Turks
The bottom line, in my opinion, is that at least $5 million in dilution is going to happen. Even if Titan were to get a $10-$15 million license deal. In that case, the stock price would be a lot higher and there would be less dilution, but given that a re-launch of probuphine is at least a year away, Titan needs to conserve its cash and prepaying all of the Horizon loan doesn't make sense.
The language you quoted states:
“Borrower shall provide Lender, on or after February 1, 2018, but on or prior to February 28, 2018, a written summary of the terms and conditions of a transaction pursuant to which Borrower shall, if such transaction is consummated, receive, on or after February 1, 2018, cash proceeds of not less than Ten Million Dollars ($10,000,000) as a result of the sale of Borrower’s Equity Securities (the “2018 Equity Financing”).”
Horizon is essentially calling in their loan. To forbear from declaring Titan in default right now, they have required Titan to repay $3.0 million of indebtedness, leaving Titan with around $4.0 million in cash right now. Under the loan amendment, by February 28, Titan has to provide Horizon with a term sheet for a $10 million equity raise.
Why $10 million? Because that's enough to take Horizon out without the chance of Titan filing for bankruptcy...making the loan prepayment to Horizon subject to the preference "clawback" of the bankruptcy court.
The loan amendment also states that, by March 15 2018, to the extent required by its charter or applicable law in order to raise $10 million, Titan needs to file a Proxy Statement. However, under Delaware law and its charter, no stockholder approval is required. TTNP could also rely upon the “financial viability” exception to Nasdaq’s stockholder approval requirement (Rule 5635(f). So stockholder approval may not be required.
By May 14 2018, Titan needs to close an equity offering with net proceeds of not less than $5 million, and pay Horizon $1 million. Note that this is less than the $10 million required for the term sheet. Until such date, Horizon has agreed to forbear from declaring Titan in default of its loan under the “material adverse change” clause in Section 8.4 of the Loan Agreement. However, nothing stops Horizon from making such a determination the day after May 14, even if it is paid $1 million.
So, the only way it would make sense to only raise $5 million is if a partnership deal with an upfront payment is signed sometime between now and May. It could happen.
