Business Context and Reporting Period
This Form 8-K Current Report was filed by Imprimis Pharmaceuticals, Inc. on July 20, 2017, covering events occurring on July 17 and July 19, 2017. The filing details a significant refinancing of debt, the termination of a prior loan agreement, the disposition of a specific business segment, and the issuance of unregistered equity securities.
Key Financial Metrics and Transactions
- New Debt Financing: Entered into a term loan agreement with SWK Funding LLC for a principal amount of $16,000,000.
- Debt Refinancing: Used proceeds from the new loan to fully pay off an existing loan to Life Sciences Alternative Funding, LLC (LSAF) with a principal balance of $12,120,310, plus applicable exit and prepayment fees.
- Asset Disposition: Sold substantially all assets of its sinus-related business for a total sales price of approximately $450,000.
- Equity Issuance: Issued warrants to the new lender to purchase up to 415,586 shares of common stock at an exercise price of $3.08 per share.
- Interest Rate: The new loan bears interest at a variable rate of 3-month LIBOR (floored at 1.50% and capped at 3.00%) plus a 10.50% margin.
Material Changes Versus Prior Period
The company has materially altered its capital structure by replacing a $12.1 million obligation with a larger $16 million facility, extending the maturity date to July 2022 (subject to reduction to 2021 based on revenue performance). Additionally, the company has exited its sinus-related business line, divesting associated intellectual property, inventory, and lease obligations for a net cash inflow of $40,000 initially, with the remainder structured as a seller's note.
Guidance, Outlook, Risks, and Unusual Items
- Revenue Covenants: The loan term and prepayment options are contingent on meeting certain minimum revenue requirements. Failure to meet these could shorten the loan term to four years and alter prepayment penalties.
- Collateral: The new loan is secured by substantially all personal property, rights, and assets of the company and its subsidiaries, including intellectual property and equity ownership.
- Covenants: The agreement includes negative covenants restricting additional indebtedness, mergers, asset dispositions, and dividend payments without lender consent.
- Asset Sale Contingency: The final value of the asset sale may be reduced by $125,000 if revenues associated with the sold assets fall below 60% of pre-closing levels within 60 days.
- Unregistered Securities: The warrants were issued under Section 4(a)(2) of the Securities Act of 1933 and are restricted securities.
Investor Verification Checklist
- Verify the specific revenue thresholds required to maintain the five-year loan term and avoid early maturity.
- Confirm the status of the $410,000 seller's note from the asset sale and whether the revenue contingency for the $125,000 reduction has been triggered.
- Review the full text of the Loan and Security Agreement (Exhibit 10.1) for detailed definitions of "material adverse change" and other events of default.
- Assess the impact of the 10.50% margin plus LIBOR on future interest expense compared to the prior LSAF loan terms.
- Monitor the company's ability to meet quarterly principal and interest payments, noting the $750,000 quarterly cap on principal repayments.