Business Context and Reporting Period
Company: Tocagen Inc. (Note: Metadata listed "Forte Biosciences, Inc." but the filing text identifies the registrant as Tocagen Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: May 18, 2018
Event: Entry into a Material Definitive Agreement (Amended and Restated Loan and Security Agreement).
Key Financial Metrics and Transaction Details
- Total Term Loans: $26,450,000
- Use of Proceeds:
- Approximately $8,631,000 applied to repayment of prior debt (principal, interest, and fees).
- Approximately $17,819,000 available for working capital and general business requirements.
- Interest Rate: Floating rate equal to the greater of 8.50% or (Prime Rate + 3.75%).
- Final Payment Fee: 7.95% of the original principal amount.
- Equity Issuance: Warrants issued for 56,578 shares of common stock at an exercise price of $9.35 per share.
- Collateral: First priority security interest in substantially all current and future assets, excluding intellectual property (IP).
Material Changes and Loan Structure
This agreement amends and restates a prior loan agreement dated October 30, 2015. Key structural terms include:
- Maturity Date: December 1, 2022.
- Repayment Schedule: Interest-only through January 1, 2020, followed by 36 equal monthly payments of principal and interest.
- Repayment Deferral Options: The interest-only period may be extended to July 1, 2020, if a Biologics License Application (BLA) for Toca 511 & Toca FC is submitted to the FDA before January 1, 2020. It may be extended further to January 1, 2021, if FDA approval is received before July 1, 2020.
- Prepayment Fees: 3.00% if prepaid within the first year; 2.00% in the second year; 1.00% thereafter.
Guidance, Risks, and Covenants
Covenants: The Company is subject to affirmative and restrictive covenants, including restrictions on paying dividends or making distributions on capital stock. The Company must maintain inventory, pay taxes, maintain insurance, and protect IP rights.
Risks and Contingencies:
- Default Events: Include failure to satisfy payment obligations, breach of covenants, material adverse changes, cross-defaults, or failure to maintain governmental approvals.
- Remedies: Upon default, lenders may declare all principal and interest immediately due, exercise secured party remedies, and collect the final payment fee and applicable prepayment fees.
- IP Restrictions: The Company agreed not to encumber its intellectual property assets except as permitted by the Agreement.
Management Commentary: The filing does not provide specific forward-looking guidance on revenue or profit, as the document focuses on the financing transaction.
Important Facts for Investor Verification
- Verify the exact amount of cash remaining after the $8.631 million debt repayment to confirm liquidity impact.
- Monitor the status of the BLA submission for Toca 511 & Toca FC to determine if the interest-only period will be extended.
- Review the full text of the Agreement (to be filed in the 10-Q for the quarter ending June 30, 2018) for detailed covenant definitions.
- Assess the dilution impact of the 56,578 warrants issued at $9.35 per share.
- Confirm the Company's ability to service the debt given the floating interest rate floor of 8.50% and the 7.95% final payment fee.