OCULAR THERAPEUTIX, INC current report, 21 February 2019

Business Context and Reporting Period

Company: Ocular Therapeutix, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: February 21, 2019
Event: Entry into a Material Definitive Agreement involving a private placement of convertible debt and amendments to existing credit facilities.

Key Financial Metrics and Capital Structure

  • New Debt Issuance: $37.5 million in unsecured senior subordinated convertible notes.
  • Interest Rate: 6% per annum, payable at maturity.
  • Maturity Date: March 1, 2026.
  • Conversion Terms: Initial conversion price of approximately $6.50 per share (153.8462 shares per $1,000 principal).
  • Ownership Limit: Conversion restricted to prevent any holder from beneficially owning more than 19.99% of outstanding common stock.
  • Existing Debt: The company maintains a secured term loan facility with MidCap Financial Trust and other senior lenders.

Material Changes and Agreements

The filing details several material agreements executed on February 21, 2019:

  • Note Purchase Agreement: The Company entered into an agreement with Cap 1 LLC (an affiliate of Summer Road LLC) to issue the $37.5 million in convertible notes.
  • Registration Rights: The Company agreed to file a resale registration statement for the common stock underlying the notes within 30 days of closing and seek effectiveness within 90 days.
  • Credit Agreement Amendment: An amendment was made to the existing Credit Agreement with MidCap Financial Trust. This added a negative covenant preventing the Company from paying the new note holders ahead of senior lenders and established a cross-default provision.
  • Subordination Agreement: The new notes are explicitly subordinated to the existing Credit Facility. Payments to note holders are contingent upon the full payment of the Credit Facility.

Outlook, Risks, and Contingencies

  • Redemption Rights: The Company may redeem the notes on or after March 1, 2022, if the stock price exceeds 130% of the conversion rate for 20 of the preceding 30 trading days.
  • Corporate Transaction Provisions: In the event of a Corporate Transaction, holders may convert notes and receive a "make-whole" cash payment or require the Company to repurchase the notes at 100% of principal plus accrued interest.
  • Events of Default: Obligations are subject to acceleration upon specified defaults, including breaches of material contracts or delisting of the common stock.
  • Financial Covenants: The Purchase Agreement does not include financial covenants.
  • Emerging Growth Company Status: The Company is an emerging growth company and has elected not to use the extended transition period for new accounting standards.

Investor Verification Checklist

  • Verify the closing date and receipt of the $37.5 million proceeds.
  • Confirm the status of the resale registration statement for the underlying common stock.
  • Review the outstanding balance and terms of the existing Credit Facility with MidCap Financial Trust to understand the subordination risk.
  • Monitor the Company's stock price relative to the $6.50 conversion price and the 130% redemption threshold.
  • Check for any subsequent filings regarding the "make-whole" provisions or early conversion events.