Business Context and Reporting Period
This Form 8-K Current Report was filed by Amedica Corporation (not Sintx Technologies, Inc.) on September 8, 2015. The filing details the entry into material definitive agreements to raise capital, settle a dispute with a major creditor, and amend existing loan covenants.
Key Financial Metrics and Agreements
- Capital Raise: The Company entered into a Placement Agreement to sell up to $15,000,000 of securities. The "Initial Funding" targets at least $5,000,000 in gross proceeds from the sale of 13,123,360 shares of Common Stock at $0.381 per share, plus Series B Warrants.
- Debt Settlement: The Company agreed to settle a dispute with MG Partners II Ltd. ("Magna") regarding senior convertible notes with an aggregate principal of approximately $4.3 million. The settlement involves redeeming these notes for a total of $5.0 million, contingent on funding milestones.
- Existing Debt: The Company holds a $20 million term loan from Hercules Technology Growth Capital, Inc., maturing January 1, 2018.
- Transaction Costs: The Placement Agent (Ladenburg Thalmann & Co. Inc.) is entitled to an 8.0% cash fee on gross proceeds, reimbursement of expenses up to $60,000, and warrants to purchase 656,168 shares (5% of the public offering).
Material Changes and Contingencies
- Debt Restructuring: The Settlement Agreement resolves a default notice issued by Magna on June 19, 2015. Redemption payments are structured in three tranches: $2.5 million upon Initial Funding, $1.25 million upon "Second Funding" (Series B Warrant exercise), and $1.25 million upon "Third Funding" (Series C Warrant exercise).
- Loan Amendment: The Hercules loan agreement was amended to permit the Magna settlement. Changes include a new prepayment charge (1.5% until Sept 2016, then 0.75%), an increase in the maturity fee from $1.45 million to $1.65 million, and a variable unrestricted cash covenant ranging from $2.5 million to $9.0 million based on the loan balance.
- Warrant Adjustments: The Hercules warrant was amended to increase the share count to 1,548,387 and reduce the exercise price to the lower of $0.47 or the Series A Warrant price.
- Penalty Clauses: If shareholder approval is not obtained by November 13, 2015, or if the Second/Third Funding fails to generate $5.0 million each, the interest rate on the Hercules loan increases by 1.5%, and the interest rate on the remaining Magna August Note increases from 6% to 10%.
Outlook and Risks
- Shareholder Approval: The full capital raise and debt settlement are contingent on shareholder approval for the issuance of shares underlying Series B, C, and D Warrants. A deadline of November 13, 2015, is set for this approval to avoid penalty interest rates.
- Liquidity Covenant: Payments to Magna under the settlement are prohibited if the Company is in violation of its liquidity covenant with Hercules.
- Dilution: The offering includes significant warrant issuances (Series A, B, C, and D) with exercise prices of $0.47, subject to beneficial ownership limitations (4.99%) and potential anti-dilution adjustments.
Investor Verification Checklist
- Verify the status of the shareholder vote required for the Series B, C, and D Warrants by November 13, 2015.
- Confirm the actual gross proceeds received from the Initial Funding to ensure the $2.5 million Magna redemption payment was triggered.
- Review the Company's current unrestricted cash balance to ensure compliance with the amended Hercules liquidity covenant.
- Monitor for any alternative equity offerings if the primary funding targets are not met, as this affects the Magna redemption formula.
- Check for any subsequent filings regarding the exercise of the Series A, B, C, or D Warrants.