Business Context and Reporting Period
This Form 8-K filing by Amedica Corporation (noted as Sintx Technologies in metadata) covers events occurring on June 30, 2014. The company, incorporated in Delaware, reported the entry into two material definitive agreements to secure financing and refinance existing debt.
Key Financial Metrics and Agreements
Hercules Loan and Security Agreement
- Loan Amount: $20 million term loan.
- Maturity: January 1, 2018.
- Interest Rate: Greater of Prime + 7.7% or 10.95%.
- Collateral: Substantially all assets of the Company and its subsidiary.
- Use of Proceeds: Repayment of prior credit facility with General Electric Capital Corporation and general corporate purposes.
- Repayment Terms: Interest-only period until July 1, 2014; principal payments commence August 1, 2015 (30 equal installments), potentially extendable to February 1, 2016 (24 installments) if conditions are met.
- Equity Component: Warrant to purchase shares based on $2.4 million (potentially $2.9 million) at a price of $4.65 per share. Potential principal repayment via common stock at a conversion price of $5.72.
Private Placement of Senior Convertible Notes (Magna)
- Investor: MG Partners II Ltd. (affiliate of Magna).
- Initial Note: $2.9 million principal for a $2.5 million purchase price.
- Additional Note: Committed $3.5 million principal for a $3.5 million purchase price (subject to registration statement effectiveness).
- Interest Rate: 6.0% annually (18% upon default).
- Maturity: June 30, 2016.
- Conversion Price: Initial fixed price of $3.75 per share. Subject to adjustment if stock price falls below 110% of the initial price (conversion at 80% of 5-day VWAP).
- Principal Extinguishment: $150,000 extinguished if registration statement filed by August 14, 2014; additional $250,000 extinguished if declared effective by October 13, 2014.
- Equity Component: Warrant to purchase up to 568,889 shares at $4.65 per share. Issuance of 50,853 "Commitment Shares" as a 4% fee.
Material Changes
The filing details a significant restructuring of the company's capital structure:
- Debt Refinancing: The $20 million Hercules loan replaces the prior credit facility with General Electric Capital Corporation.
- New Debt Obligations: Creation of $6.4 million in total senior convertible notes (initial and additional).
- Dilution Risk: Issuance of warrants and commitment shares, with potential for further dilution upon conversion of notes or exercise of warrants. Stockholder approval is required if total issuance exceeds 15% of outstanding shares.
Guidance, Risks, and Contingencies
- Registration Rights: The Company must file a registration statement by August 14, 2014, and have it declared effective by October 13, 2014, to trigger principal extinguishment on the Magna notes and satisfy investor conditions.
- Default Provisions: The Magna notes include a "Event of Default Redemption Price" of 135% of principal (or 100% for insolvency events) or a value based on stock price, whichever is greater. Default interest is 18%.
- Trading Restrictions: The Magna investor is subject to trading restrictions (selling no more than $125,000 or 15% of daily volume) unless the stock price falls below $2.50.
- Covenants: The Hercules agreement includes standard financial covenants, limitations on indebtedness, liens, and asset sales.
Investor Verification Checklist
- Verify the status of the SEC Registration Statement filing (deadline: August 14, 2014) to determine if $400,000 of the Magna note principal will be extinguished.
- Confirm the exact amount of cash proceeds received versus the principal obligation for the Magna notes ($2.5M cash for $2.9M principal).
- Review the full text of the Hercules Loan and Security Agreement for specific financial covenants and conditions required to extend the interest-only period.
- Monitor the company's stock price relative to the $3.75 conversion price and $2.50 trading restriction threshold for the Magna investor.
- Check for any subsequent filings regarding stockholder approval for the issuance of Commitment, Conversion, and Warrant shares if the 15% threshold is approached.