Quarterly report pursuant to Section 13 or 15(d)

3. DEBT

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3. DEBT
3 Months Ended
Mar. 31, 2016
Debt Disclosure [Abstract]  
3. Debt

 Loan and Security Agreement

 

On June 19, 2015, the Company entered into the LSA with Oxford for up to $21.0 million and refinanced its existing loan with Hercules.  The first tranche of $16.0 million from the Oxford loan was primarily used to repay its previous facility with Hercules and the remaining $5.0 million is available at ADMA’s option upon RI-002’s BLA being approved from the FDA on or before January 31, 2017, which funding would also extend its interest only period for an additional six months pursuant to the May 2016 amendment to the LSA.  The LSA bears interest at a rate per annum equal to the greater of (i) 7.80% and (ii) the sum of (a) the three (3) month U.S. LIBOR rate (as reported in The Wall Street Journal) on the date occurring on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 7.54% on the outstanding principal balance.  The Company is obligated to begin to repay the principal over 36 months beginning February 1, 2017, unless accelerated as a result of certain events of default.  A final payment equal to 8.95% of the funded loan amount is due at the earlier of loan maturity or prepayment.  In the event of the six-month interest only extension, the final payment will be 9.95% of the funded loan, which shall also be due at the earlier of loan maturity or prepayment. In addition, a facility fee of $105,000 was paid at closing.  In the event the Company prepays a loan for any reason, the Company is obligated to pay a prepayment charge corresponding to a percentage of the principal amount of the applicable loan prepaid, with such percentage being: 3.0% if prepayment occurs through the first anniversary of its funding, 2.0% if prepayment occurs after the first anniversary through the second anniversary of the applicable funding date, and 1.0% if prepayment occurs after the second anniversary of its funding date and prior to its maturity date.  The loan matures no later than January 1, 2020.  The loan is secured by the Company’s assets, except for its intellectual property (which is subject to a negative pledge). The LSA contains customary representations, warranties and covenants, including limitations on incurring indebtedness, engaging in mergers or acquisitions and making investments, distributions or transfers.  The representations, warranties and covenants contained in the LSA were made only for purposes of such agreement and as of a specific date or specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the LSA. Events of default under the agreement include, but are not limited to: (i) insolvency, liquidation, bankruptcy or similar events; (ii) failure to pay any debts due under the LSA or other loan documents on a timely basis; (iii) failure to observe any covenant or secured obligation under the LSA or other loan documents, which failure, in most cases, is not cured within 10 days of written notice by lender; (iv) occurrence of any default under any other agreement between the Company and the lender, which is not cured within 10 days; (v) occurrence of an event that could reasonably be expected to have a material adverse effect;  (vi) material misrepresentations; (vii) occurrence of any default under any other agreement involving indebtedness or the occurrence of a default under any agreement that could reasonably be expected to have a material adverse effect; and (viii) certain money judgments are entered against the Company or a certain portion of its assets are attached or seized. Remedies for events of default include acceleration of amounts owed under the LSA and taking immediate possession of, and selling, any collateral securing the loan.

 

In connection with the LSA, on June 19, 2015, the Company issued to Oxford a seven year warrant, expiring on June 19, 2022, to purchase 74,309 shares of common stock at an exercise price of $8.51 per share. The Company recorded $367,700 as the fair value of the warrant to additional paid-in capital and as a debt discount to the carrying value of the loan.  The key assumptions used to value the warrants included: volatility of 57% on the Company’s common stock based upon a pro rata percentage of the Company’s common stock’s volatility and similar public companies’ volatilities for comparison, an expected dividend yield of 0.0%, a risk-free interest rate of 1.99% and a term of 7 years.  As a result of prepaying the Hercules loan prior to maturity, the Company incurred a loss on extinguishment of debt of $0.7 million comprised of unamortized debt issuance costs, unamortized debt discount related to the warrants issued to Hercules, along with a prepayment penalty.

 

In May 2016, the Company amended its LSA with Oxford.  This amendment provided ADMA with an additional $4.0 million term loan, the availability of which was predicated on completing an equity financing of its common stock of at least $10.0 million in gross proceeds no later than May 31, 2016.  In May 2016, the Company completed an underwritten public offering of its common stock, raising gross proceeds of approximately $14.1 million, (see Note 8 for additional details on the equity financing and loan amendment) and subsequently borrowed an additional $4.0 million from Oxford under the amended LSA, which brings the total principal borrowed to $20.0 million.

  

A summary of the Oxford loan balance as of March 31, 2016 is as follows:

 

Gross proceeds   $ 16,000,000  
         
Less: debt discount, net        
End of term fee     (1,161,544 )
Warrants     (282,486 )
Financing fees     (175,211 )
         
Note payable   $ 14,380,759