If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01 Entry into a Material Definitive Agreement.
On August 1, 2022, Fennec Pharmaceuticals Inc. (the “Company”) entered into a Securities Purchase Agreement (the “SPA) with Petrichor Opportunities Fund I LP (the “Investor”) in connection with the issuance of up to $45,000,000 of senior secured floating rate convertible notes (the “Notes”), issuable in multiple tranches. Upon certain closing conditions being satisfied, an initial tranche of $5,000,000 (the “First Closing Note”) will be issued and convertible at a price per share equal to the Initial Conversion Price equal to $8.11 per share, a 20% premium of the 5-day volume weighted average price (the “VWAP”) of the Company’s common shares as traded on the Nasdaq Capital Market immediately prior announcement of the SPA.
A second tranche (the “Second Closing Notes”) of $20,000,000 is to be funded upon the approval of the United States Food and Drug Administration of the Company’s PEDMARK and satisfaction of other closing conditions. Subsequent to the funding of the Second Closing Note, and before December 31, 2023, the Company may draw up to $20,000,000 of additional financing under the SPA, in one or more tranches of $10,000,000 upon mutual agreement of the Company and the Investor (the “Subsequent Closing Notes”). Each of the Second and Subsequent Closing Notes will be convertible at a price per share equal to a 20% premium to the 5-day VWAP of the Company’s common shares as traded on the Nasdaq Capital Market immediately prior to the date on which the Company obtains FDA approval of PEDMARK (the “Second Closing Trigger”), provided, however, that the Second Closing Note and Subsequent Closing Notes Conversion Price shall be no more than one hundred and fifty percent (150%) of the Initial Conversion Price.
A commitment fee of 2.0% of the Notes is payable under the SPA. Half of such fee will be paid by the issuance on the first closing of warrants to purchase 55,498 Fennec common shares and half is payable in cash or warrants, at our election, on the second closing. The warrants will be exercisable at a price per share of $8.11 and will have a term of five years from the date of the grant.
Pursuant to the SPA, the Company agreed to register the Company shares underlying the Notes and warrants by filing a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) by the 105th calendar day after the closing date of the Transaction (subject to certain permitted extensions). To the extent the registration statement is not filed within such 45-day deadline, the registration statement is not declared effective within 150 calendar days (or 180 calendar days if reviewed by the SEC, subject to certain permitted extensions in each case) or the effectiveness of the registration statement is not maintained (subject to certain allowable grace periods), then the Company will be obligated pay a fee.
The Notes and warrants are being offered and sold to the Investor pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D as promulgated thereunder.
Notes
The Notes will be senior secured obligations of the Company. Unless earlier converted or redeemed, the Notes will mature on August 1, 2027.
The Notes accrue interest at a rate equal to the greater of (a) US Prime Rate or (b) three and one-half percent (3.5%), plus the applicable margin of four and one-half percent (4.5%) on the outstanding balance of the Notes, payable quarterly on the first business day of each calendar quarter. Fort the first twenty-four (24) months following the Closing Date, Interest equal to three and one-half percent (3.5%) on the outstanding balance of the Note will be paid-in-kind.
Prior to the maturity, a holder of the First Closing Note will have the right to convert the principal and any accrued but unpaid interest into shares of Common Stock at a conversion price of $8.11 per share (the “First Closing Note Conversion Price”), subject to certain adjustments as set forth in the First Closing Note. The Second Closing Note and Subsequent Closing Notes will have the right to convert into shares of Common Stock at a conversion price equal to a 20% premium to the 5-day VWAP of the Company’s common shares as traded on the Nasdaq Capital Market immediately prior to the Second Closing Trigger, provided, however, that the Second Closing Note and Subsequent Closing Notes Conversion Price shall be no more than one hundred and fifty percent (150%) of the Initial Conversion Price.
At any time after August 1, 2025, the Company has the right to redeem all, but not less than all, of the outstanding Notes for cash prior to the Maturity Date, at a redemption premium on such amount as follows: (a) prior to August 1, 2026, 110%; and (b) after August 1, 2026 but on or prior to August 1, 2027, 107.5% (the “Redemption Premium”).
Upon the occurrence of certain events of default as set forth in the Notes (other than events of default relating to bankruptcy, insolvency, reorganization or liquidation proceedings) or a change of control, a holder of the Notes may require the Company to redeem
