Business Context and Reporting Period
This Form 8-K is filed by Heatwurx, Inc. (not Processa Pharmaceuticals, Inc.) for the reporting period of January 6, 2014. The filing discloses the entry into a material definitive loan agreement and the acquisition of Dr. Pave, LLC, a California limited liability company controlled by the Company's CEO.
Key Financial Metrics and Obligations
- Debt Financing: The Company entered a Loan Agreement allowing for up to $1,000,000 in loans. An initial tranche of $250,000 was received on January 6, 2014.
- Interest Rate: 12% per annum on unsecured promissory notes.
- Maturity Date: January 6, 2016.
- Repayment Terms: Interest paid in equal monthly installments; principal may be prepaid without penalty.
- Equity Issuance (Warrants): 83,334 warrants issued to the initial lender (1/3 warrant per $1.00 loaned). Exercise price is $3.00 per share; expiration is one year from issuance.
- Acquisition Consideration: 58,333 shares of common stock issued to acquire Dr. Pave, LLC.
- Revenue and Cash Flow: The filing text does not provide specific revenue, profit, or cash flow figures for the period.
Material Changes and Transactions
- Debt Increase: Current direct financial obligation increased by $250,000, with potential to reach $1,000,000.
- Acquisition: On January 8, 2014, the Company acquired all membership interests of Dr. Pave, LLC. The transaction closed with an effective date of January 1, 2014, for tax and accounting purposes.
- Related Party Transactions:
- The initial $250,000 loan was provided by Gus Blass II, father of a Company director.
- Dr. Pave is controlled by David Dworsky, the Company's CEO. The acquisition involved the issuance of 41,668 shares to Dworsky Partners, LLC (80% owned by the CEO) and 3,333 shares to a Company director.
- Dr. Pave forgave a $30,000 promissory note from Dworsky Partners immediately preceding the closing.
Outlook, Risks, and Contingencies
- Default Provisions: Upon an event of default, all outstanding principal and accrued interest become immediately due and payable.
- Assignment Restrictions: Notes may not be assigned to competitors without authorization. Warrants may not be sold or transferred without Company consent.
- Significance of Acquisition: Management determined the purchase of Dr. Pave did not constitute the acquisition of a significant amount of assets under Item 2.01.
- Regulatory Status: Securities were sold unregistered under Section 4(a)(2) and Rule 506(b) exemptions. No selling commissions were paid.
Investor Verification Checklist
- Verify the total outstanding debt balance and whether additional tranches of the $1,000,000 facility have been drawn since January 6, 2014.
- Confirm the financial performance and asset value of Dr. Pave, LLC to assess the strategic value of the stock issuance.
- Review the Company's cash position to ensure it can meet the monthly interest payment obligations on the new debt.
- Check for any subsequent filings regarding the exercise of the 83,334 warrants issued to Gus Blass II.
- Monitor for any events of default that could trigger immediate repayment of the $250,000 note.