Business Context and Reporting Period
This Form 6-K filing by Kornit Digital Ltd. covers the month of January 2017, specifically reporting on a strategic agreement executed on January 10, 2017. The filing details a Master Purchase Agreement and a concurrent Transaction Agreement with Amazon Corporate LLC, a subsidiary of Amazon.com, Inc.
Key Financial Metrics and Transaction Terms
The filing does not provide standard financial metrics such as revenue, profit, cash flow, margins, debt, or liquidity for the reporting period. Instead, it outlines the financial structure of the new Amazon partnership:
- Warrant Issuance: Kornit agreed to issue a warrant to an Amazon affiliate for up to 2,932,176 ordinary shares.
- Exercise Price: $13.03 per share, based on the preceding 30-day VWAP.
- Vesting Threshold: Shares vest based on Amazon payments totaling up to $150 million over five years.
- Vesting Increments: 85,521 shares per $5 million payment until $75 million is reached; thereafter, 109,956 shares per increment.
- Term: The Purchase Agreement term is five years, beginning May 1, 2016, with automatic one-year renewals unless terminated by Amazon.
- Minimum Commitments: There are no minimum spending commitments under the Purchase Agreement.
Material Changes and Agreements
The primary material change is the establishment of a long-term supply relationship with Amazon for Avalanche 1000 digital direct-to-garment printers, NeoPigment ink, consumables, maintenance services, and extended warranties. Key contractual obligations include:
- End of Life Program: Kornit must provide 12 months' notice before stopping support for products and must continue supplying ink for at least 36 months after the agreement term ends or 18 months after the last product purchase.
- Continuity and Penalties: Kornit must ensure supply continuity in cases of non-compliance or insolvency. The agreement includes sliding scale penalties for late deliveries or system unavailability.
- Change of Control: Unvested warrant shares will vest in full upon a change of control transaction.
Guidance, Risks, and Contingencies
The filing does not contain forward-looking financial guidance or management commentary regarding future earnings. However, it outlines specific risks and contingencies associated with the Amazon agreement:
- Standstill Restrictions: Amazon is subject to restrictions on acquiring additional Kornit shares, soliciting proxies, or influencing control until the warrant shares represent less than 2% of outstanding shares.
- Transfer Restrictions: The warrant is generally non-transferable except to Amazon subsidiaries, and warrant shares have restrictions on transfer to beneficial owners of more than 5% of outstanding shares.
- Registration Rights: Amazon has rights to request shelf registration statements (Form F-3 or S-3) and piggyback rights on underwritten offerings.
Investor Verification Checklist
- Verify the current vesting status of the warrant shares based on payments made by Amazon prior to and after the agreement date.
- Confirm the impact of the $13.03 exercise price on potential future dilution relative to the current market price.
- Review the specific volume-based pricing tiers agreed upon in the Master Purchase Agreement, as these are not detailed in the filing.
- Monitor the "end of life" notification timelines to ensure Kornit can meet the 12-month advance notice requirement for product discontinuation.
- Assess the financial impact of potential penalties for late delivery or system unavailability under the sliding scale provision.