Business Context and Reporting Period
This Form 8-K is filed by Tocagen Inc. (not Forte Biosciences, Inc.) on October 28, 2019. The registrant is a Delaware corporation with its principal executive offices in San Diego, California. The report details two material events: an amendment to a loan agreement and a notice regarding stock listing compliance.
Key Financial Metrics and Debt
- Debt Facility: The Company has a Loan and Security Agreement with Oxford Finance LLC and Silicon Valley Bank involving $26.5 million in term loans.
- Prepayment: In connection with the Second Amendment to the loan agreement, the Company made a prepayment of $23.3 million.
- Prepayment Allocation: The $23.3 million covered $21.5 million of outstanding principal, accrued interest, a pro-rated portion of the final payment, and outstanding lender expenses.
- Collateral: The Company granted a security interest in its intellectual property as additional collateral to secure the remaining term loans.
- Revenue and Profit: The filing text does not provide a clear value for revenue, profit, cash flow, or margins.
Material Changes and Events
Amendment to Loan Agreement
On October 31, 2019, the Company entered into a Second Amendment to its Loan and Security Agreement. Key changes include:
- Waiver of prepayment fees for any prepayment made on or after the amendment date.
- Consent to sell specified equipment, provided net proceeds are used to repay the term loans.
- Release of liens on specified equipment upon the closing of such sales.
- Future prepayments between the amendment date and May 31, 2020, must be in minimum increments of $500,000.
Nasdaq Listing Notice
The Company received a notice from The Nasdaq Stock Market stating that for 30 consecutive trading days prior to October 28, 2019, the closing bid price of its common stock was below the $1.00 per share minimum requirement for continued listing on The Nasdaq Global Select Market.
Outlook, Risks, and Contingencies
- Compliance Period: The Company has an 180-calendar-day compliance period to regain compliance by maintaining a closing bid price of at least $1.00 for 10 consecutive business days.
- Delisting Risk: If the Company fails to regain compliance by the end of the period and does not apply to transfer listing to The Nasdaq Capital Market (subject to meeting other standards), the stock will be subject to delisting.
- Management Action: The Company intends to monitor the stock price and may consider available options, such as a reverse stock split, to regain compliance.
- Current Status: The notice has no immediate effect on the listing; the stock continues to trade under the symbol "TOCA."
Investor Verification Checklist
- Verify the current outstanding principal balance of the term loans following the $21.5 million principal prepayment.
- Monitor the daily closing bid price of TOCA stock to assess progress toward the $1.00 Nasdaq compliance threshold.
- Review the full text of the Second Amendment to the Loan and Security Agreement (to be filed as an exhibit to the Form 10-Q for the quarter ended September 30, 2019) for detailed covenants.
- Confirm whether the Company has initiated a reverse stock split or filed a transfer application to The Nasdaq Capital Market if the 180-day compliance period is nearing expiration.