| Item 1.01 | Entry into a Material Definitive Agreement. |
On May 8, 2019, GI Dynamics, Inc. (the “Company”) entered into a Note and Warrant Purchase Agreement by and between the Company, as borrower, and Crystal Amber Fund Limited, as purchaser (the “Purchaser”). Pursuant to the Note and Warrant Purchase Agreement, the Company issued and sold to the Purchaser a senior unsecured convertible promissory note in an aggregate principal amount of US$3 million to be funded in four tranches from May 10, 2019 through July 11, 2019 (the “Note”), and agreed to issue to the Purchaser a Warrant (the “Warrant”) to purchase CHESS Depositary Interests (“CDIs”) (with each CDI representing 1/50th of a share of the Company’s common stock, US$0.01 par value per share (the “Common Stock”)) or Common Stock as set forth in the Warrant, subject to the receipt of required shareholder approval. The Purchaser is the Company’s largest shareholder.
The Note accrues interest at a rate equal to 10% per annum, computed daily until the date upon which full funding of the Note is anticipated, whether or not funding occurs on such date (the “Full Funding Date”), and thereafter compounded annually, other than during the continuance of an event of default, when the Note accrues interest at a rate of 16% per annum. The entire outstanding principal balance and all unpaid accrued interest thereon is due on the fifth anniversary of the Full Funding Date. Subject to the receipt of required shareholder approval (for the purposes of, among others, Listing Rule 10.11 of the Australian Securities Exchange (the “ASX”)), the entire outstanding principal balance under the Note and all unpaid accrued interest thereon is convertible into CHESS Depositary Interests (“CDIs”), each representing 1/50th of a share of Common Stock, (i) at the option of the Purchaser at a conversion price equal to US$0.0127 per CDI, or (ii) automatically upon the occurrence of an equity financing in which the Company raises at least $10,000,000 (a “Qualified Financing”) at the price per CDI of the CDIs issued and sold in such financing. In the event that the Company issues additional CDIs to a shareholder other than Crystal Amber in a subsequent equity financing at a price per CDI that is less than the conversion price under the Note, the conversion price shall be reduced to the lowest such price per CDI. In addition, upon a change of control of the Company, the Purchaser may, at its option, demand that the Company prepay all accrued and unpaid interest plus 110% of the remaining outstanding unconverted principal balance. The Company may not prepay the Note without the consent of the Purchaser. If the shareholder approvals required to issue the Warrant or to issue any CDIs upon conversion of the Note are not obtained, the Company is obligated to prepay all accrued and unpaid interest plus 110% of the remaining outstanding unconverted principal balance on the earlier of the Full Funding Date or the date that is six months following the date of the stockholder meeting at which the requisite approvals were not obtained.
Pursuant to the terms of the Warrant and pending stockholder approval of the Warrant’s issuance, the Purchaser will be entitled to purchase up to 236,220,480 CDIs (or the corresponding number of shares of Common Stock) at an exercise price per CDI equal to US$0.0127, subject to adjustment as provided in the Warrant. The number of CDIs available for purchase under the Warrant will be proportional to the principal balance outstanding under the Note. In the event that the Company issues additional CDIs to a shareholder other than Crystal Amber in a subsequent equity financing at a price per CDI that is less than the exercise price under the Warrant, the exercise price shall be reduced to the lowest such price per CDI. The Warrant shall lapse on the fifth anniversary of the Full Funding Date.
The Note and Warrant Purchase Agreement contains customary events of default. If a default occurs and is not cured within the applicable cure period or is not waived, any outstanding obligations under the Note may be accelerated. The Note and Warrant Purchase Agreement and related Note and Warrant documents also contain additional representations and warranties, covenants and conditions, in each case customary for transactions of this type.
The foregoing description of the Note and Warrant Purchase Agreement, the Note and the Warrant does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the Note and Warrant Purchase Agreement, the Note and the Warrant, each of which will be included as an exhibit to the Company’s Quarterly Report on Form10-Q for the fiscal quarter ending June 30, 2019. A copy of the press release announcing the closing of this financing is attached hereto as Exhibit 99.1.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation Under anOff-Balance Sheet Arrangement of a Registrant. |
The disclosure set forth under Item 1.01 of this Current Report on Form8-K is incorporated into this Item 2.03 by reference.
