Business Context and Reporting Period
This Form 8-K Current Report was filed by Inmune Bio, Inc. (INMB) on June 15, 2021, covering events that occurred on June 10, 2021. The filing details a material restructuring of the company's relationship with Xencor, Inc., the termination of prior definitive agreements, and the execution of a new debt facility with Silicon Valley Bank.
Key Financial Metrics and Transactions
- Debt Financing: Entered into a Loan and Security Agreement with Silicon Valley Bank (SVB) and SVB Innovation Credit Fund VIII, L.P. for an initial term loan of $15,000,000, with an option for an additional $5,000,000 advance.
- Loan Terms: Interest accrues at the greater of 7.75% or Prime Rate plus a margin. A 6.50% premium on the advanced amount is due upon termination or maturity. Maturity date is January 1, 2025.
- Repayment Schedule: 30 consecutive equal monthly installments of principal plus interest, or 18 installments if an "Equity Event" is achieved.
- Equity Issuance: Issued 192,533 shares of Common Stock to Xencor, Inc. valued at approximately $3,300,000 based on the closing date price.
- Warrants: Issued warrants to the lenders to purchase 45,386 shares of common stock at an exercise price of $14.05 per share, expiring June 10, 2031.
- Cash Outflow: Paid $15,000,000 in cash to Xencor, Inc. to cancel a stock purchase option.
Material Changes Versus Prior Period
- Termination of Agreements: Terminated the 2017 Stock Issuance Agreement, Voting Agreement, and the original License Agreement with Xencor, Inc.
- Option Cancellation: Cancelled Xencor's option to purchase up to 10% of the company's fully diluted shares for $10,000,000. This was replaced by a cash payment and stock issuance.
- License Amendment: Executed a First Amendment to the License Agreement with Xencor to modify due diligence milestones.
- Board Composition: David Szymkowski, a Vice President of Preclinical Operations at Xencor, resigned from the Board of Directors effective June 10, 2021.
Outlook, Risks, and Contingencies
- Collateral: The company granted a security interest in its assets to the lenders for the benefit of the SVB facility.
- Default Risks: The loan agreement includes customary events of default, including failure to make timely payments. Upon default, lenders may declare all obligations immediately due and payable.
- Prepayment: The company may prepay the loan in full but is subject to a prepayment premium.
- Registration Rights: The company agreed to file a registration statement to register the shares issued to Xencor pursuant to the Option Cancellation Agreement.
Investor Verification Checklist
- Verify the exact closing price of INMB stock on June 10, 2021, to confirm the valuation of the 192,533 shares issued to Xencor.
- Review the full text of the Loan and Security Agreement (Exhibit 10.3) for specific definitions of the "Equity Event" that would accelerate repayment to 18 months.
- Confirm the impact of the 6.50% premium and 7.75%+ interest rate on the company's future cash flow projections.
- Assess the implications of the terminated Voting Agreement on the company's corporate governance structure.
- Check subsequent filings for the status of the registration statement for the shares issued to Xencor.