Item
1.01 |
Entry
into a Material Definitive Agreement. |
On
August 9, 2022, Celcuity Inc. (“Celcuity” or the “Company”) entered into The First Amendment (the “Amendment”)
to its existing Loan and Security Agreement, dated April 8, 2021 (the “Loan Agreement”), with Innovatus Life Sciences Lending
Fund I, LP, a Delaware limited partnership (“Innovatus”). The Loan Agreement, as amended by the Amendment (collectively,
the “Amended Loan Agreement”) provides Celcuity with up to $75 million in term loans, a $50 million increase from the debt
facility under the original Loan Agreement.
The
Amended Loan Agreement provides for funding through up to five term loans. Funding of the first $15.0 million term loan occurred on April
8, 2021 in connection with entering into the original Loan Agreement. The Company will be eligible to draw on a second term loan of up
to $20.0 million upon the closing of the Company’s $100 million private placement announced on May 16, 2022. The Company will be
eligible to draw on a third term loan of up to $10.0 million upon the achievement of at least 50% of the targeted enrollment for the
wild-type Study 1 Arm A and the Study 1 Arm C in the Company’s VIKTORIA-1 clinical trial. The Company will be eligible to draw
on a fourth term loan of up to $20.0 million upon the achievement of (i) either (A) Study 1 Arm A (gedatolisib in combination with palbociclib
and fulvestrant) or (B) Study 1 Arm B (gedatolisib in combination with fulvestrant) reports a statistically improvement in PFS (progression-free
survival) relative to Study 1 Arm C (fulvestrant). The Company will be eligible to draw on a fifth term loan of up to $10.0 million upon
the achievement of the Company submitting an NDA to the FDA for gedatolisib. Funding of these additional term loans is also subject to
certain other conditions, and upon satisfaction of all applicable conditions, the Company can request funding of the second term loan
no later than December 31, 2022, the third term loan from September 1, 2023 to April 1, 2024, the fourth term loan from August 1, 2024
to November 1, 2024, and the fifth term loan from November 1, 2024 to February 28, 2025.
The
loans will mature on April 8, 2027, the sixth anniversary of the initial funding date, provided that the lender may accelerate and cause
the loans to become immediately due and payable upon the occurrence of events of default as described in the Amended Loan Agreement.
The term loans bear interest at a rate equal to the sum of the greater of (i) the prime rate or (ii) 3.25%, plus 5.70%. The Company has
the option to prepay the loans at any time following August 9, 2023, the first anniversary of the Amendment date, with tiered prepayment
fees ranging from 0.00 – 1.00% of the prepayment amount based on when the prepayments occur. Upon a change of control or event
of default, mandatory prepayment will be required, and if such an event occurs prior to the first anniversary of the Amendment date,
an additional prepayment fee of 3.0% applies. The Company is entitled to make interest only payments until May 1, 2025 or, if certain
conditions are met, May 1, 2026. The Company has elected to make 4.95% of the interest rate as payable in-kind, which will accrue as
principal monthly.
The
Amended Loan Agreement includes certain other fees, such as a final fee of 4.5% of the funded loan amounts not converted into equity
by the lender, which apply if prepayment, an event of default, or change of control occurs prior to August 9, 2025, the third anniversary
of the Amendment date. Subject to certain other conditions, no final fee will be payable after August 9, 2025 if the terms loans are
not prepaid prior thereto.
Under
the Amended Loan Agreement, Innovatus has the right, at its election and until August 9, 2025, the third anniversary of the Amendment
date, to convert up to $6.6 million of outstanding principal into Company common stock, assuming all term loans are funded (the
“Conversion Rights”). These Conversion Rights include the right to convert up: (i) 20.00% of the outstanding principal amount
of the initial term loan that funded April 8, 2021, and (ii) an additional 7.00% of the amount by which the aggregate principal
amount of the other term loans that are funded exceed $35 million, provided that the aggregate outstanding principal amount of all term
loans funded under the Amended Loan Agreement is at least $35 million. The number of shares of common stock issuable upon exercise of
the Conversion Rights will be based upon a price of $10.00 per share.
The
Amended Loan Agreement is secured by all assets of the Company. Proceeds will be used for working capital purposes and to fund the Company’s
general business requirements. The Amended Loan Agreement contains customary representations and warranties and covenants, subject to
customary carve outs, and includes financial covenants related to or based upon liquidity, trailing twelve months revenue and the funded
loan amounts.
The
description of the Loan Agreement, as amended by the Amendment, contained herein does not purport to be complete and is qualified in
its entirety by reference to the complete text of the Loan Agreement, which was included as Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q filed with the SEC on August 11, 2021, and the Amendment, filed as exhibit 10.1 hereto, each of which are incorporated
herein by reference.