Business Context and Reporting Period
This Form 8-K was filed by Amedica Corporation (not Sintx Technologies, Inc.) on January 31, 2018. The filing reports the entry into a Material Definitive Agreement and the creation of a direct financial obligation.
Key Financial Metrics and Transaction Details
- Transaction Type: Sale of an Original Issue Discount (OID) Promissory Note and Warrants to L2 Capital LLC.
- Initial Funding: $500,000 received at closing.
- Initial Principal: $565,000 (reflecting the OID).
- Total Capacity: Up to $840,000 principal for a total purchase price of up to $750,000.
- Interest Rate: 8% per annum (18% default rate).
- Maturity: Six months from the effective date of each tranche funded.
- Warrants: 68,257 shares exercisable at $3.31 per share, exercisable after six months with a five-year term.
Material Changes and Terms
The filing details a new debt instrument with aggressive terms designed to protect the investor:
- Prepayment Penalties: 110% of principal if prepaid within 30 days; 120% between days 31-60; 125% thereafter.
- Default Penalty: Upon certain events of default, the company must pay 280% (plus 5% per additional default) of the outstanding balance.
- Conversion on Default: Convertible at 70% of the lowest VWAP during a 20-day lookback period selected by the holder.
- Most Favored Nation: If the company issues more favorable terms to other investors, those terms automatically apply to this Note.
- Repayment Obligation: The company must use up to 50% of proceeds from any new financing of $2,000,000 or more to repay this Note.
Outlook, Risks, and Contingencies
The filing does not provide forward-looking guidance or management commentary on future operations. However, it highlights significant financial risks:
- Liquidity Risk: The company is restricted in its ability to prepay the debt without incurring significant penalties.
- Dilution Risk: The warrant exercise price ($3.31) is subject to adjustment if future securities are issued below this price. The conversion price on default is heavily discounted (70% of VWAP).
- Events of Default: Include failure to pay, appointment of a new auditor, restatement of financials, or failure to repay upon a financing of $10,000,000 or more.
Investor Verification Checklist
- Verify the company name is Amedica Corporation, not Sintx Technologies, Inc.
- Confirm the total outstanding principal balance ($565,000 initial) and any subsequent tranches funded.
- Review the company's cash position to assess ability to meet the 8% interest payments and potential prepayment penalties.
- Monitor for any new financing rounds, as proceeds over $2,000,000 must be used to repay this debt.
- Check for any "more favorable" terms issued to other investors that would trigger the Most Favored Nation clause.