of shares of Spring Bank common stock having voting power outstanding on                , 2020 (the “Record Date”). The approval of the Reverse Stock Split (Proposal No. 2) and Spring Bank Name Change (Proposal No. 3) is a condition to closing under the Exchange Agreement. Consequently, if the requisite Spring Bank stockholders approve the Exchange and the issuance of Spring Bank common stock pursuant to the Exchange Agreement but do not approve the Reverse Stock Split or the Spring Bank Name Change, the Exchange will not be consummated.
The Spring Bank Name Change (Proposal No. 3) is a condition to Closing under the Exchange Agreement. If the Exchange is not completed, Proposal No. 3 will not be implemented, and Spring Bank’s name will not
 
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be changed. The Reverse Stock Split (Proposal No. 2) is not conditioned upon the consummation of the Exchange, and the Reverse Stock Split may be implemented by the Spring Bank Board even if the Exchange does not take place.
The presence at the Special Meeting of the holders of a majority in voting power of all outstanding shares of Spring Bank common stock entitled to vote at the Special Meeting is necessary to constitute a quorum at the meeting. Votes of stockholders of record who are represented at the Special Meeting abstentions, and broker
non-votes
are counted for purposes of determining whether a quorum exists.
Votes will be counted by the inspector of election appointed for the Special Meeting, who will separately count “FOR” and “AGAINST” votes, abstentions and broker
non-votes.
Abstentions and broker
non-votes
will not be considered votes cast by the holders of all the shares of Spring Bank common stock represented at the Special Meeting and voting affirmatively or negatively, and will therefore not have any effect with respect to Proposal No. 1. Abstentions will have the same effect as a vote “AGAINST” Proposal Nos. 2 and 3. Abstentions will not have any effect with respect to Proposal No. 4.
As of August 1, 2020, certain Spring Bank stockholders who in the aggregate own approximately 7.7% of the outstanding shares of Spring Bank common stock, have entered into Voting Agreements (as defined below) with Spring Bank and
F-star,
whereby such stockholders have agreed to vote their shares in favor of the Proposals described above.
For a more complete description of the closing conditions under the Exchange Agreement, Spring Bank urges you to read the section titled
“The Exchange Agreement—Conditions to the Completion of the Exchange”
in this proxy statement/prospectus.
 
Q:
What will
F-star
Securityholders receive in the Exchange?
 
A:
Immediately after the consummation of the Exchange, the holders of
F-star
share capital (including all
F-star
shares issued in connection with the
F-star
Note Conversion, the
F-star
Share Conversion and
Pre-Closing
Financing) will receive shares of Spring Bank common stock equal to the Exchange Ratio for each
F-star
ordinary share held immediately prior to the Closing. Immediately following the Closing and assuming an Exchange Ratio of 0.5338 (which assumes both that Spring Bank’s valuation will not be adjusted as a result of its expected net cash at Closing and that
F-star
raises $25.0 million in the
Pre-Closing
Financing at a
pre-money
valuation of at least $35.0 million), the
F-star
securityholders are expected to own approximately 61.2% of the outstanding capital stock of the combined company, which is subject to adjustment as described in the section titled “
The Exchange Agreement — Transaction Consideration and Adjustment
.”
All issued and outstanding
F-star
share options granted under its three legacy equity incentive plans are currently exercisable, and prior to the Closing, the holders of
F-star
Legacy Options will be notified by the
F-star
Board of Directors that they may exercise their
F-star
Legacy Options conditional upon and effective at the Closing. All holders of share options and restricted stock units granted by
F-star
under the
F-star
2019 Equity Incentive Plan will have those awards replaced by options and awards on the same terms (including vesting) for Spring Bank common stock, based on the Exchange Ratio.
For a more complete description of what holders of
F-star
share capital will receive in the Exchange, see the section titled
“The Exchange Agreement—Exchange Consideration”
in this proxy statement/prospectus.
 
Q:
What will Spring Bank stockholders receive in the Exchange?
 
A:
At the Closing, Spring Bank stockholders will continue to own and hold their existing shares of Spring Bank common stock. Immediately following the Closing and assuming an Exchange Ratio of 0.5338 (which assumes both that Spring Bank’s valuation will not be adjusted as a result of its expected net cash at Closing and that
F-star
raises $25.0 million in the
Pre-Closing
Financing at a
pre-money
valuation of at least $35.0
 
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  million), the Spring Bank securityholders are expected to own approximately 38.8% of the outstanding capital stock of the combined company, which is subject to adjustment as described in the section titled “
The Exchange Agreement—Transaction Consideration and Adjustment
.”
All unvested issued and outstanding Spring Bank options and restricted stock units will be accelerated and vested in full immediately prior to the Closing and, following this acceleration, each option that has not previously been exercised will expire on the date of the Closing.
In addition, Spring Bank stockholders will receive two separate and distinct contingent value rights (“CVRs”) for each share of Spring Bank common stock held of record as of immediately prior to the Closing. The CVRs will represent the rights to receive cash payments in connection with (i) certain transactions involving Spring Bank’s proprietary STING agonist compound (the “STING Agonist CVR Agreement”) and (ii) certain other transactions involving Spring Bank’s proprietary STING antagonist compound (the “STING Antagonist CVR Agreement”).
Pursuant to the Exchange Agreement and the STING Agonist CVR Agreement, each share of Spring Bank common stock held by Spring Bank stockholders as of a record date immediately prior to the Closing will receive a dividend of one CVR entitling such holders to receive, in connection with certain transactions involving Spring Bank’s proprietary STimulator of INterferon Genes (STING) agonist compound occurring on or prior to an agreed-upon expiration date, an aggregate amount equal to the greater of (i) 25% of the Net Proceeds received from all STING Agonist CVR Transactions (each as defined in the STING Agonist CVR Agreement) and (ii) up to an aggregate amount of $18.0 million, the product of $1.00 (as adjusted for the Reverse Stock Split, to the extent applicable) and the total number of shares of Spring Bank common stock outstanding as of such record date.
Pursuant to the Exchange Agreement and the STING Antagonist CVR Agreement, each share of Spring Bank common stock held by Spring Bank stockholders as of a record date immediately prior to the Closing will receive a dividend of one CVR entitling such holders to receive, in connection with the execution of a potential development agreement (the “Approved Development Agreement”) and certain other transactions involving Spring Bank’s proprietary STING antagonist compound occurring during the seven-year period after the Closing, an amount equal to 80% of all Net Proceeds (each as defined in the STING Antagonist CVR Agreement) received by Spring Bank after the Closing pursuant to (i) the Approved Development Agreement, if any, and (ii) all STING Antagonist CVR Transactions (as defined in the STING Antagonist CVR Agreement) entered into during the
seven-year
period after the Closing.
See the section titled “
Agreements Related to the Exchange—Contingent Value Rights Agreements”
in this proxy statement/prospectus.
 
Q:
Who will be the directors of the combined company following the Exchange?
 
A:
Following the Closing, the board of directors of the combined company will include a total of eight directors, three of whom will be current directors of Spring Bank and five of whom will be designated by
F-star.
It is anticipated that, following the Closing, the board of directors of the combined company will be constituted as follows:
 
Name
  
Current Principal Affiliation
Eliot Forster, Ph.D.    Director and Chief Executive Officer,
F-star
Nessan Bermingham, Ph.D.    Director,
F-star
Edward Benz, Jr., M.D.    Director,
F-star
Geoffrey Race    Director,
F-star
Patrick Krol    Director,
F-star
David Arkowitz    Director, Spring Bank
Todd Brady, M.D., Ph.D.    Director, Spring Bank
Pamela Klein, M.D.    Director, Spring Bank
 
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Q:
Who will be the executive officers of the combined company immediately following the Exchange?
 
A:
Immediately following the Closing, the executive management team of the combined company is expected to be as follows:
 
Name
  
Title
Eliot Forster, Ph.D.    President, Chief Executive Officer and Director
Darlene Deptula-Hicks    Chief Financial Officer and Treasurer
Neil Brewis, Ph.D.    Chief Scientific Officer
Louis Kayitalire, M.D.    Chief Medical Officer
 
Q:
What are the material U.S. federal income tax consequences of the Exchange to U.S. Holders?
 
A:
Spring Bank and
F-star
intend to treat the Exchange as constituting a reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (a
“B-Reorganization”).
As further described in the section titled
“The Exchange—Material U.S. Federal Income Tax Consequences of the Exchange to U.S. Holders”
in this proxy statement/prospectus, whether the Exchange constitutes a
B-Reorganization
is uncertain. Assuming the Exchange constitutes a
B-Reorganization,
subject to the limitations and qualifications further described in the above referenced section of this proxy statement/prospectus, U.S. Holders (as defined in the above referenced section of this proxy statement/prospectus) of
F-star
shares generally should not recognize gain or loss for U.S. federal income tax purposes in connection with the Exchange.
If the Exchange is not treated as a
B-Reorganization,
then, subject to the limitations and qualifications described in the above referenced section of this proxy statement/prospectus, each U.S. Holder of
F-star
share capital will generally recognize capital gain or loss, for U.S. federal income tax purposes, on the receipt of shares of Spring Bank common stock issued to such U.S. Holder in the Exchange. The U.S. federal income tax consequences to each U.S. Holder of
F-star
share capital will depend on that stockholder’s particular circumstances. Each U.S. Holder of
F-star
share capital should consult with his, her or its tax advisor for a full understanding of the tax consequences of the Exchange to that stockholder.
There are no material U.S. federal income tax consequences of the Exchange to U.S. Holders of Spring Bank common stock.
 
Q:
What are the material U.S. federal income tax consequences of the receipt of two CVRs and the Reverse Stock Split to U.S. Holders?
 
A:
Spring Bank intends to take the position that the fair market value of the CVRs cannot be reasonably ascertained on the date of the issuance of the CVRs and, accordingly, the issuance of the CVRs constitutes an “open transaction.” Accordingly, absent a change in law requiring otherwise, Spring Bank will not report the issuance of the CVRs as a current distribution of property with respect to its stock and will instead report each future cash payment (if any) on the CVRs as a distribution by Spring Bank for U.S. federal income tax purposes, with each such payment being reported as a dividend to the extent of Spring Bank’s current or accumulated earnings and profits in the year in which such payment is made. However, as further described in the in the section titled “
Agreements Related to the Share Exchange—Material U.S. Federal Income Tax Consequences of the Receipt of CVRs to U.S. Holders
” in this proxy statement/prospectus, there is substantial uncertainty as to the U.S. federal income tax treatment of the issuance of CVRs. Specifically, there is no authority directly addressing whether the issuance of contingent value rights with characteristics similar to the CVRs should be treated as a distribution of property with respect to the Spring Bank’s common stock, a distribution of equity, a “debt instrument” or an “open transaction” for U.S. federal income tax purposes. Applicable U.S. Treasury regulations provide that “open transaction” treatment is only available in those “rare and extraordinary cases” involving contingent payment obligations in which the “fair market value of the obligation cannot reasonably be ascertained.” If the issuance of the CVRs is treated as an “open transaction,” a U.S. Holder (as defined in the above referenced section of this proxy statement/
 
5

Table of Contents
  prospectus) would not generally recognize income in respect of the CVRs at the time such CVRs are issued and would take no tax basis in the CVRs. Future cash payments (if any) on the CVRs would be treated as a distribution and constitute a dividend to the extent of the U.S. Holder’s pro rata share of Spring Bank current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) in the taxable year of such payment, then as a non-taxable return of capital to the extent of the U.S. Holder’s basis in its Spring Bank common stock, and finally as capital gain from the sale or exchange of Spring Bank common stock with respect to any remaining payment. Dividends received by individual U.S. Holders are currently eligible for reduced rates of taxation applicable to long-term capital gains, provided certain holding period requirements are met.
Spring Bank intends to treat the Reverse Stock Split and the issuance of CVRs as separate transactions for U.S. federal income tax purposes. However, as provided in more detail in the section titled “
Matters Being
Submitted to a Vote of Spring Bank Stockholders—Proposal No.
 2: Approval of an amendment to the Amended and Restated Certificate of Incorporation of Spring Bank Effecting the Reverse Stock Split—Material U.S. Federal Income Tax Consequences of the Reverse Stock Split to U.S. Holders
” whether the Reverse Stock Split and the issuance of CVRs should be treated as separate transactions or as a single transactions is uncertain. Consistent with Spring Bank’s intent to treat the Reverse Stock Split and the issuance of CVRs as separate transactions for U.S. federal income tax purposes, a U.S. Holder of Spring Bank common stock generally should not recognize gain or loss upon the Reverse Stock Split, except to the extent a U.S. Holder receives cash in lieu of a fractional share of Spring Bank common stock. Please review the information in the above referenced section of this proxy statement/prospectus for a more complete description of the material U.S. federal income tax consequences of the Reverse Stock Split to U.S. Holders of Spring Bank common stock.
The tax consequences to you of the receipt of CVRs and the Reverse Stock Split are subject to 
substantial
uncertainty and may also depend on your particular facts and circumstances. Please consult your tax advisors as to the specific tax consequences to you.
 
Q:
What is the
Pre-Closing
Financing?
 
A:
Concurrently with entering into the Exchange Agreement, certain existing investors of
F-star
agreed, pursuant to binding equity commitment letters by and between each investor and
F-star,
to purchase ordinary shares of
F-star
in a private placement to occur immediately prior to the Closing. This is referred to as the
“Pre-Closing
Financing”. As of                 , 2020,
F-star
had received commitments from investors to purchase $        million of ordinary shares of
F-star
in the
Pre-Closing
Financing.
F-star
may continue to seek additional commitments in the
Pre-Closing
Financing until 11:59 p.m., Eastern time on the 10
th
day prior to the Special Meeting. The
Pre-Closing
Financing is expected to be completed pursuant to Regulation D under the Securities Act of 1933, as amended.
F-star
ordinary shares that are issued in the
Pre-Closing
Financing will be converted into shares of Spring Bank common stock in the Exchange. Accordingly, by approving Proposal No. 1 relating to the issuance of shares in the Exchange, Spring Bank stockholders will also be approving the issuance of shares of Spring Bank common stock to be issued in exchange for all
F-star
ordinary shares that are sold in the
Pre-Closing
Financing.
 
Q:
Do persons involved in the Exchange have interests that may conflict with mine as a Spring Bank stockholder?
 
A:
Yes. When considering the recommendations of Spring Bank Board, you should be aware that certain Spring Bank directors and executive officers have interests in the Exchange that are different from, or are in addition to, yours. The Spring Bank Board was aware of these interests and considered them, among other matters, in its decision to approve the Exchange. Upon completion of the Exchange, if the employment of Martin Driscoll, R. P. “Kris” Iyer, Ph.D., Lori Firmani and Garrett Winslow, is terminated by Spring Bank without cause, these executive officers will be entitled to certain payments and employment benefits following their respective terminations. In addition, all unvested issued and outstanding Spring Bank
 
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  options and restricted stock units will be accelerated and vested in full immediately prior to the Closing and, following this acceleration, each option that has not previously been exercised will expire on the date of the Closing. As of August 1, 2020, the aggregate value of these severance payments, benefits and accelerated vesting is $2,098,798 (collectively, not individually), as described in the section titled “
The Exchange—Interests of the Spring Bank Directors and Executive Officers in the Exchange—Exchange-Related Compensation of Executive Officers
” in this proxy statement/prospectus. Additionally, David Arkowitz, Todd Brady, M.D., Ph.D. and Pamela Klein, M.D., current members of the Spring Bank Board, will continue to serve as members of the combined company’s board of directors after the Exchange.
 
Q:
As a Spring Bank stockholder, how does the Spring Bank Board recommend that I vote?
 
A:
After careful consideration, the Spring Bank Board recommends that Spring Bank stockholders vote “FOR” each of the proposals.
 
Q:
What risks should I consider in deciding whether to vote in favor of the Exchange?
 
A:
You should carefully review the section of this proxy statement/prospectus titled “Risk Factors,” which sets forth certain risks and uncertainties related to the Exchange, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which each of Spring Bank and
F-star,
as independent companies, are subject.
 
Q:
Who can vote at the Special Meeting?
 
A:
Only Spring Bank stockholders of record at the close of business on the Record Date,                 , 2020, will be entitled to vote at the Special Meeting. As of                 , 2020, there were                 shares of Spring Bank common stock outstanding and entitled to vote.
Stockholder of Record: Shares Registered in Your Name
If, at the close of business on the Record Date, your shares of Spring Bank common stock were registered directly in your name with Spring Bank’s transfer agent, Computershare Trust Company, N.A., then you are a Spring Bank stockholder of record. As a Spring Bank stockholder of record, you may vote at the Special Meeting or vote by proxy. Whether or not you plan to attend the Special Meeting, please vote as soon as possible by completing and returning the enclosed proxy card or vote by proxy over the telephone or on the internet as instructed below to ensure your vote is counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If, at the close of business on the Record Date, your shares of Spring Bank common stock were not held in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Special Meeting. As a beneficial owner, you have the right to direct your broker or other agent how to vote the shares in your account. You are also invited to attend the Special Meeting and may vote at the Special Meeting or vote by proxy.
If your shares are not registered in your own name and you plan to vote your shares in person at the virtual Special Meeting,
 you will need the
16-digit
control number included with your proxy materials or provided by the brokerage firm, bank, dealer or other similar organization that holds your shares.
 
Q:
As a holder of Spring Bank common stock, how many votes do I have?
 
A:
On each matter to be voted upon, you have one vote for each share of Spring Bank common stock you own as of the Record Date.
 
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Q:
What is the quorum requirement for the Special Meeting?
 
A:
The presence, of the holders of a majority of the voting power of all outstanding shares of Spring Bank common stock entitled to vote at the Special Meeting is necessary to constitute a quorum at the Special Meeting. Votes of stockholders of record who are represented at the Special Meeting abstentions, and broker
non-votes
are counted for purposes of determining whether a quorum exists.
On                , 2020, there were                shares of Spring Bank common stock outstanding and entitled to vote. Accordingly, Spring Bank expects that the holders of at least                shares of Spring Bank common stock must be present at the Special Meeting for a quorum to exist.
 
Q:
What are “broker
non-votes”?
 
A:
If you hold shares beneficially in street name and do not provide your broker or other agent with voting instructions, your shares may constitute “broker
non-votes.”
Broker
non-votes
occur on a matter when banks, brokers and other nominees are not permitted to vote on certain
non-discretionary
matters without instructions from the beneficial owner and instructions are not given. These matters are referred to as
“non-routine”
matters. Proposal No. 1 is anticipated to be a
non-routine
matter, and Proposal Nos. 2, 3 and 4 are anticipated to be routine matters on which Spring Bank expects brokers, banks or other nominees to have authority and, therefore, broker
non-votes
are not expected with respect to these proposals. Broker
non-votes
will have no effect on the outcome of Proposal No. 1.
 
Q:
When do you expect the Exchange to be consummated?
 
A:
Spring Bank and
F-star
anticipate that the closing of the Exchange will occur shortly after the Special Meeting to be held on                , 2020, but the companies cannot predict the exact timing. For more information, see the section titled
“The Exchange Agreement—Conditions to the Completion of the Exchange”
in this proxy statement/prospectus.
 
Q:
What do I need to do now?
 
A:
Spring Bank and
F-star
urge you to read this proxy statement/prospectus carefully, including its annexes, and to consider how the Exchange affects you.
If you are a Spring Bank stockholder of record, you may provide your proxy instructions in one of two different ways. First, you can mail your signed proxy card in the enclosed return envelope. You may also provide your proxy instructions via telephone or via the internet by following the instructions on your proxy card or voting instruction form. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the Special Meeting.
 
Q:
What happens if I do not return a proxy card or otherwise provide proxy instructions, as applicable?
 
A:
If you are a Spring Bank stockholder, the failure to return your proxy card or otherwise provide proxy instructions will reduce the aggregate number of votes required to approve Proposal Nos. 1 and 4 and will have the same effect as a vote “AGAINST” Proposal Nos. 2 and 3.
 
Q:
When and where is the Special Meeting of Spring Bank stockholders?
 
A:
The Special Meeting will be held virtually via live audio webcast on the internet at www.virtualshareholdermeeting.com/SBPH2020SM at                 , Eastern time, on                , 2020.
 
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Q:
If my Spring Bank shares are held in “street name” by my broker, will my broker vote my shares for me?
 
A:
Unless your broker has discretionary authority to vote on certain matters, your broker will not be able to vote your shares of Spring Bank common stock without instructions from you. Brokers are not expected to have discretionary authority to vote for Proposal No. 1. To make sure that your vote is counted, you should instruct your broker to vote your shares, following the procedures provided by your broker.
 
Q:
May I change my vote after I have submitted a proxy or provided proxy instructions?
 
A:
Spring Bank stockholders of record, other than those Spring Bank stockholders who are parties to the Voting Agreements, may change their vote at any time before their proxy is voted at the Special Meeting in one of four ways. First, a Spring Bank stockholder of record can send a written notice to the Secretary of Spring Bank stating that it would like to revoke its proxy. Second, a Spring Bank stockholder of record can submit new proxy instructions either on a new proxy card, via telephone or via the internet. Third, a Spring Bank stockholder of record can attend the Special Meeting and vote. Attendance alone will not revoke a proxy. If a Spring Bank stockholder who owns shares of Spring Bank common stock in “street name” has instructed a broker to vote its shares of Spring Bank common stock, the stockholder must follow directions received from its broker to change those instructions. The Spring Bank stockholder’s most current vote, whether by telephone, internet or proxy card, is the one that will be counted.
 
Q:
Who is paying for this proxy solicitation?
 
A:
Spring Bank and
F-star
will share equally, up to $50,000 in the case of
F-star,
the cost of soliciting, printing and filing this proxy statement/prospectus and the proxy card. Arrangements will also be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of Spring Bank common stock for the forwarding of solicitation materials to the beneficial owners of Spring Bank common stock. Spring Bank will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable
out-of-pocket
expenses they incur in connection with the forwarding of solicitation materials.
Spring Bank has engaged The Proxy Advisory Group, LLC to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of customary disbursements that are not expected to exceed $25,000 in total.
 
Q:
Who can help answer my questions?
 
A:
If you are a Spring Bank stockholder and would like additional copies, without charge, of this proxy statement/prospectus or if you have questions about the Exchange, including the procedures for voting your shares, you should contact:
Spring Bank Pharmaceuticals, Inc.
35 Parkwood Drive, Suite 210
Hopkinton, MA
(508)
473-5993
Attn: General Counsel 
and Corporate Secretary
You may also request information from The Proxy Advisory Group, LLC, Spring Bank’s proxy solicitor, at the following address and telephone number:
The Proxy Advisory Group, LLC
18 East 41st Street, Suite 2000
New York, New York 10017
1-212-616-2181
 
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If you are a holder of
F-star
share capital, and would like additional copies, without charge, of this proxy statement/prospectus or if you have questions about the Exchange, you should contact:
F-star
Therapeutics Limited
Eddeva B920
Babraham Research Campus
Cambridge, CB22 3AT
United Kingdom
+44-1223
497400
Attn: General Counsel
 
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PROSPECTUS SUMMARY
This summary highlights selected information from this proxy statement/prospectus and may not contain all of the information that is important to you. To better understand the Exchange and the proposals being considered at the Special Meeting, you should read this entire proxy statement/prospectus carefully, including the Exchange Agreement attached as Annex A, the opinion of Ladenburg Thalmann & Co. Inc. (“Ladenburg”) attached as Annex B and the other annexes to which you are referred herein. For more information, see the section titled “Where You Can Find More Information” in this proxy statement/prospectus.
The Companies
Spring Bank Pharmaceuticals, Inc.
Spring Bank Pharmaceuticals, Inc.
35 Parkwood Drive, Suite 210
Hopkinton, MA 01748
(508)
473-5993
Spring Bank is a clinical-stage biopharmaceutical company engaged in the discovery and development of novel therapeutics for the treatment of a range of cancers and inflammatory diseases using its proprietary small molecule nucleotide platform. Spring Bank designs its compounds to selectively target and modulate the activity of specific proteins implicated in various disease states. Its internally developed programs are primarily designed to stimulate and/or dampen immune responses. Spring Bank is devoting its resources to advancing multiple programs in its STING product portfolio, including its STING agonist clinical program for intravenously-administered SB 11285 in oncology, its STING antagonist compounds for inflammatory diseases, and its STING agonist antibody drug conjugate program for oncology. On July 29, 2020, Spring Bank announced that it had entered into a definitive agreement with
F-star
and certain holders of issued and outstanding capital shares and convertible loan notes of
F-star,
under which Spring Bank will acquire the entire issued and outstanding share capital of
F-star.
F-star
Therapeutics Limited
F-star
Therapeutics Limited
Eddeva B920
Babraham Research Campus
Cambridge, CB22 3AT
United Kingdom
+44-1223
497400
F-star
is a clinical-stage immuno-oncology company focused on transforming the lives of patients with cancer through the development of
F-star’s
innovative tetravalent mAb
2
bispecific antibodies. With four distinct binding sites in a natural human antibody format,
F-star
believes its proprietary technology will overcome many of the challenges facing current immuno-oncology therapies, because of the strong pharmacology enabled by tetravalent bispecific binding.
F-star’s
vision is to transform the treatment of cancer through the development of differentiated and well-tolerated mAb
2
bispecific antibodies, which are designed to address multiple immune evasion pathways that limit the effect of current immuno-oncology therapies
.
F-star’s most advanced product candidate, FS118, simultaneously targets two immune checkpoint receptors, LAG-3 and PD-L1, to directly address known tumor evasion pathways, and is currently being evaluated in a Phase 1 trial in heavily pretreated patients with advanced cancer, having received a median of six lines of such
 
 
 
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treatments. F-star expects to report data from this Phase 1 trial in the fourth quarter of 2020, and to initiate a proof of concept trial in PD-1/PD-L1 resistant patients in selected indications in the first half of 2021. For another of its mAb
2
product candidates, FS120, which targets CD137 and OX40, F-star has an open Investigational New Drug application (“IND”), from the U.S. Food and Drug Administration (“FDA”), and plans to initiate a Phase 1 trial in patients with advanced cancers in the fourth quarter of 2020. F-star intends to submit a Clinical Trial Application (“CTA”), to the European Medicines Agency (“EMA”) for an additional mAb
2
product candidate, FS222, which targets PD-L1 and CD137, in the second half of 2020 and to initiate a Phase 1 trial in patients with advanced cancers in the first quarter of 2021.
The Exchange
(see page 
124)
Spring Bank will acquire the entire issued and outstanding share capital of
F-star
(including all shares issuable in connection with the
F-star
Note Conversion, the
F-star
Share Conversion and the
Pre-Closing
Financing, each as defined below). The combined company, operating under the name
F-star
Therapeutics, Inc., will seek to advance
F-star’s
immuno-oncology pipeline of multiple tetravalent bispecific antibody programs, as well as Spring Bank’s STING agonist, SB 11285, currently in a Phase 1a/1b clinical trial.
At the Closing, each ordinary share of
F-star
will be acquired by Spring Bank in exchange for a number of shares of Spring Bank common stock, $0.0001 par value per share, based on the Exchange Ratio (defined below), rounded to the nearest whole share of Spring Bank common stock after aggregating all fractional shares issuable to each Seller. The Exchange Ratio may be adjusted (i) to the extent that Spring Bank’s expected net cash as of Closing is less than $15.0 million or greater than $17.0 million, (ii) to the extent that
F-star
does not raise at least $25.0 million in the
Pre-Closing
Financing at a
pre-money
valuation of at least $35.0 million, and (iii) to account for the actual proceeds raised in the
Pre-Closing
Financing. Should the Closing occur after September 30, 2020, the $15.0 million and $17.0 million thresholds will each be reduced by $250,000 on October 30, 2020 and on the last day of each
30-day
period thereafter until the Closing occurs. These and other adjustments to the Exchange Ratio are described further in this proxy statement/prospectus. Immediately following the Closing and assuming an Exchange Ratio of 0.5338 (which assumes both that Spring Bank’s valuation will not be adjusted as a result of its expected net cash at Closing and that
F-star
raises $25.0 million in the
Pre-Closing
Financing at a
pre-money
valuation of at least $35.0 million), the Spring Bank securityholders and holders of
F-star’s
share capital (including all
F-star
shares issued in connection with the
F-star
Note Conversion, the
F-star
Share Conversion and Pre-Closing Financing) are expected to own approximately 38.8% and 61.2%, respectively, of the outstanding capital stock of the combined company.
The
Pre-Closing
Financing
Concurrently with the execution of the Exchange Agreement, certain existing investors of
F-star,
pursuant to binding equity commitment letters by and between each investor and
F-star,
agreed to subscribe for ordinary shares of
F-star
in a private placement to
occur
 immediately prior to the Closing. As of                 , 2020,
F-star
had received commitments from investors to purchase $     million of ordinary shares of
F-star
in the
Pre-Closing
Financing.
F-star
may continue to seek additional commitments in the
Pre-Closing
Financing until 11:59 p.m., Eastern time on the 10
th
day prior to the Special Meeting. Ordinary shares of
F-star
sold in the
Pre-Closing
Financing will be exchanged for shares of Spring Bank common stock in the Exchange.
 
 
 
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The
F-star
Share Conversion and
F-star
Note Conversion
F-star’s
issued share capital currently consists of ordinary shares, Seed Preference Shares and Series A Preference Shares. Immediately prior to the Closing, the Seed Preference Shares and Series A Preference Shares will be converted into
F-star
ordinary shares (the
“F-star
Share Conversion”). Additionally, pursuant to the terms of the Exchange Agreement and immediately prior to the Closing, all issued and outstanding
F-star
convertible loan notes will convert into
F-star
ordinary shares (the
“F-star
Note Conversion”).
Equity Plans
All unvested issued and outstanding Spring Bank options and restricted stock units will be accelerated and vested in full immediately prior to the Closing and, following this acceleration, each option that has not previously been exercised will expire on the date of the Closing. All issued and outstanding
F-star
share options granted under its three legacy equity incentive plans are currently exercisable, and prior to the Closing, the holders of
F-star
Legacy Options will be notified by the
F-star
Board of Directors that they may exercise their
F-star
Legacy Options conditional upon and effective at the Closing. Upon the Closing, all holders of share options and restricted stock unit awards granted by
F-star
under the
F-star
2019 Equity Incentive Plan will have those awards replaced by options and awards, on the same terms (including vesting), for Spring Bank common stock, based on the Exchange Ratio.
Closing
The Closing will occur no later than two business days after the last of the conditions as set forth in the Exchange Agreement has been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of each such condition), or at such other time as Spring Bank and
F-star
agree. Spring Bank and
F-star
anticipate that the Closing will occur in the fourth quarter of 2020. However, because the Exchange is subject to a number of conditions, neither Spring Bank nor
F-star
can predict exactly when the Closing will occur or if it will occur at all. Upon completion of the Exchange, Spring Bank will be renamed
“F-star
Therapeutics, Inc.”
Reasons for the Exchange
(see page
137)
Spring Bank and
F-star
believe that the combined company will have the following potential advantages:
 
   
F-star’s
Promising Clinical-Stage Assets
.
F-star
is a clinical-stage immuno-oncology company with multiple promising and innovative clinical-stage therapeutic programs, near-term milestones, and an accomplished oncology development leadership team.
F-star
believes that its product candidates will overcome many of the challenges facing current immuno-oncology therapies.
F-star’s
vision is to transform the treatment of cancer through the development of differentiated and well-tolerated mAb
2
bispecific antibodies, which are designed to simultaneously address multiple immune evasion pathways that limit the effect of current immuno-oncology therapies.
 
   
Management Team
. The combined company will be led by a senior management from
F-star
experienced in immuno-oncology clinical drug development under the supervision of an experienced, well-qualified board of directors with representation from each of the current boards of directors of Spring Bank and
F-star.
 
   
Cash Resources
. The combined company is expected to have sufficient cash from the
Pre-Closing
Financing and cash on hand to enable it to implement its near-term business plans, and the combined company will have greater access to the public market to raise additional funds in the future.
 
 
 
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Each of the boards of directors of Spring Bank and
F-star
also considered other reasons for the Exchange, as described herein. For example, the Spring Bank Board of Directors (the “Spring Bank Board”) considered, among other things:
 
   
the Spring Bank Board’s belief that maintaining Spring Bank as an independent stand-alone company involved significant risk and the potential for significant dilution to the Spring Bank stockholders, taking into account Spring Bank’s business, operational and financial status and prospects, including its cash position, the substantially diminished price of the Spring Bank common stock following the termination of Spring Bank’s lead clinical development program, uncertainty regarding the successful clinical development of Spring Bank’s remaining clinical program, given its early stage of development, and the need to raise significant additional financing for the future development of Spring Bank’s remaining clinical product candidate in a volatile market;
 
   
the Spring Bank Board’s belief, based in part on the judgment, advice and analysis of Spring Bank senior management with respect to the potential strategic, financial and operational benefits of the Exchange, that
F-star’s
multiple promising clinical-stage therapeutic programs in the area of immuno-oncology, and the potential for near-term milestones, would result in a greater probability of providing value to Spring Bank’s stockholders than Spring Bank continuing as an independent stand-alone company;
 
   
that the Spring Bank stockholders could potentially receive significant future payments pursuant to the CVRs in the event of certain business development transactions involving Spring Bank’s STING agonist compound and its STING antagonist program during specified future periods;
 
   
the Spring Bank Board’s belief that if Spring Bank were to raise sufficient capital to develop Spring Bank’s SB 11285 clinical program and conduct the necessary
IND-enabling
activities for the lead STING antagonist development candidate as a stand-alone company, the resulting dilution to existing Spring Bank stockholders would have been greater than the dilution resulting from the Exchange;
 
   
the Spring Bank Board’s consideration of the valuation and business prospects of the other strategic combination candidates involved in its thorough strategic review process, and its collective view that
F-star
was the most attractive candidate for Spring Bank due to, among other things,
F-star’s
belief that its tetravalent mAb
2
bispecific antibodies may overcome many of the challenges facing current immuno-oncology therapies, and that
F-star’s
potential to achieve key milestones over the next two years could enable the combined company to access the public markets for additional financial resources; and
 
   
the significant risks and delays associated with, and uncertain value and costs to Spring Bank stockholders of, a potential liquidation of Spring Bank.
In addition, the
F-star
Board of Directors approved the Exchange based on a number of factors, including the following:
 
   
historical and current information concerning
F-star’s
business, including its financial performance and condition, operations, management and competitive position;
 
   
current industry and economic conditions and
F-star’s
prospects if it were to remain an independent company, including its need to obtain additional financing and the terms on which it would be able to obtain such financing, if at all;
 
   
the cash resources of the combined company expected to be available at the Closing and the anticipated burn rate of the combined company;
 
   
the potential for increased access to sources of capital and a broader range of investors to support the development of
F-star’s
product candidates than it could otherwise obtain if it continued to operate as a privately held company;
 
 
 
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the potential to provide its current shareholders with greater liquidity by owning stock in a public company; and
 
   
the expectation that the Exchange with Spring Bank would be a more time- and cost-effective means to access capital than other options considered.
Opinion of the Spring Bank Financial Advisor
(see page
142)
Pursuant to an engagement letter dated March 20, 2020, Spring Bank retained Ladenburg to act as a financial advisor in connection with the Exchange and to render an opinion to the Spring Bank Board (the “Opinion”) as to the fairness, from a financial point of view of the Acquisition Consideration (as defined in the Opinion) to the Spring Bank stockholders. On July 27, 2020, at the request of the Spring Bank Board, Ladenburg rendered the oral opinion, subsequently confirmed by delivery of the written opinion dated July 27, 2020, to the Spring Bank Board, that the Acquisition Consideration was fair, from a financial point of view, to the Spring Bank stockholders as of the date of the Opinion and based upon the various assumptions, qualifications and limitations set forth in the Opinion.
The full text of the Opinion is attached as
Annex
 B
to this proxy statement/prospectus and is incorporated by reference. Spring Bank encourages its stockholders to read the Opinion in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review by Ladenburg. The summary of the Opinion set forth herein is qualified by reference to the full text of the Opinion. Ladenburg provided its Opinion for the sole benefit and use by the Spring Bank Board in its consideration of the Exchange. The Opinion is not a recommendation to the Spring Bank Board or to any stockholder as to how to vote with respect to the proposed Exchange or to take any other action in connection with the Exchange or otherwise.
Overview of the Exchange Agreement
Exchange Consideration and Adjustment (
see page 161
)
Immediately prior to the Closing, in the
F-star
Share Conversion, all of the issued and Seed Preference Shares and Series A Preference Shares of
F-star
will convert into ordinary shares of
F-star,
and all outstanding
F-star
convertible loan notes will convert into ordinary shares of
F-star.
At the Closing, each
F-star
ordinary share will be converted into the number of shares of Spring Bank common stock determined by the exchange ratio formula set forth in the Exchange Agreement,(the “Exchange Ratio”) subject to certain adjustments and to account for the anticipated Reverse Stock Split.
Immediately following the Closing, based on an assumed Exchange Ratio of 0.5338, the owners of
F-star
securities are expected to own approximately 61.2% of the combined company, and the owners of Spring Bank’s securities, whose shares of Spring Bank common stock and other securities will remain outstanding after the Exchange, will own approximately 38.8% of the combined company.
The ownership percentages for each party are subject to adjustment of the Exchange Ratio. Spring Bank’s valuation has been determined to be $38 million, which amount is subject to adjustment in the event that Spring Bank’s net cash as of immediately prior to the closing is less than $15.0 million or greater than $17.0 million, in which case, Spring Bank’s valuation would be decreased or increased, respectively, on a
dollar-for-dollar
basis by the amount that Spring Bank’s actual net cash is less than $15.0 million or greater than $17.0 million, respectively. As noted above, should the Closing occur after September 30, 2020, the $15.0 million and $17.0 million thresholds will each be reduced by $250,000 on October 30, 2020 and on the last day of each
30-day
period thereafter until the Closing occurs.
F-star’s
valuation is the sum of the lesser of the
pre-money
valuation attributed to
F-star
for purposes of the
Pre-Closing
Financing and $35.0 million,
minus
the amount, if
 
 
 
15

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any, by which $25.0 million exceeds the aggregate subscription amount for which
F-star
has received executed equity commitment letters as of the 10
th
day preceding the Stockholders Meeting,
plus
the proceeds actually received by
F-star
in the
Pre-Closing
Financing.
The Exchange Ratio is calculated based on the respective allocation percentages for Spring Bank and
F-star.
Spring Bank’s allocation percentage is the quotient of Spring Bank’s valuation, as adjusted as described above, divided by the sum of the Spring Bank valuation and the
F-star
post-financing valuation, referred to herein as the “Aggregate Valuation.”
F-star’s
allocation percentage is the quotient of
F-star’s
valuation, as adjusted as described above, divided by the Aggregate Valuation.
The Exchange Agreement does not include a price-based termination right, and there will be no adjustment to the total number of shares of Spring Bank common stock that
F-star
shareholders will be entitled to receive for changes in the market price of Spring Bank common stock. Accordingly, the market value of the shares of Spring Bank common stock issued pursuant to the Exchange will depend on the market value of the shares of Spring Bank common stock at the time the Exchange closes and could vary significantly from the market value on the date of this proxy statement/prospectus.
Treatment of
F-star
Share Options and F-star Restricted Stock Units (see page 173)
Prior to (and conditional upon and effective as of) the Closing, the Spring Bank Board will cause Spring Bank to assume the F-star Therapeutics Limited 2019 Equity Incentive Plan (the “F-Star EIP”, also referred to as the “Assumed Plan”). Thereafter, the Spring Bank Board will, conditional upon and effective immediately the Closing, offer to grant each holder of outstanding options granted under the
F-star
EIP (“the Original EIP Options”), in exchange for each of the holder’s Original EIP Options, a replacement option under the Assumed Plan (a “Replacement EIP Option”), which will be an option to subscribe for or purchase shares of Spring Bank common stock. The vesting schedule and vesting dates applicable to each Replacement EIP Option will be the same as the vesting schedule applicable to the Original EIP Option that it replaces. The aggregate number of shares of Spring Bank common stock issuable on exercise in full of each Replacement EIP Option will be calculated by applying the Exchange Ratio to the number of
F-star
ordinary shares issuable on exercise in full of the Original EIP Option that it replaces, and rounding the resulting number down to the nearest whole number of shares of Spring Bank common stock. The aggregate exercise price payable to exercise in full each Replacement EIP Option will be the same as the aggregate exercise price payable to exercise in full the Original EIP Option that it replaces; provided, however, that the exercise price with respect to a Replacement EIP Option may be adjusted, as required by the Exchange Agreement, with respect to any option granted to a United States participant under the
F-star
EIP.
Each holder of outstanding restricted stock units granted under the
F-star
EIP (the “Original EIP RSUs”) will, immediately after the Closing and in exchange for the holder’s Original EIP RSUs, be granted replacement restricted share units (“Replacement EIP RSUs”). The Replacement EIP RSUs will be granted under the Assumed Plan and will be a right to acquire shares of Spring Bank common stock. The number of shares of Spring Bank common stock issuable on vesting in full of each Replacement EIP RSU will be calculated by applying the Exchange Ratio to the number of
F-star
ordinary shares issuable on vesting in full of the Original EIP RSU that it replaces, and rounding the resulting number down to the nearest whole number of shares of Spring Bank common stock.
The Replacement EIP RSUs and the Replacement EIP Options with respect to Original EIP Options granted to U.S. participants will be subject to the same terms and conditions as the Original EIP RSUs and Original EIP Options, respectively (except to the extent such terms are rendered inoperative as a result of the transactions contemplated by the Exchange Agreement), and will not provide holders of the Replacement EIP Options or Replacement EIP RSUs with any additional benefits that the holders did not have under their Original EIP Options or Original EIP RSUs. Similarly, the grant of Replacement EIP Options in exchange for the release of
 
 
 
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Original EIP Options shall be effected in such manner as shall meet the requirements of Part 6 of Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 (an act of the UK Parliament) (“ITEPA 2003”) so as to ensure that each Replacement EIP Option shall qualify as “Replacement Options” under the said Part 6 of Schedule 5 to ITEPA 2003.
Prior to the Closing, each holder of options granted under the:
(i) F-star
Alpha Limited Share Option Scheme (each, an
“F-star
Alpha Legacy Option”); (ii)
F-star
Beta Limited Share Option Scheme (each, an
“F-star
Beta Legacy Option”); and
(iii) F-star
Gmbh Limited Share Option Scheme (each, an
“F-star
Gmbh Legacy Option”, and together with the
F-star
Alpha Legacy Options and the
F-star
Beta Legacy Options, the
“F-star
Legacy Options”) will be notified by the
F-star
Board of Directors that they may exercise their
F-star
Legacy Options conditional upon and effective at the Closing. Spring Bank will not assume any of the
F-star
Legacy Options or the
F-star
Alpha Limited Share Option Scheme, the
F-star
Beta Limited Share Option Scheme or the
F-star
Gmbh Limited Share Option Scheme and shall not make an offer of replacement options in respect of the
F-star
Legacy Options.
Conditions to the Completion of the Exchange (see page
174)
To consummate the Exchange, Spring Bank stockholders must approve the issuance of shares of Spring Bank common stock pursuant to the Exchange Agreement and approve and adopt the amendments to the amended and restated certificate of incorporation of Spring Bank effecting the proposed Reverse Stock Split and the Spring Bank Name Change. In addition to obtaining such stockholder approvals and appropriate regulatory approvals, each of the other closing conditions set forth in the Exchange Agreement must be satisfied or waived.
No Solicitation (see page
179)
Each of Spring Bank and
F-star
agreed that, subject to limited exceptions, Spring Bank and
F-star
will not, nor will either party authorize or permit any of its subsidiaries or authorize the officers, directors, employees, partners, attorneys, advisors, accountants, agents or representatives of it or any of its subsidiaries to, directly or indirectly:
 
   
solicit or initiate, or knowingly encourage, induce or facilitate the making, submission or announcement of, any Acquisition Proposal, in the case of Spring Bank, or an
F-star
Acquisition Proposal, in the case of
F-star,
each as defined in “
The Exchange Agreement – Spring Bank Acquisition Proposal and Acquisition Transaction
” and “
The Exchange Agreement –
F-star
Acquisition Proposal,”
respectively, or take any action that would reasonably be expected to lead to an Acquisition Proposal or
F-star
Acquisition Proposal, as the case may be;
 
   
furnish any
non-public
information with respect to it or any of its subsidiaries to any person in connection with or in response to an Acquisition Proposal or
F-star
Acquisition Proposal, as the case may be, or an inquiry or indication of interest that would reasonably be expected to lead to an Acquisition Proposal or
F-star
Acquisition Proposal, as the case may be;
 
   
engage in discussions or negotiations with any person with respect to any Acquisition Proposal or
F-star
Acquisition Proposal, as the case may be;
 
   
approve, endorse or recommend an Acquisition Proposal or an
F-star
Acquisition Proposal, as the case may be; or
 
   
enter into any letter of intent or similar document or any agreement providing for or otherwise relating to, with respect to Spring Bank, an Acquisition Transaction, as defined in “
The Exchange Agreement – Spring Bank Acquisition Proposal and Acquisition Transaction
” or with respect to
F-star,
a transaction contemplated by an
F-star
Acquisition Proposal.
 
 
 
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Termination (see page
187)
Either Spring Bank or
F-star
can terminate the Exchange Agreement under certain circumstances, which would prevent the Exchange from being consummated.
Termination Fee
;
Expenses
(see page
188)
The Exchange Agreement contains certain termination rights for both Spring Bank and
F-star,
and further provides that, upon termination of the Exchange Agreement under specified circumstances, either party may be required to pay the other party a termination fee of $2.0 million, or, in the case of Spring Bank in some circumstances, reimburse
F-star’s
expenses up to a maximum amount of $750,000.
Voting Agreements
(see page
190)
Each of the officers and directors and certain stockholders of Spring Bank have entered into voting agreements with
F-star
(the “Voting Agreements”) pursuant to which they agreed to vote in favor of approval of (i) issuance of Spring Bank common stock to the holders of
F-star
share capital pursuant to the Exchange and the change of control of Spring Bank resulting from the Exchange pursuant to The Nasdaq Stock Market LLC (Nasdaq Listing Rules 5635(a) and 5635(b), respectively), (ii) an amendment to Spring Bank’s amended and restated certificate of incorporation effecting the Reverse Stock Split, (iii) an amendment to Spring Bank’s amended and restated certificate of incorporation effecting the Spring Bank Name Change upon Closing, (iv) any proposal to postpone or adjourn the Special Meeting to a later date, if there are not sufficient votes for the approval of the Exchange and other matters to be approved on date of the Special Meeting, and (v) any other proposal included in this proxy statement/prospectus in connection with, or related to, the consummation of the Exchange for which the Spring Bank Board has recommended that the stockholders of Spring Bank vote in favor.
The Spring Bank stockholders that are party to the Voting Agreements owned approximately 7.7% of the outstanding shares of Spring Bank common stock as of August 1, 2020.
Lock-up
Agreements
(see page
190)
As a condition to the Closing, certain Spring Bank stockholders and
F-star
shareholders have entered into
lock-up
agreements, pursuant to which they agreed not to, except in limited circumstances, sell or transfer, or engage in swap or similar transactions with respect to, shares of Spring Bank common stock, including, as applicable, shares received in the Exchange and issuable upon exercise of certain options, during the
180-day
period following the Closing.
As of August 1, 2020, Spring Bank stockholders who have executed
lock-up
agreements owned in the aggregate approximately 7.7% of the outstanding shares of Spring Bank common stock.
F-star
shareholders who have executed
lock-up
agreements as of August 1, 2020 owned in the aggregate approximately 92.2% of the outstanding shares of
F-star
share capital on an as converted into common stock basis.
Contingent Value Rights Agreements
(see page
191)
Spring Bank stockholders will receive two separate and distinct CVRs for each share of Spring Bank common stock held of record as of immediately prior to the Closing. The CVRs will represent the rights to receive cash payments in connection with (i) certain transactions involving Spring Bank’s proprietary STING agonist compound and (ii) certain other transactions involving Spring Bank’s proprietary STING antagonist compound.
 
 
 
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Pursuant to the STING Agonist Contingent Value Rights Agreement, each share of Spring Bank common stock held by Spring Bank stockholders as of a record date immediately prior to the Closing will be entitled to receive, in connection with certain transactions involving Spring Bank’s proprietary STING agonist compound occurring on or prior to an agreed-upon expiration date, an aggregate amount equal to the greater of (i) 25% of the Net Proceeds received from all STING Agonist CVR Transactions (each as defined in the STING Agonist Contingent Value Rights Agreement) and (ii) up to an aggregate amount of $18.0 million, the product of $1.00 (as adjusted for the Reverse Stock Split, to the extent applicable) and the total number of shares of Spring Bank common stock outstanding as of a record date immediately prior to the Closing. Pursuant to the STING Antagonist Contingent Value Rights Agreement, each share of Spring Bank common stock held by Spring Bank stockholders as of a record date immediately prior to the Closing will be entitled to receive, in connection with the execution of an Approved Development Agreement and certain other transactions involving Spring Bank’s proprietary STING antagonist compound occurring during the
7-year
period after the Closing, an aggregate amount equal to 80% of all Net Proceeds (as defined in the STING Antagonist Contingent Value Rights Agreement) received by Spring Bank after the Closing pursuant to (i) the Approved Development Agreement, if any, and (ii) all STING Antagonist CVR Transactions (as defined in the STING Antagonist Contingent Value Rights Agreement) entered into during the
seven-year
period after the Closing.
Management Following the Exchange
(see page 338)
Effective as of the Closing, the officers of the combined company are expected to include:
 
Name
  
Title
Eliot Forster, Ph.D.
   President, Chief Executive Officer and Director
Darlene Deptula-Hicks
  
Chief Financial Officer and Treasurer
Neil Brewis, Ph.D.
  
Chief Scientific Officer
Louis Kayitalire, M.D.
  
Chief Medical Officer
Interests of Directors, Officers and Affiliates of Spring Bank and
F-star
(see pages 151 and 156)
When considering the recommendations of the Spring Bank Board, Spring Bank stockholders should be aware that certain Spring Bank directors and executive officers have interests in the Exchange that are different from, or are in addition to, theirs. Upon completion of the Exchange, if the employment of Martin Driscoll, R. P. “Kris” Iyer, Ph.D., Lori Firmani and Garrett Winslow, is terminated by Spring Bank without cause, these executive officers will be entitled to certain payments and employment benefits following their respective terminations. All unvested issued and outstanding Spring Bank options and restricted stock units will be accelerated and vested in full immediately prior to the Closing and, following this acceleration, each option that has not previously been exercised will expire on the date of the Closing. As of August 1, 2020, the aggregate value of these severance payments, benefits and vesting acceleration is $2,098,798 (collectively, not individually). Additionally, David Arkowitz, Todd Brady, M.D., Ph.D. and Pamela Klein, M.D., current members of the Spring Bank Board, will continue to serve as members of the combined company’s board of directors after the Exchange.
F-star
shareholders should be aware that certain members of the
F-star
Board of Directors and certain executive officers of
F-star
have interests in the Exchange that may be different from, or in addition to, interests they have as
F-star
shareholders. For example,
F-star’s
executive officers have options, subject to vesting, to purchase
F-star
ordinary shares, which will convert into options to purchase a number of shares of Spring Bank common stock determined by the Exchange Ratio, rounding any resulting fractional shares down to the nearest whole share, certain of
F-star’s
directors and executive officers are expected to become directors and executive officers of the combined company upon the Closing and all of
F-star’s
directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Exchange Agreement.
 
 
 
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Material U.S. Federal Income Tax Consequences of the Exchange
(see page
165)
Spring Bank and
F-star
intend to treat the Exchange as constituting a reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (a
“B-Reorganization”).
As further described in the above referenced section of this proxy statement/prospectus, whether the Exchange constitutes a
B-Reorganization
is uncertain. In general, and subject to the qualifications and limitations set forth in the above referenced section of this proxy statement/prospectus, if the Exchange qualifies as a
B-Reorganization,
the material tax consequences to a U.S. Holder of
F-star
capital stock should be as follows:
 
   
such
F-star
shareholder
will not recognize gain or loss upon the exchange of
F-star
capital stock for Spring Bank common stock pursuant to the Exchange;
 
   
such
F-star
shareholder’s
aggregate tax basis for the shares of Spring Bank common stock received in the Exchange will equal the stockholder’s aggregate tax basis in the shares of
F-star
capital stock surrendered in the Exchange; and
 
   
the holding period of the shares of Spring Bank common stock received by such
F-star
shareholder
in the Exchange will include the holding period of the shares of
F-star
capital stock surrendered in exchange therefor.
If the Exchange is not treated as a
B-Reorganization,
then each U.S. Holder generally will be treated as exchanging its shares of
F-star
capital stock in a fully-taxable transaction in exchange for shares of Spring Bank common stock.
F-star
shareholders
will generally recognize gain or loss in such exchange equal to the amount that such
F-star
shareholder’s
adjusted tax basis in the shares of
F-star
capital stock surrendered is less or more than the fair market value of the shares of Spring Bank common stock received in exchange therefor. Determining the actual tax consequences of the Exchange to you may be complex and will depend on the facts of your own situation. You should consult your tax advisors to fully understand the tax consequences to you of the Exchange, including estate, gift, state, local or
non-U.S.
tax consequences of the Exchange.
Material U.K. Income Tax Consequences of the Exchange
(see page
169)
The summary set out below is based on current United Kingdom (“UK”) tax law and HM Revenue and Customs (“HMRC”) practice (which may not be binding on HMRC) as of the date of this proxy statement/prospectus, both of which are subject to change, possibly with retrospective effect.
Spring Bank and
F-star
intend the Exchange to qualify as a UK tax free reorganization. Subject to certain conditions, the Capital Gains Tax (“CGT”) legislation in Section 135 TCGA 1992 provides that
F-star
shares exchanged for Spring Bank Shares may be treated for UK tax residents as a reorganization of the original holding such that the Spring Bank Shares may be treated as if they were the original
F-star
stockholding and there should be no disposal for CGT purposes as a result of such reorganization.
The conditions of Section 135 TCGA 1992 are:
 
   
Spring Bank will hold more than 25% of the original share capital of
F-star;
and
 
   
The exchange of securities takes place for bona fide commercial reasons and does not form part of a scheme or arrangements, of which the main purpose, or one of the main purposes is the avoidance of liability to CGT (Section 137 TCGA 1992).
Advance clearance from HMRC under Section 138 TCGA 1992 that the bona fide commercial reasons test applies has been received. It should be noted that this test should only be relevant in the case of stockholders who (together with persons connected with them) currently hold more than 5% of
F-star
shares.
 
 
 
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Advance clearance has also been obtained from HMRC under Section 701 ITA 2007 and Section 748 CTA 2010 that the main purpose, or one of the main purposes, of the Exchange is not to obtain an income tax or corporation tax advantage for UK individual or corporate stockholders, so that the transactions in securities rules should not apply to recharacterize the Exchange into a taxable event from the perspective of such individuals or corporates.
In the event that the conditions of Section 135 TCGA 1992 are not met, the Exchange is a chargeable event under the provisions of the CGT legislation. Each UK stockholder of
F-star
share capital will generally recognize a chargeable gain or loss on the receipt of shares of Spring Bank common stock issued to such holder of
F-star
share capital.
Risk Factors
(see page 33)
Both Spring Bank and
F-star
are subject to various risks associated with their businesses and their industries. In addition, the Exchange poses a number of risks to each company and its respective stockholders, including the possibility that the Exchange may not be completed and the following risks:
 
   
The issuance of Spring Bank common stock to holders of
F-star
share capital pursuant to the Exchange Agreement and the resulting change in control from the Exchange must be approved by Spring Bank stockholders. Failure to obtain these approvals or meet other conditions set forth in the Exchange Agreement would prevent the Closing of the Exchange.
 
   
The Exchange Ratio may be adjusted depending on Spring Bank’s net cash at Closing, the timing of Closing and the amount of gross proceeds received in the
Pre-Closing
Financing such that the Spring Bank securityholders and
F-star
securityholders may own more or less of the combined company that presented in this proxy statement/prospectus.
 
   
The Exchange Ratio set forth in the Exchange Agreement is not adjustable based on the market price of Spring Bank common stock, so the Exchange consideration at the Closing may have a greater or lesser value than at the time the Exchange Agreement was signed.
 
   
Failure to complete the Exchange may result in either Spring Bank or
F-star
paying a termination fee to the other party and could significantly harm the market price of Spring Bank common stock and negatively affect the future business and operations of each company.
 
   
The Exchange may be completed even though certain events occur prior to the Closing that materially and adversely affect Spring Bank or
F-star.
 
   
Some Spring Bank and
F-star
officers and directors have interests in the Exchange that are different from the respective stockholders of Spring Bank and
F-star
and that may influence them to support or approve the Exchange without regard to the interests of the respective Spring Bank stockholders or holders of F-star share capital.
 
   
The market price of Spring Bank common stock following the Exchange may decline as a result of the Exchange.
 
   
Spring Bank stockholders may not receive any payment on the CVRs and the CVRs may otherwise expire valueless.
 
   
The Spring Bank stockholders and holders of F-star share capital may not realize a benefit from the Exchange commensurate with the ownership dilution they will experience in connection with the Exchange.
 
   
During the pendency of the Exchange, Spring Bank and
F-star
may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Exchange Agreement, which could adversely affect their respective businesses.
 
 
 
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Certain provisions of the Exchange Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Exchange Agreement.
These risks and other risks are discussed in greater detail under the section titled “
Risk Factors
” in this proxy statement/prospectus. Spring Bank and
F-star
both encourage you to read and consider all of these risks carefully.
Regulatory Approvals
(see page 165)
In the United States, Spring Bank must comply with applicable federal and state securities laws and the rules and regulations of Nasdaq in connection with the issuance of shares of Spring Bank common stock and the filing of this proxy statement/prospectus with the SEC.
Nasdaq Capital Market Listing
(see page 170)
Spring Bank intends to file an initial listing application with the Nasdaq Capital Market pursuant to Nasdaq’s rules for companies conducting a business combination that results in a change of control. If this application is accepted, Spring Bank anticipates that shares of Spring Bank common stock will be listed on the Nasdaq Capital Market following the Closing under Spring Bank’s new name,
“F-star
Therapeutics, Inc.,” with the trading symbol “FSTX”.
Anticipated Accounting Treatment
(see page 170)
The Exchange will be recorded as a business combination using the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, “Business Combinations.” Accounting principles generally accepted in the United States (“U.S. GAAP”) require that one of the two companies in a business combination be designated as the acquirer for accounting purposes based on evidence available.
F-star
will be treated as the acquiring entity for accounting purposes. In identifying
F-star
as the acquiring entity for accounting purposes,
F-star
and Spring Bank took into account factors including, but not limited to, the anticipated voting rights of all equity instruments following the Exchange, the intended corporate governance structure of the combined company, composition of senior management, and the relative size of each of the companies. No single factor was the sole determinant in the overall conclusion that
F-star
has been designated as the acquirer for accounting purposes; rather, all factors were considered in arriving at this conclusion.
Management of
F-star
and Spring Bank have determined a preliminary estimate of the purchase price calculated as described in Note 2 to the unaudited pro forma condensed combined financial statements included in this proxy statement/prospectus. The net tangible assets acquired and liabilities assumed of Spring Bank in connection with the Exchange are recorded at their estimated acquisition date fair values. The acquisition method of accounting is dependent upon certain valuations and any other studies and calculations deemed necessary that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. A final determination of these estimated fair values, which cannot be made prior to the completion of the transaction, will be based on the actual net tangible assets of Spring Bank that exist as of the date of completion of the Exchange.
Appraisal Rights and Dissenters
Rights
(see page 171)
Under the Delaware General Corporation Law (“DGCL”), the stockholders of Spring Bank do not have appraisal rights in connection with the issuance of shares of Spring Bank common stock pursuant to the Exchange Agreement and the resulting change of control of Spring Bank.
F-star
shareholders generally do not have appraisal rights under English law.
 
 
 
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Table of Contents
Comparison of Rights
of Holders
(see page 365)
Spring Bank is incorporated under the laws of the State of Delaware, and the rights of stockholders of Spring Bank are currently, and will continue to be, governed by the DGCL. The internal affairs of Spring Bank are currently, and will continue to be, governed by Spring Bank’s amended and restated certificate of incorporation and bylaws.
F-star
is registered in England and Wales, and the rights of
F-star
shareholders are currently governed by the Companies Act 2006. The internal affairs of
F-star
are currently governed by
F-star’s
articles of association and the shareholders’ agreement between
F-star
and its shareholders.
After the Closing,
F-star
shareholders will become stockholders of Spring Bank. Due to the differences between the governing laws and documents of
F-star
and Spring Bank, the Exchange will result in
F-star
shareholders having different rights once they become Spring Bank stockholders.
 
 
 
23

Table of Contents
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA
The following tables present summary historical financial data for Spring Bank and
F-star,
summary unaudited pro forma condensed financial data for Spring Bank and
F-star,
and comparative historical and unaudited pro forma per share data for Spring Bank and
F-star.
Selected Historical Financial Data of Spring Bank
Not required for smaller reporting companies.
Selected Historical Financial Data of
F-star
F-star
Therapeutics Limited
(“F-star”)
acquired
F-star
Delta Limited
(“F-star
Delta”),
F-star
Beta Limited
(“F-star
Beta”),
f-star
Biotechnologische Forschungs-und Entwicklungsges, m.b.H.
(“F-star
GmbH”), and
F-star
Alpha Limited
(“F-star
Alpha”), (collectively, the
“F-star
Group Entities”) on May 7, 2019.
F-star
Beta and
F-star
GmbH, are deemed to be predecessor entities (the “Predecessor Group” or together with
F-Star,
the “Entities”), as described in the
F-star
Management’s Discussion and Analysis of Financial Condition and Results of Operations section included elsewhere in this proxy statement/ prospectus. Accordingly, the selected historical financial data as of and for the years ended December 31, 2019, 2018 and 2017 for
F-star
and for the period ended May 6, 2019, and the years ended December 31, 2018 and 2017 for
F-star
GmbH and
F-star
Beta are set forth below. Historical financial statements of
F-star
reflect the results of operations and historical financial position and financial performance of
F-star
Delta only, as the accounting acquirer, for the years ended December 31, 2018 and 2017.
F-star,
the legal acquirer of the
F-star
Group Entities, is an entity with no historical operations and was created solely for the purpose of effecting the corporate reorganization. For accounting purposes,
F-star
is not deemed substantive and not deemed the accounting acquirer.
F-star
Delta’s financial information is included for the full year ended December 31, 2019 within the consolidated
F-star
financial statements and hence no separate financial information is presented for
F-star
Delta in the period to May 6, 2019. The selected historical financial data as of and for the period ended May 6, 2019 and the years ended December 31, 2019, 2018 and 2017 has been derived from the audited historical financial statements of the Entities, which are included elsewhere in this proxy statement/prospectus (see table below).
F-star
prepares its financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.
The historical financial data for the years ended December 31, 2018 and 2017 has been restated for
F-star
(F-star
Delta, the accounting acquirer). See Note 4.9 of the
F-star
audited consolidated financial statements for the year ended December 31, 2019. Following a management review of the presentation of the statement of (loss)/income for the current reporting period, it was determined that a “by function” presentation would provide more reliable and relevant information to the users of
F-star
and
F-star
Beta financial statements. See Note 2.1 to audited financial statements of
F-star
and Note 2.1 to the audited financial statements of
F-star
Beta.
The historical results of the Entities are not necessarily indicative of future performance. You should read the information in this section in conjunction with “Unaudited Pro Forma Condensed Combined Financial Statements,” and
F-star
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the historical financial statements of the Entities that are included elsewhere in this proxy statement/ prospectus.
F-star’s
IFRS historical financial statements and information are not comparable to Spring Bank’s U.S. GAAP historical financial statements and information included in this proxy statement/ prospectus. Furthermore, because the financial statements of
F-star
and
F-star
Beta are presented in pounds sterling and the financial statements of
F-star
GmbH are presented in euro and not in U.S. dollars, they are not directly comparable to Spring Bank’s financial statements and financial information included in this proxy statement/ prospectus.
 
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Entities Included in the
F-star
Consolidated Financial Statements
 
    
Six Months Ended June 30,
  
Years Ended December 31,
Entities
  
2020
  
2019
  
2019
  
2018
  
2017
F-star Delta
   Full 6
months
   Full 6 months    Full Year    Full Year    Full Year
F-star
   Full 6
months
   May 7, 2019 to June 30, 2019    May 7, 2019 to December 31, 2019      
F-star GmbH
   Full 6
months
   May 7, 2019 to June 30, 2019    May 7, 2019 to December 31, 2019      
F-star Beta
   Full 6
months
   May 7, 2019 to June 30, 2019    May 7, 2019 to December 31, 2019      
F-star Alpha
   Full 6
months
   May 7, 2019 to June 30, 2019    May 7, 2019 to December 31, 2019      
The financial results of
F-star
Alpha,
F-star
Beta and
F-star
GmbH are consolidated from and as a result of the reorganization on May 7, 2019, with
F-star
Delta as the accounting acquirer.
 
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F-star
Therapeutics Limited
(“F-star”)
(all amounts are presented in GBP)
Unaudited Condensed Consolidated Statement of Comprehensive Loss
 
    
6 months ended June 30,
 
    
2020
    
2019
    
Change
 
    
(in thousands)
 
Revenue
   £ 1,537      £ 20,154        (£18,616)  
Costs related to collaborative arrangements
     (333      (17,437      17,104  
Research and development costs
     (7,423      (9,575      2,152  
General and administrative expenses
     (4,960      (3,764      (1,196
Other income
     371        —          371  
Other expenses
     (1,282      (243      (1,040
  
 
 
    
 
 
    
 
 
 
Loss from operations
  
 
(12,090
  
 
(10,865
  
 
(1,225
Fair value losses on financial liabilities at fair value through profit or loss (FVTPL)
     (1,509      —          (1,509
Finance income
     8        1        7  
Finance costs
     (438      —          (438
  
 
 
    
 
 
    
 
 
 
Loss before tax from continuing operations
  
 
(14,028
  
 
(10,864
  
 
(3,164
Income tax credit
     2,692        756        1,936  
  
 
 
    
 
 
    
 
 
 
Loss for the year attributable to equity holders of the parent
  
 
(£11,336
  
 
(£10,108
  
 
(£1,228
Basic and diluted loss per share
     (£0.64      (£0.86    £ 0.22  
 
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Consolidated Statements of Comprehensive Income
 
    
Year ended December 31,
 
    
(in thousands, except per share data)
 
          
(Restated)
   
(Restated)
 
    
2019
   
2018
   
2017
 
Revenue
   £ 21,882     £ 29,997     £ 11,027  
Costs related to collaborative arrangements
     (17,960     (13,892     (6,346
Research & development expense
     (32,673     —         —    
General & administrative expense
     (12,295     (399     (616
Other income
     113       —         —    
Other gains
     310       195       71  
  
 
 
   
 
 
   
 
 
 
(Loss)/ profit from operations
  
 
(40,622
 
 
15,900
 
 
 
4,136
 
Fair value losses on financial liabilities at fair value through profit or loss (FVTPL)
     (1,106     —         —    
Finance income
     8       4       —    
Finance costs
     (256     —         —    
  
 
 
   
 
 
   
 
 
 
(Loss)/ profit before tax from continuing operations
  
 
(41,976
 
 
15,905
 
 
 
4,136
 
  
 
 
   
 
 
   
 
 
 
Income tax credit/(charge)
     7,016       (2,636     (657
  
 
 
   
 
 
   
 
 
 
(Loss)/ profit for the year attributable to equity holders of the parent
  
 
(34,959
 
 
13,269
 
 
 
3,479
 
  
 
 
   
 
 
   
 
 
 
Items that may be reclassified to profit or loss in subsequent periods:
      
Foreign exchange arising on consolidation
     77       —         —    
  
 
 
   
 
 
   
 
 
 
Other comprehensive income for the period
  
 
77
 
 
 
—  
 
 
 
—  
 
  
 
 
   
 
 
   
 
 
 
Total comprehensive (loss)/ income attributable to owners of the parent
  
 
(£34,882
 
£
13,269
 
 
£
3,479
 
(Loss)/earnings per share for profit attributable to the shareholders of the parent:
      
(Loss)/earnings per share
     (£ 2.37   £ 1.47     £ 0.38  
(Loss)/earnings per share, after dilution
     (£ 2.37   £ 1.47     £ 0.38  
The historical financial statements of
F-star
reflect the results of operations and historical financial position and financial performance of
F-star
Delta only, as the accounting acquirer, for the years ended December 31, 2018 and 2017.
Selected Statements of Financial Position Data
 
    
As of December 31,
 
    
(in thousands)
 
          
(Restated)
    
(Restated)
 
    
2019
   
2018
    
2017
 
Cash and cash equivalents
   £ 3,736     £ 6,458      £ 3,780  
Total assets
     53,102       24,979        13,964  
Total liabilities
     24,570       9,118        10,485  
Issued capital
     178               
(Accumulated losses)/ retained earnings
     (16,908     15,861        3,479  
Total equity
   £ 28,532     £ 15,861      £ 3,479  
 
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Selected Statement of Cash Flows Data
 
    
As of December 31,
 
    
(in thousands)
 
    
2019
   
2018
   
2017
 
Net cash (used in)/ generated from operating activities
     (£16,557   £ 12,298     £ 13,627  
Net cash generated from/ (used in) investing activities
     4,105       (9,620     (9,846
Net cash generated from financing activities
   £ 9,733       £—       £—  
 
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Table of Contents
f-star
Biotechnologische Forschungs-und Entwicklungsges, M.B.H.
(“F-star
GmbH”) (Predecessor)
(All amounts presented in EUR)
Consolidated Statements of Comprehensive Income
 
    
Period Ended
May 6,
   
Year Ended
December 31,
 
    
(in thousands, except per share data)
 
    
2019
   
2018
   
2017
 
Revenue
   9,058     21,088     15,749  
Other income
     591       505       232  
Raw materials and consumables used
     (1,339     (3,960     (2,958
Depreciation, amortization and loss on disposal
     (454     (835     (559
Employee expenses
     (3,369     (7,995     (6,853
Other expenses
     (3,087     (7,429     (5,613
  
 
 
   
 
 
   
 
 
 
Operating profit/ (loss)
     1,399       1,375       (3
Finance income
     125       164       116  
Finance costs
     (109     (223     (201
  
 
 
   
 
 
   
 
 
 
Net finance income/ (costs)
     16       (60     (85
  
 
 
   
 
 
   
 
 
 
Profit/(loss) before tax on ordinary activities
     1,415       1,315       (88
Income tax (charge)/ credit
     (49     195       225  
  
 
 
   
 
 
   
 
 
 
Profit for the period
     1,366       1,510       137  
  
 
 
   
 
 
   
 
 
 
Earnings per share
     €2.26       €2.50       €0.23  
Earnings per share, after dilution
     €2.15       €2.50       €0.23  
Selected Consolidated Statements of Financial Position Data
 
    
As of
May 6,
   
As of December 31,
 
    
(in thousands)
 
    
2019
   
2018
   
2017
 
Cash and cash equivalents
   849     2,053     3,133  
Total assets
     19,949       18,543       13,598  
Total liabilities
     20,518       20,019       9,696  
Share capital—ordinary
     605       605       605  
Accumulated losses
     (32,533     (33,836     (28,328
Total shareholders’ (deficit)/ equity
     (€569     (€1,477     €3,902  
Selected Consolidated Statements of Cash Flows Data
 
    
Period Ended
May 6,
   
Year Ended
December 31,
 
    
(in thousands)
 
    
2019
   
2018
   
2017
 
Net cash flows (used in) / generated from operating activities
     (€2,253   6,680       (€273
Net cash flows generated from/ (used in) investing activities
     127       (7,518     (4,217
Net cash flows generated from/ (used in) financing activities
     €845       (€217     €2,079  
 
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F-star
Beta Limited
(“F-star
Beta”) (Predecessor)
(All amounts presented in GBP)
Statements of Comprehensive Income
 
    
Period Ended
May 6,
   
Year Ended
December 31,
 
    
(in thousands, except per share data)
 
    
2019
   
2018
   
2017
 
Revenue
   £ 7,903     £ 17,394     £ 14,993  
Costs related to collaborative arrangements
     (1,864     (6,719     (3,289
Research and development costs
     (5,106     (12,049     (11,933
General and administrative expenses
     (909     (345     (352
Other gains
     —         1       165  
Other expenses
     (58     (20     —    
  
 
 
   
 
 
   
 
 
 
Loss on operations
  
 
(34
 
 
(1,738
 
 
(414
Finance costs
     (103     (145     (102
  
 
 
   
 
 
   
 
 
 
Loss before tax on continuing operation
  
 
(137
 
 
(1,883
 
 
(516
Corporation tax benefit
     639       2,416       705  
  
 
 
   
 
 
   
 
 
 
Profit for the year and total comprehensive income attributable to the equity holders of the parent
  
 
£502
 
 
 
£533
 
 
 
£189
 
  
 
 
   
 
 
   
 
 
 
Earnings per share
     £0.05       £0.06       £0.02  
Earnings per share, after dilution
     £0.05       £0.06       £0.02  
Selected Statements of Financial Position Data
 
    
As of
May 6,
   
As of December 31,
 
    
(in thousands)
 
    
2019
   
2018
   
2017
 
Cash and cash equivalents
   £ 915     £ 5,709     £ 1,910  
Total assets
     5,727       9,408       5,030  
Total liabilities
     13,704       18,575       5,421  
Issued capital
     —         —         —    
Accumulated losses
     (7,977     (9,167     (391
Total equity
     (£7,977     (£9,167     (£391
Selected Statement of Cash Flows Data
 
    
Period Ended
May 6,
   
Year Ended
December 31,
 
    
(in thousands)
 
    
2019
   
2018
   
2017
 
Net cash (used in)/ generated from operating activities
     (£4,621     £242       (£2,959
Net cash used in investing activities
     (50     (2,424     —    
Net cash (used in)/ generated from financing activities
     (£123   £ 5,981     £ 2,667  
 
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Comparative Historical and Unaudited Pro Forma Per Share Data
The following information does not give effect to the proposed reverse stock split described in Proposal No. 2 of this proxy statement/prospectus.
The information below reflects the historical net loss and book value per share of Spring Bank common stock and the historical net loss and book value per share of
F-star
common and preferred shares in comparison with the unaudited pro forma net loss and book value per share after giving effect to the Exchange on a pro forma basis. The pro forma amounts are presented for illustrative purposes only and are not necessarily indicative of what the financial position, results of operations or per share information of the company would have been if Spring Bank and
F-star
had effected the Exchange as of or for the periods presented.
You should read the information below in conjunction with the audited and unaudited consolidated financial statements of each of Spring Bank and
F-star
included in this proxy statement/prospectus and the related notes and the unaudited pro forma condensed combined financial information and notes related to such financial statements included elsewhere in this proxy statement/prospectus.
 
    
Six Months
Ended
June 30,
2020
   
Year Ended
December 31,
2019
 
Spring Bank Historical Per Common Share Data:
    
Basic and diluted net loss per share
   $ (0.88   $ (1.46
Book value per share
   $ 1.35     $ 2.15  
F-star
Historical Per Common Share Data:
    
Basic and diluted net loss per share
   £ (0.64   £ (2.37
Book value per share
   £ 1.15     £ 2.08  
F-star
and Spring Bank Combined Unaudited Pro Forma Data:
    
Basic and diluted net loss per share
   $ (0.62   $ (1.32
Book value per share
   $ 1.36    
 
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MARKET PRICE AND DIVIDEND INFORMATION
Spring Bank common stock is listed on the Nasdaq Capital Market under the symbol “SBPH”.
F-star
is a private company and shares of
F-star
common stock and
F-star
preferred stock are not publicly traded. The closing price of Spring Bank common stock on July 29, 2020, the last trading day prior to the public announcement of the Exchange, was $2.08 per share, and the closing price of Spring Bank common stock was $     on                 , 2020, each as reported on the Nasdaq Capital Market. These closing sale prices are not necessarily indicative of the price at which the common stock of the combined company will trade after the Closing. Because the market price of Spring Bank common stock is subject to fluctuation, the market value of the shares of Spring Bank common stock that
F-star
shareholders will be entitled to receive in the Exchange may increase or decrease.
Assuming approval of Proposal Nos. 1, 2, and 3 and successful application for initial listing on the Nasdaq Capital Market, following the consummation of the Exchange, the Spring Bank common stock will be listed on the Nasdaq Capital Market and will trade under the symbol “FSTX”.
As of                 , 2020, the Record Date for the Special meeting, there were approximately                  holders of record of Spring Bank common stock. As of                 , 2020,
F-star
had                  holders of record of
F-star
common stock and                  holders of record of
F-star
preferred stock. For detailed information regarding the beneficial ownership of certain Spring Bank stockholders upon consummation of the Exchange, see the section titled “
Principal Stockholders of the Combined Company
” in this proxy statement/prospectus.
Dividends
Spring Bank has never declared or paid any cash dividends on the Spring Bank common stock and does not anticipate paying cash dividends on the Spring Bank common stock for the foreseeable future.
Notwithstanding the foregoing, any determination to pay cash dividends subsequent to the Exchange will be at the discretion of the combined company’s then-current board of directors and will depend upon a number of factors, including the combined company’s results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors the then-current board of directors deems relevant.
 
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RISK FACTORS
The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus, you should carefully consider the material risks described below and those described in the section of this proxy statement/prospectus titled “Forward-Looking Statements” before deciding how to vote your shares of stock. In addition, you should read and consider the risks associated with the business of Spring Bank because these risks may also affect the combined company—these risks can be found in Spring Bank’s Annual Report on
Form 10-K, as
updated by subsequent Quarterly Reports on
Form 10-Q, all
of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. You should also read and consider the other information in this proxy statement/prospectus and the other documents incorporated by reference into this proxy statement/prospectus. See the section titled “Where You Can Find More Information” in this proxy statement/prospectus.
Risks Related to the Exchange
The Exchange Ratio set forth in the Exchange Agreement is not adjustable based on the market price of Spring Bank common stock, so the Exchange consideration at the Closing may have a greater or lesser value than at the time the Exchange Agreement was signed. As described in the Exchange Agreement, the Exchange Ratio may be adjusted depending on Spring Bank’s net cash at Closing, the timing of Closing, the amount of gross proceeds received in the
Pre-Closing
Financing and the
pre-money
valuation attributed to
F-star
in the
Pre-Closing
Financing such that the Spring Bank security holders and
F-star
securityholders may own more or less of the combined company that presented in this proxy statement/prospectus.
At the Closing, the issued and outstanding share capital of
F-star
will be sold to Spring Bank in exchange for shares of Spring Bank common stock based on the Exchange Ratio. The Exchange Ratio may be adjusted (i) to the extent that Spring Bank’s expected net cash as of Closing is less than $15.0 million or greater than $17.0 million, (ii) to the extent that
F-star
does not raise at least $25.0 million in the
Pre-Closing
Financing at a
pre-money
valuation of at least $35.0 million, and (iii) to account for the actual proceeds raised in the
Pre-Closing
Financing. As of                 , 2020,
F-star
had received commitments from investors to purchase $     million of ordinary shares of
F-star
in the
Pre-Closing
Financing. Should the Closing occur after September 30, 2020, the $15.0 million and $17.0 million thresholds will each be reduced by $250,000 on October 30, 2020 and on the last day of each
30-day
period thereafter until the Closing occurs. These and other adjustments to the Exchange Ratio are described further in this proxy statement/prospectus under the section titled
“The Exchange Agreement – Transaction Consideration and Adjustment”
and the Exchange Agreement. Immediately following the Closing and assuming an Exchange Ratio of 0.5338 (which assumes both that Spring Bank’s valuation will not be adjusted as a result of its expected net cash at Closing and that
F-star
raises $25.0 million in the
Pre-Closing
Financing at a
pre-money
valuation of at least $35.0 million), the Spring Bank’s securityholders and the holders of
F-star’s
share capital are expected to own approximately 38.8% and 61.2%, respectively, of the outstanding capital stock of the combined company. However, the Exchange Ratio will be adjusted based on the amount of Spring Bank net cash at Closing, the timing of Closing, the actual ratio of the Reverse Stock Split, amounts raised in the
Pre-Closing
Financing and as further set forth in the Exchange Agreement. The final Exchange Ratio may vary from the estimated Exchange Ratio presented in this proxy statement/information such that the holders of
F-star
share capital and Spring Bank securityholders may own more or less of the combined company than estimated in this proxy statement/information statement.
For purposes of the Exchange Agreement, Spring Bank’s net cash at closing is subject to certain reductions, including, without limitation, accounts payable, accrued expenses, current liabilities payable in cash, unpaid expenses related to the Exchange and certain other unpaid obligations, including outstanding lease obligations. In the event the amount of Spring Bank’s cash is smaller or such reductions are greater than anticipated, Spring Bank’s securityholders could hold a significantly smaller portion of the combined company.
 
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Any changes in the market price of Spring Bank common stock before the completion of the Exchange will not affect the number of shares of Spring Bank common stock issuable to the
F-star
securityholders pursuant to the Exchange Agreement. Therefore, if before the completion of the Exchange, the market price of Spring Bank common stock declines from the market price on the date of the Exchange Agreement, then the
F-star
securityholders could receive Exchange consideration with substantially lower value than the value of the Exchange consideration on the date of the Exchange Agreement. Similarly, if before the completion of the Exchange, the market price of Spring Bank common stock increases from the market price of Spring Bank common stock on the date of the Exchange Agreement, then
F-star’s
securityholders could receive Exchange consideration with substantially greater value than the value of the Exchange consideration on the date of the Exchange Agreement. Because the Exchange Ratio does not adjust as a result of changes in the market price of Spring Bank common stock, for each one percentage point change in the market price of Spring Bank common stock, there is a corresponding one percentage point rise or decline, respectively, in the value of the total Exchange consideration payable to the
F-star
securityholders pursuant to the Exchange Agreement.
F-star
may not obtain sufficient funding in the
Pre-Closing
Financing and may require additional financing.
Immediately following the Closing and assuming an Exchange Ratio of 0.5338, the Spring Bank securityholders and holders of
F-star’s
share capital (including all
F-star
shares issued in connection with the
F-star
Note Conversion, the
F-star
Share Conversion and
Pre-Closing
Financing) are expected to own approximately 38.8% and 61.2%, respectively, of the outstanding capital stock of the combined company. This percentage of ownership assumes that Spring Bank’s valuation will not be adjusted as a result of the expected net cash at Closing and that
F-star
raises $25.0 million in the
Pre-Closing
Financing.
F-star
expects to raise at least $25.0 million in the
Pre-Closing
Financing, but it cannot guarantee that it will be able to do so. In the event that
F-star
raises less than $25.0 million in the
Pre-Closing
Financing, the anticipated percentage of ownership of the combined company by holders of share capital of
F-star
may be less than presently estimated. If either or both of Spring Bank or
F-star
hold less cash at the time of the Closing than the parties currently expect, or
F-star
raises less in the
Pre-Closing
Financing than anticipated, the combined company will need to raise additional capital sooner than currentlyexpected to fund its planned operations.
Spring Bank stockholders may not receive any payment on the CVRs and the CVRs may otherwise expire valueless.
Pursuant to the Exchange Agreement and the CVR Agreements, each share of Spring Bank common stock held by Spring Bank stockholders as of a record date immediately prior to the Closing will receive a dividend of (i) one contingent value right entitling these holders to receive payments in connection with certain transactions involving Spring Bank’s proprietary STING agonist compound (the “STING Agonist CVR”), and (ii) one contingent value right entitling these holders to receive payments in connection with the execution of a potential development agreement and certain other transactions involving Spring Bank’s proprietary STING antagonist compound (the “STING Antagonist CVR” and, together with the STING Agonist CVR, the “CVRs”).
The right of Spring Bank stockholders to receive any future payment on or to derive any value from the CVRs will be contingent solely upon the achievement of the events specified in the CVR Agreements within the time periods specified in the CVR Agreements and the consideration received being greater than any amounts permitted to be retained or deducted by Spring Bank under the CVR Agreements. The combined company may not be able to successfully achieve the development of Spring Bank’s Agonist or Antagonist compounds in a manner or within a time period that would generate payment pursuant to the CVR Agreements. If these payment triggering events are not achieved for any reason within the time periods specified in the CVR Agreements or the consideration received for these events is not greater than the amounts permitted to be retained or deducted by Spring Bank, no payments will be made under the CVRs, and the CVRs will expire valueless.
Furthermore, the CVRs will be unsecured obligations of the combined company and all payments under the CVRs, all other obligations under the CVR Agreement and the CVRs and any rights or other related claims will
 
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be subordinated in right of payment to the prior payment in full of all current or future senior obligations of the combined company. Finally, the U.S. federal income tax treatment of the CVRs is unclear. There is no legal authority directly addressing the U.S. federal income tax treatment of the receipt of, and payments on, the CVRs, and there can be no assurance that the Internal Revenue Service would not assert, or that a court would not sustain, a position that could result in adverse U.S. federal income tax consequences to holders of the CVRs. Please review the information in the section titled “
Agreements Related to the Share Exchange—Material U.S.
Federal Income Tax Consequences of the Receipt of CVRs to U.S. Holders
” for a more complete description of the material U.S. federal income tax consequences of the receipt of, and payments on, the CVRs.
The U.S. federal income tax treatment of the CVRs is unclear.
The U.S. federal income tax treatment of the CVRs is subject to substantial uncertainty. There is no legal authority directly addressing the U.S. federal income tax treatment of the receipt of, and payments under, the CVRs, and there can be no assurance that the IRS would not assert, or that a court would not sustain, a position that could potentially result in adverse U.S. federal income tax consequences to holders of the CVRs.
In particular, as discussed in the section titled “
Agreements Related to the Exchange—Contingent Value Rights Agreements—Material U.S. Federal Income Tax Consequences of the CVRs to U.S. Holders
,” absent a change in law requiring otherwise, Spring Bank intends to take the position that the fair market value of the CVRs cannot be reasonably ascertained on the date of the issuance of the CVRs and, accordingly, the issuance of the CVRs constitutes an “open transaction”. Therefore, absent a change in law requiring otherwise, for U.S. federal income tax purposes, Spring Bank will not report the issuance of the CVRs as a current distribution of property with respect to its common stock and will instead report each future cash payment (if any) on the CVRs as a distribution with respect to Spring Bank’s common stock in the year in which such payment is made. It is possible that the IRS could assert that the issuance of the CVRs is not an “open transaction” and that the Spring Bank stockholders are treated as having received a distribution of property equal to the fair market value of the CVRs on the date the CVRs are distributed, which could be taxable to Spring Bank stockholders without the corresponding receipt of cash. In addition, it is possible that the IRS or a court could determine that the issuance of the CVRs (and/or any payments thereon) and the reverse stock split constitute a single “recapitalization” for U.S. federal income tax purposes with the CVRs constituting taxable “boot” received in such recapitalization exchange. In such case, the tax consequences of the CVRs and the Reverse Stock Split would differ from those described in this proxy statement/prospectus, including with respect to the timing and character of income.
Failure to complete the Exchange may result in either Spring Bank or
F-star
paying a termination fee to the other party and could significantly harm the market price of Spring Bank common stock and negatively affect the future business and operations of each company.
If the Exchange is not completed and the Exchange Agreement is terminated under certain circumstances, the terminating party may be required to pay the other party a termination fee of $2.0 million. In addition, under certain conditions, Spring Bank may be required to reimburse
F-star
for up to $750,000 of
F-star’s
out-of-pocket
expenses. Even if a termination fee or expenses of the other party are not payable in connection with a termination of the Exchange Agreement, each of Spring Bank and
F-star
have incurred significant fees and expenses, which must be paid whether or not the Exchange is completed. Further, if the Exchange is not completed, it could significantly harm the market price of Spring Bank common stock.
In addition, if the Exchange Agreement is terminated and the Spring Bank Board of Directors (the “Spring Bank Board”) or the
F-star
Board of Directors determines to seek another business combination or strategic transaction, there can be no assurance that either Spring Bank or
F-star
will be able to find a partner and close an alternative transaction on terms that are as favorable or more favorable than the terms set forth in the Exchange Agreement.
 
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The issuance of Spring Bank common stock in the Exchange pursuant to the Exchange Agreement, the resulting change in control from the Exchange, the Reverse Stock Split and the Spring Bank Name Change must be approved by Spring Bank stockholders. Failure to obtain these approvals and failure of any other closing conditions to the Exchange Agreement would prevent the Closing and Exchange.
Before the Exchange can be completed, the Spring Bank stockholders must approve the issuance of Spring Bank common stock in the Exchange. Failure to obtain the required stockholder approval may result in a material delay in, or the abandonment of, the Exchange. Even if these matters are approved by the Spring Bank stockholders, certain other specified conditions set forth in the Exchange Agreement must be satisfied or waived to complete the Exchange. Spring Bank and
F-star
cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Exchange will not occur or will be delayed, and Spring Bank or
F-star
each may lose some or all of the intended benefits of the Exchange. Any delay in completing the Exchange may materially adversely affect the timing and benefits that are expected to be achieved from the Exchange.
The Exchange may be completed even though certain events occur prior to the Closing that materially and adversely affect Spring Bank or
F-star.
The Exchange Agreement provides that either Spring Bank or
F-star
can refuse to complete the Exchange if there is a material adverse change affecting the other party between the date of the Exchange Agreement and the Closing. However, certain types of changes do not permit either party to refuse to complete the Exchange, even if this change could have a material adverse effect on Spring Bank or
F-star,
including:
 
   
general business or economic conditions affecting the industries in which Spring Bank or
F-star,
as applicable, operates and general conditions in financial markets to the extent these general conditions do not disproportionately affect Spring Bank and
F-star,
respectively;
 
   
with respect to Spring Bank, any change in its stock price or trading volume excluding any underlying effect that may have caused such change, unless this effect is otherwise exempt from causing a material adverse effect under the Exchange Agreement;
 
   
failure to meet internal or analysts’ expectations or projections for results of operations;
 
   
failure to meet expectations regarding, or changes in expectations regarding, clinical trial program or study progress and, subject to certain exceptions, the occurrence of adverse events or serious adverse events in a clinical trial program;
 
   
any effect resulting from the performance of obligations under the Exchange Agreement or the announcement of the Exchange or any related transactions;
 
   
natural disasters, acts of terrorism, sabotage, military action or war or any escalation or worsening of military actions or wars, or any viruses, pandemics, epidemic or other outbreaks of illness or public health events, or any spread or worsening of these events (including worsening of the
COVID-19
(as defined below) pandemic), or any other circumstance that may be considered a force majeure event;
 
   
certain changes in, or any compliance with or action taken for the purpose of complying with, applicable laws or generally accepted accounting principles in the United States (“U.S. GAAP”), International Financial Reporting Standards or related interpretations provided these matters do not disproportionately affect Spring Bank or
F-star,
respectively;
 
   
actions taken by Spring Bank as reasonably necessary to comply with the Exchange Agreement or as otherwise permitted by the Exchange Agreement;
 
   
a government authority’s rejection or
non-acceptance
of intellectual property filings and applications;
 
   
regulatory action or the announcement of regulatory action regarding potentially competitive products or product candidates; and
 
   
stockholder litigation arising from or relating to the Exchange Agreement or the Exchange.
 
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If adverse changes occur and Spring Bank and
F-star
still complete the Exchange, the market price of the combined company’s common stock may suffer. This in turn may reduce the value of the Exchange to the stockholders of Spring Bank,
F-star
or both.
Some Spring Bank and
F-star
officers and directors have interests in the Exchange that are different from the respective stockholders of Spring Bank and
F-star
and that may influence them to support or approve the Exchange without regard to the interests of the respective stockholders of Spring Bank or
F-star.
Certain officers and directors of Spring Bank and
F-star
participate in arrangements that provide them with interests in the Exchange that are different from the interests of the respective stockholders of Spring Bank and
F-star.
For example, certain members of the Spring Bank Board and executive officers of Spring Bank have interests in the Exchange that may be different from, or in addition to, the interests of the Spring Bank stockholders. These interests relate to or arise from, among other things, (i) severance payments to which certain of Spring Bank’s executive officers will be entitled following completion of the Exchange as a result of termination of employment under certain circumstances, (ii) the accelerated vesting of certain of the equity awards held by Spring Bank’s executive officers and directors in connection with the completion of the Exchange, and (iii) the fact that certain current directors of Spring Bank, will continue as directors of the combined company after the Closing, each of which could influence them to support the Exchange.
Spring Bank and
F-star
securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the Closing as compared to their current ownership and voting interest in the respective companies.
If the proposed Exchange is completed, the current securityholders of Spring Bank and
F-star
will own a smaller percentage of the combined company than their ownership in their respective companies prior to the Exchange. The issuance of shares of Spring Bank common stock to securityholders of
F-star
in the Exchange will reduce significantly the relative voting power of each share of Spring Bank common stock held by its current stockholders and will reduce the relative voting power of each share of
F-star
share capital held by current
F-star
securityholders. Consequently, Spring Bank stockholders as a group and the
F-star
securityholders as a group will have less influence over the management and policies of the combined company after the Exchange than prior to the Exchange.
In addition, the eight member board of directors of the combined company will initially include three individuals designated by Spring Bank and five individual designated by
F-star.
Consequently, securityholders of Spring Bank and F-star will be able to exercise less influence over the management and policies of the combined company following the Closing than they currently exercise over the management and policies of their respective companies.
Spring Bank stockholders and
F-star
securityholders may not realize a benefit from the Exchange commensurate with the ownership dilution they will experience in connection with the Exchange.
If the combined company is unable to realize the strategic and financial benefits currently anticipated from the Exchange, Spring Bank stockholders and
F-star
securityholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving the expected commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the expected strategic and financial benefits currently anticipated from the Exchange.
During the pendency of the Exchange, Spring Bank and
F-star
may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Exchange Agreement, which could adversely affect their respective businesses.
Subject to certain limited exceptions, covenants in the Exchange Agreement impede the ability of Spring Bank and
F-star
to make acquisitions or to complete other transactions that are not in the ordinary course of
 
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business pending completion of the Exchange. As a result, if the Exchange is not completed, the parties may be at a disadvantage to their competitors during this period. In addition, while the Exchange Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets, or other business combination outside the ordinary course of business with any third party, subject to certain exceptions relating to fiduciary duties. These transactions could be favorable to Spring Bank’s or
F-star’s
securityholders.
The pendency of the Exchange could have an adverse effect on the trading price of Spring Bank common stock and its business, financial condition and prospects.
The pendency of the Exchange could disrupt Spring Bank’s business in many ways, including:
 
   
the attention of its management and employees may be directed toward the completion of the Exchange and related matters and may be diverted from Spring Bank’s
day-to-day
business operations; and
 
   
third parties may seek to terminate or renegotiate their relationships with Spring Bank as a result of the Exchange, whether pursuant to the terms of their existing agreements with Spring Bank or otherwise.
Should they occur, any of these matters could adversely affect the trading price of Spring Bank common stock or harm Spring Bank’s business, financial condition and prospects.
The lack of a public market for
F-
star shares makes it difficult to evaluate the value of
F-star
share capital. The
F-star
securityholders may receive shares of Spring Bank common stock in the Exchange that have a value that is less than, or greater than, the fair market value of the
F-star
share capital.
The outstanding share capital of
F-star
is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of
F-star.
Because the percentage of Spring Bank common stock to be issued to
F-star
securityholders was determined based on negotiations between the parties, it is possible that the value of Spring Bank common stock to be received by
F-star
securityholders will be less than the fair market value of
F-star,
or Spring Bank may pay more than the aggregate fair market value for
F-star.
Spring Bank is substantially dependent on its employees to facilitate the consummation of the Exchange.
Spring Bank’s ability to successfully complete the Exchange depends in large part on its ability to retain certain personnel. Despite Spring Bank’s efforts to retain these employees, one or more may terminate their employment with Spring Bank on short notice. The loss of the services of certain employees could potentially harm Spring Bank’s ability to consummate the Exchange, to run its
day-to-day
business operations, as well as to fulfill its reporting obligations as a public company.
Litigation relating to the Exchange could require Spring Bank or
F-star
to incur significant costs and suffer management distraction, and could delay or enjoin the Exchange.
Spring Bank and
F-star
could be subject to demands or litigation related to the Exchange, whether or not the Exchange is consummated. Such actions may create uncertainty relating to the Exchange, or delay or enjoin the Exchange, result in substantial costs to Spring Bank or
F-star
and divert management time and resources.
Risks Related to the Proposed Reverse Stock Split
The proposed Reverse Stock Split may not increase the combined company’s stock price over the long-term.
One of the purposes of the proposed Reverse Stock Split is to increase the
per-share
market price of the Spring Bank common stock. It cannot be assured, however, that the proposed Reverse Stock Split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of Spring Bank common stock will proportionally increase the market price of Spring Bank common stock, it cannot be assured that the proposed Reverse Stock Split will increase the market
 
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price of Spring Bank common stock by a multiple of the proposed Reverse Stock Split ratio, or result in any permanent or sustained increase in the market price of Spring Bank common stock, which is dependent upon many factors, including the combined company’s business and financial performance, general market conditions and prospects for future success. Thus, while the stock price of the combined company might meet the listing requirements for the Nasdaq Capital Market initially, it cannot be assured that it will continue to do so.
The proposed Reverse Stock Split may decrease the liquidity of the combined company’s common stock.
The liquidity of the combined company’s common stock could be adversely affected by the reduced number of shares outstanding after the proposed Reverse Stock Split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for Spring Bank common stock.
The proposed Reverse Stock Split may lead to a decrease in the combined company’s overall market capitalization.
Should the market price of the combined company’s common stock decline after the proposed Reverse Stock Split, the percentage decline may be greater, due to the lesser number of shares outstanding, than it would have been prior to the proposed Reverse Stock Split. A reverse stock split may be viewed negatively by the market and, consequently, can lead to a decrease in the combined company’s overall market capitalization. If the per share market price does not increase in proportion to the proposed Reverse Stock Split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the
per-share
stock price of companies that have effected reverse stock splits subsequently declined back to
pre-reverse
split levels, and accordingly, it cannot be assured that the total market value of Spring Bank common stock will remain the same after the proposed Reverse Stock Split is effected, or that the proposed Reverse Stock Split will not have an adverse effect on the stock price of Spring Bank common stock due to the reduced number of shares outstanding after the proposed Reverse Stock Split.
Risks Related to the Combined Company
The market price of the combined company’s common stock following the Exchange may decline as a result of the Exchange.
The market price of the combined company’s common stock may decline as a result of the Exchange for a number of reasons, including if:
 
   
investors react negatively to the Exchange, Spring Bank’s reasons for the Exchange or the prospects of the combined company’s product candidates, business and financial condition following the Exchange;
 
   
the effect of the Exchange on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts; or
 
   
the combined company does not achieve the perceived benefits of the Exchange as rapidly or to the extent anticipated by financial or industry analysts.
 
The combined company’s stock price is expected to be volatile, and the market price of its common stock may drop following the Exchange.
The market price of the combined company’s common stock following the Exchange could be subject to significant fluctuations following the Exchange. Market prices for securities of early-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of the combined company’s common stock to fluctuate include:
 
   
any delay in the commencement, enrollment and ultimate completion of clinical trials;
 
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results of clinical trials of existing and future product candidates, or those of the combined company’s competitors;
 
   
variations in the combined company’s financial results or those of companies that are perceived to be similar to the combined company;
 
   
regulatory or legal developments in the United States or other countries;