Business Context and Reporting Period
Company: pSivida Corp. (Note: Request metadata listed "Eyepoint, Inc.", but the filing text identifies the registrant as pSivida Corp.)
Filing Type: Form 8-K (Current Report)
Date of Report: March 28, 2018
Reporting Period: Events occurring on the Closing Date of March 28, 2018.
On March 28, 2018, pSivida Corp. consummated a series of material transactions including equity financings, a debt financing, and the acquisition of Icon Bioscience, Inc. The company also announced its delisting from the Australian Securities Exchange (ASX) to trade solely on the Nasdaq Global Market.
Key Financial Metrics and Capital Structure
Equity Financings
- First Tranche: Sold 8,606,324 shares of common stock at $1.10 per share.
- Gross Proceeds: Approximately $9.5 million.
- Use of Proceeds: Working capital and funding product launches (including Icon Acquisition assets).
- Second Tranche (Pending Stockholder Approval): Agreement to sell approximately $25.5 million of units (one share + one warrant).
- Purchase Price: Lower of $1.265 or 20% discount to 20-day VWAP (floor $0.88).
- Warrant Exercise Price: Lower of $1.43 or 20% discount to 20-day VWAP (floor $0.88).
- Warrant Expiration: Until 15 business days after Medicare announces a new C-Code for the Lead Product.
Debt Financing
- Facility: Senior secured term loan of up to $20 million.
- Initial Advance: $15 million funded on Closing Date.
- Additional Advance: Up to $5 million available by December 31, 2018, subject to a "Minimum Capital Raise" of $20 million in net cash proceeds.
- Interest Rate: 3-month LIBOR (1.5% floor) + 10.50%.
- Maturity: March 28, 2023.
- Fees: 1.5% upfront fee; 6% exit fee.
- Repayment: Interest-only for first 8 quarterly payments; thereafter, quarterly principal repayments capped at $1.25 million, based on a percentage of net revenue.
- Collateral: Pledge of substantially all assets of the Company and Guarantors.
Acquisition (Icon Bioscience, Inc.)
- Closing Payment: $15.0 million cash paid to former Icon securityholders.
- Contingent Consideration:
- $15.0 million upon first commercial sale of Dexycu (Lead Product) in the U.S.
- Up to $95.0 million in sales milestone payments.
- Quarterly earn-outs: 12% of net sales (increasing to 16% if annual consideration exceeds $200 million).
- 20% of partnering revenue outside the U.S.
- Escrow: $1.5 million deposited to secure indemnification obligations.
Material Changes and Governance
- Board Composition: Board size increased to eight members. Ronald W. Eastman (representing First Tranche Investors) appointed as a new director. James Barry resigned effective upon ASX delisting.
- Listing Status: Company requested delisting from the ASX; shares will trade solely on Nasdaq.
- Financial Covenants:
- Maintain at least $4 million in "Consolidated Unencumbered Liquid Assets" (increases to $24 million if Minimum Capital Raise is not met by Feb 15, 2019).
- Beginning Q1 2019: Maintain minimum aggregate revenue and EBITDA at 75% of projected amounts.
Outlook, Risks, and Contingencies
- Use of Proceeds: Funds from equity and debt financings are designated for working capital and funding the launch of products, specifically those acquired from Icon Bioscience.
- Regulatory Risk: Warrant exercise in the Second Tranche is contingent on Medicare establishing a new C-Code for the Lead Product.
- Capital Raise Requirement: Failure to raise $20 million in net cash proceeds by February 15, 2019, triggers stricter liquidity covenants ($24 million minimum).
- Forward-Looking Statements: The filing contains forward-looking statements regarding the benefits of the financings and acquisition, subject to risks detailed in the company's 10-K and 10-Q filings.
Investor Verification Checklist
- Verify the status of the Second Tranche equity offering and whether stockholder approval has been obtained.
- Confirm the timeline for the "Minimum Capital Raise" of $20 million to avoid stricter liquidity covenants.
- Monitor the Medicare C-Code announcement for the Lead Product (Dexycu), which triggers warrant exercisability.
- Review the upcoming pro forma financial information and Icon Bioscience financial statements, expected to be filed by June 13, 2018.
- Assess the impact of the $15 million initial debt advance and associated interest costs on future cash flow.