Item 1.01 Entry into a Material Definitive Agreement.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant.
Item 3.02 Unregistered Sales of Equity Securities.
On December 20, 2018, iCAD, Inc., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement, a form of which is attached hereto as Exhibit 10.1 (the “SPA”), with certain institutional and accredited investors, including, but not limited to, all directors and executive officers of the Company (the “Investors”), pursuant to which the Investors agreed to purchase unsecured subordinated convertible debentures, a form of which is attached hereto as Exhibit 4.1 (the “Convertible Debentures”), with the aggregate principal amount of approximately $7.0 million in a private placement (the “Private Placement”). Capitalized terms used but not defined in the following description shall have the meaning assigned to such terms in the SPA or Convertible Debentures.
The Company will pay interest to the Investors on the outstanding principal amount of the Convertible Debentures at the rate of 5% per annum, payable semi-annually on December 21 and June 21, beginning on the first such date after the Original Issue Date, on each Conversion Date (as to that principal amount then being converted) and on the Maturity Date. The Convertible Debentures mature on December 21, 2021. In connection with the issuance of the Convertible Debentures, the Company’s subsidiaries entered into a Subsidiary Guarantee, dated as of December 20, 2018, attached hereto as Exhibit 10.2 (the “Subsidiary Guarantee”), for the benefit of the Investors, pursuant to which the subsidiaries guaranteed the Company’s payments under the Convertible Debentures. The Convertible Debentures are unsecured and structurely subordinate to the Company’s existing indebtedness.
At any time prior to the Maturity Date, the Convertible Debentures are convertible into shares of the Company’s common stock (“Common Stock”) at a conversion price of $4.00 per share, at the Investor’s option, subject to certain anti-dilution adjustments. The Convertible Debentures contain a cap of shares to be issued upon the conversion of the Convertible Debentures at 19.99% of the issued and outstanding shares of the Company’s Common Stock on December 21, 2018 unless shareholder approval of such issuance has been obtained. Upon the satisfaction of certain conditions, the Company has the right to cause the Investors to convert all or part of the then outstanding principal amount of the Convertible Debentures. In connection with such Forced Conversion, the Company will be required to pay accrued but unpaid interest, the Make Whole Amount, liquidated damages and other amounts owing to the Investors under the Convertible Debentures.
In connection with the Private Placement, on December 20, 2018, the Company entered into a registration rights agreement, a form of which is attached hereto as Exhibit 10.3 (the “Registration Rights Agreement”), with the Investors, pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission to register the resale of shares of Common Stock underlying the Convertible Debentures under the Securities Act of 1933, as amended (the “Securities Act”) on or prior to January 31, 2019. The Company will have to pay damages if it fails to meet its obligations pursuant to the Registration Rights Agreement.
The Company closed the Private Placement and issued the Convertible Debentures on December 21, 2018. The Private Placement resulted in net proceeds of approximately $6.5 million, which the Company intends to use for its general corporate purposes. Craig-Hallum Capital Group LLC served as the sole placement agent for the Private Placement and received a fee equal to 6% of the proceeds received by the Company from the Investors and the reimbursement of expenses in an amount of $30,000.
The Convertible Debentures and the shares of Common Stock underlying the Convertible Debentures were offered and sold in the Private Placement exempt from registration under the Securities Act in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder. Each of the Investors represented that it was an “accredited investor” as such term is defined in Regulation D.
In connection with the Private Placement, the Company entered into the Third Loan Modification Agreement, attached hereto as Exhibit 10.4 (the “Amendment”), dated as of December 20, 2018, with Silicon Valley Bank, a California corporation, in respect of the Amended and Restated Loan and Security Agreement, dated as of August 7, 2017, as amended. Pursuant to the Amendment, the Company has agreed to repay the 2018 Term Loan Advance (as defined in the Loan Agreement) in 23 equal monthly installments rather than 30 equal monthly installments as provided in the Loan Agreement. Additionally, because the Convertible Debentures will be issued prior to December 31, 2018, the Detection Revenue and Adjusted EBITDA covenants in the Loan Agreement will not be tested for thesix-month period ending December 31, 2018. In addition, pursuant to the Amendment, the 2018 Term Loan Maturity Date was changed from March 1, 2022 to August 1, 2021.