8-K: Coeptis Therapeutics Secures $20 Million Standby Equity Facility with Yorkville

Coeptis Therapeutics Holdings, Inc. has entered into a Standby Equity Purchase Agreement with YA II PN, LTD for up to $20 million in funding.

Summary

• Coeptis Therapeutics has secured a Standby Equity Purchase Agreement (SEPA) with Yorkville for up to $20 million.
• The company has the option to sell shares to Yorkville over time, but is not obligated to do so.
• Yorkville will purchase shares at 95% of the lowest daily VWAP during a three-day period after an advance notice.
• Coeptis can set a minimum acceptable price for each advance.
• The SEPA will terminate on December 1, 2027, or when all advances are paid, and can be terminated by Coeptis with five days' notice.
• Yorkville cannot own more than 4.99% of the voting power or 19.99% of the outstanding shares without shareholder approval.
• Coeptis paid a $25,000 diligence fee and will pay a $200,000 commitment fee, with $80,000 in shares and $120,000 in cash or an advance.
• Yorkville also provided a $1,304,758 convertible promissory note with 8% interest, increasing to 18% upon default, maturing on November 1, 2025.
• The note can be converted at the lower of $1.00 or 95% of the lowest VWAP over five days, with a floor price of $0.04.
• Yorkville can force an advance by offsetting the note balance against the purchase price of shares.
• Coeptis can redeem the note early with a 5% premium if the VWAP is below $1.00.
• An amortization event occurs if the VWAP is below $0.04 for five days in a week or if the exchange cap is reached, requiring monthly payments of $250,000 plus a 5% premium and interest.
• The company intends to use the proceeds for working capital and general corporate purposes.

Sentiment

Score: 4

Explanation: The agreement provides necessary funding but introduces significant risks of dilution and debt. The terms are not particularly favorable for existing shareholders, hence the lower sentiment score.

Positives

• The SEPA provides Coeptis with access to up to $20 million in capital.
• The company has flexibility in deciding when and how much to draw down from the facility.
• The convertible note provides immediate funding of $1,304,758.
• The company has the option to redeem the note early if the share price is low.
• The agreement includes a registration rights agreement, allowing for the resale of shares issued to Yorkville.

Negatives

• The share price will be diluted if Coeptis draws down the full $20 million.
• The conversion price of the note could result in significant dilution if the share price falls.
• The 18% default interest rate on the note is high.
• The amortization event could force the company to make significant monthly payments.
• Yorkville has the ability to force an advance by offsetting the note balance against the purchase price of shares.

Risks

• The company's share price could be negatively impacted by the potential for dilution.
• The company may be forced to make significant monthly payments if an amortization event occurs.
• The company may be unable to access the full $20 million if the share price falls significantly.
• The company is subject to the risk of default on the convertible note.
• The company's ability to control the timing and amount of sales of shares to Yorkville is limited by the Investor Notice.

Future Outlook

The company expects that any proceeds received from sales to Yorkville will be used for working capital and general corporate purposes. The company will control the timing and amount of any sales of shares of Common Stock to Yorkville, except with respect to Investor Advances. Actual sales of shares of Common Stock to Yorkville as an Advance under the SEPA will depend on a variety of factors to be determined by the Company from time to time, which may include, among other things, market conditions, the trading price of the Companys Common Stock and determinations by the Company as to the appropriate sources of funding for our business and operations.

Industry Context

This type of financing agreement is common for small-cap biotech companies seeking to raise capital. The use of a standby equity purchase agreement provides flexibility but also carries the risk of dilution. The convertible note provides immediate funding but also introduces the risk of debt and potential dilution upon conversion.

Comparison to Industry Standards

• Standby equity purchase agreements are a common financing tool for small-cap and micro-cap companies, particularly in the biotech sector, where access to traditional debt financing can be limited.
• The terms of this agreement, such as the 95% of VWAP pricing and the convertible note with a floor price, are fairly standard for these types of transactions.
• Comparable companies that have used similar financing structures include those with limited revenue and high cash burn rates, often in the early stages of drug development or clinical trials.
• The interest rate on the convertible note (8%, increasing to 18% upon default) is within the typical range for such agreements, reflecting the higher risk associated with these types of investments.
• The 4.99% ownership limitation is a common feature to avoid triggering ownership reporting requirements and to provide some protection against hostile takeovers.
• The inclusion of a registration rights agreement is standard practice, allowing the investor to resell the shares received under the agreement.

Stakeholder Impact

• Shareholders will likely experience dilution if the company draws down the full $20 million.
• Employees may benefit from the increased financial stability of the company.
• Customers and suppliers may see no immediate impact, but the long-term viability of the company is improved.
• Creditors may be concerned about the increased debt load, but the equity facility provides a potential source of repayment.

Next Steps

• The company will file a registration statement to allow for the resale of shares issued to Yorkville.
• The company will decide when and how much to draw down from the equity facility.
• The company will need to manage its cash flow to avoid triggering an amortization event.
• The company will need to monitor its share price to avoid triggering a forced conversion of the note.

Key Dates

Keywords

Standby Equity Purchase Agreement, Convertible Promissory Note, Share Dilution, Capital Raise, Yorkville, VWAP, Amortization Event, Registration Rights, Funding, Equity Financing