Deal terms were amended to add fourth tranche for another $6.25 million
By Susanna Moon
Chicago, May 3 – EnteroMedics Inc. raised another $6.25 million in the third tranche of a $25 million registered direct offering of 7% senior amortizing convertible notes that priced on Nov. 5. The company took in $1.5 million on Nov. 9 and $11 million in the second tranche on Jan. 11.
The original securities purchase agreement, which consisted of three tranches, has been amended to allow for a fourth tranche of $6.25 million, according to a company update on Tuesday.
The final tranche must be drawn or waived by Aug. 15.
Proceeds will be used to continue commercialization efforts for the Maestro Rechargeable System, for clinical and product development activities and for other working capital and general corporate purposes.
The notes are payable in monthly installments and will mature 24 months after the initial closing of the offering. At each monthly installment date, the notes may be repaid, at the company's election, in either cash or shares of the company's common stock at a discount to the then-current market price.
The notes are also convertible from time to time, at the election of the holders, into shares of the company's common stock at an initial conversion price of $4.35 per share, split adjusted, which adjusted upon issuance to $1.09 per share due to the reverse stock split in January, the company noted.
Also, investors will receive warrants for about 30% of the number of shares that would be issued if the principal were converted. The warrants are callable under some circumstances.
Northland Securities, Inc. is the agent.
"Drawing of the third tranche of this offering provides the company with added flexibility as we execute on a focused, direct-to-patient marketing strategy and work toward reimbursement and coverage goals that will further drive the commercial potential of vBloc Therapy," Greg Lea, the company’s senior vice president, said in a statement.
"By amending the agreement to provide for four funding tranches, we are also better able to align our capital needs with our issuance of additional shares."
Background
On Nov. 5, when the deal was announced, the company said that the notes were convertible into common stock at $0.29 per share. The conversion price was a 3.33% discount to the Nov. 3 closing share price of $0.30.
Each five-year warrant from the first tranche is exercisable at $0.31, a 3.33% premium to the Nov. 3 closing share price.
In the first closing, the buyers bought $1.5 million of notes and warrants for 1,762,862 shares. In the second tranche, investors bought $11 million notes and warrants for 861,842 shares.
The second-tranche warrants are exercisable at $4.65 for five years. The strike price is a 232.14% premium to the Jan. 7 closing share price of $1.40, which takes into account the company’s 1-for-15 reverse stock split on Jan. 6.
St. Paul, Minn.-based EnteroMedics develops implantable systems for the treatment of obesity and other gastrointestinal disorders.
| Issuer: | EnteroMedics Inc.
|
| Issue: | Senior amortizing convertible notes
|
| Amount: | $25 million
|
| Maturity: | Two years
|
| Coupon: | 7%
|
| Conversion price: | $4.35, split adjusted, adjusted upon issuance to $1.09
|
| Warrants: | 30% coverage
|
| Warrant expiration: | Five years
|
| Warrant strike price: | $0.31, $4.65
|
| Agent: | Northland Securities, Inc.
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| Pricing date: | Nov. 4
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| Settlement dates: | Nov. 9 (for $1.5 million), Jan. 11 (for $11 million), May 3 (for $6.25 million)
|
| Stock symbol: | Nasdaq: ETRM
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| Stock price: | $0.30 at close Nov. 3, $1.40 on Jan. 7 after Jan. 6 1-for-15 reverse stock split
|
| Market capitalization: | $145.03 million
|
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