Business Context and Reporting Period
Company: Aziyo Biologics, Inc. (Note: Request metadata listed "Elutia Inc." but the filing text identifies Aziyo Biologics, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: August 11, 2022
Event Date: August 10, 2022
Context: The Company entered into a new Credit Agreement with SWK Funding LLC as agent to refinance existing debt and fund ongoing commercial and product development initiatives.
Key Financial Metrics and Debt Structure
- Initial Term Loan: $21.0 million (drawn on Closing Date).
- Additional Term Loan: Up to $4.0 million available subject to achieving specified operational and financial metrics by September 30, 2023.
- Revolving Facility: New asset-based revolving facility of up to $8.0 million.
- Interest Rate: SOFR-based loans with an applicable margin of 8.75% (or 4.75% if PIK Interest option is elected). Term SOFR Rate has a floor of 2.75%.
- PIK Interest Option: Borrower may elect to pay 4.5% interest in-kind until November 15, 2024 (or November 17, 2025 if Additional Term Loan conditions are met).
- Amortization: Begins November 15, 2024 (extendable to November 17, 2025). Principal payments are subject to revenue-based caps.
- Equity Issuance: Warrant issued to SWK Funding LLC to purchase up to 187,969 shares of Class A Common Stock at an exercise price of $6.65 per share.
Material Changes Versus Prior Period
- Debt Refinancing: Proceeds from the Initial Term Loan were used to repay outstanding amounts under the Existing Term Loan and Existing Revolving Facility with Midcap Financial Trust and Midcap Funding IV Trust.
- Agreement Termination: The Existing Credit Agreement was terminated upon the execution of the new Credit Agreement.
- Security: The Company and its subsidiaries granted a lien to the Agent on substantially all assets now owned or hereafter acquired.
Guidance, Covenants, and Risks
- Liquidity Covenants: The Company must maintain minimum Consolidated Unencumbered Liquid Assets of $5.0 million (or the greater of $5.0 million or Operating Burn for the two prior consecutive fiscal quarters after October 10, 2022).
- Revenue Covenants: The Company must maintain certain minimum revenue levels, tested quarterly beginning with the quarter ending September 30, 2022.
- Prepayment Penalties: 2.00% of principal prepaid if done within the first two anniversaries of the Closing Date, plus remaining scheduled interest for the first year if prepaid in year one. No penalty thereafter.
- Exit Fee: 6.50% of the aggregate amount of Term Loans funded upon termination of the Credit Agreement.
- Warrant Terms: The warrant is immediately exercisable for 157,894 shares, with an additional 30,075 shares exercisable upon borrowing the Additional Term Loan. It expires on the seventh anniversary of the Closing Date.
Investor Verification Checklist
- Verify the specific "minimum revenue levels" required by the covenant, as the exact dollar thresholds are not disclosed in this summary.
- Confirm the current status of the "Operating Burn" calculation to assess compliance with the liquidity covenant post-October 10, 2022.
- Review the full Credit Agreement (Exhibit 10.1) for detailed definitions of "Operating Burn" and "Consolidated Unencumbered Liquid Assets."
- Monitor the Company's progress toward the operational and financial metrics required to access the additional $4.0 million tranche by September 30, 2023.
- Assess the impact of the 6.50% exit fee on potential future refinancing or debt restructuring scenarios.