Sunshine Heart (SSH) Announces $3.8M Conv. Preferred Direct Offering, Private Placement

October 31, 2016 9:03 AM EDT

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Sunshine Heart, Inc. (Nasdaq: SSH) announced that it has entered into a definitive agreement with a healthcare dedicated institutional investor for an offering of shares of two series of convertible preferred stock with gross proceeds of $3.8 million in a registered direct offering and concurrent private placement.

In connection with the offering, the Company will issue 2,900 registered shares of Series C Convertible Preferred Stock (which, subject to adjustment, will be convertible into a total of 17,058,824 shares of common stock at an initial conversion price of $0.17). Concurrently, in a private placement, the Company will issue 900 unregistered shares of Series D Convertible Preferred Stock (which, subject to adjustment, will be convertible into a total of 5,294,118 shares of common stock at an initial conversion price of $0.17). Also in the private placement, the investors in the offering will receive warrants to purchase shares of common stock exercisable for up to 22,352,941 additional shares of common stock, in the aggregate. The warrants have an exercise price of $0.18 per share, subject to adjustment, and are exercisable for 5 years commencing on the later of the receipt of stockholder approval of the transactions and six months from the closing date. Subject to the satisfaction of customary closing conditions, the initial closing of the offering and private placement is expected to take place on or about November 3, 2016 with a second closing to take place within three business days following stockholder approval of the transactions, if received. The shares of Series C Convertible Preferred Stock and Series D Convertible Preferred Stock are not convertible into, and the warrants are not exercisable for, shares of common stock if and until the Company’s stockholders approve the transactions.

Northland Securities, Inc. acted as the exclusive placement agent in connection with the offering.

The Company intends to use the net proceeds from the offering and private placement offering for working capital needs for our recently-acquired Aquadex product line and for general corporate purposes.

The shares of Series C Convertible Preferred Stock described above (but not the warrants or the shares of common stock underlying the warrants) are being offered pursuant to a shelf registration statement (File No. 333-194731). Such shares of common stock may be offered only by means of a prospectus, including a prospectus supplement, forming a part of the effective registration statement.

The Series D Convertible Preferred Stock and the warrants and the shares of common stock underlying such preferred stock and warrants have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws in reliance on an exemption from such registration. Accordingly, the shares of Series D Convertible Preferred Stock, warrants such underlying shares of common stock may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws.

The Company also announced that, in a separate transaction, it has entered into an agreement with the holders of its Series B Convertible Preferred Stock pursuant to which the Company will issue such holders 2,227.2 shares of the Company’s Series B-1 Convertible Preferred Stock in exchange for the cancellation of all shares of Series B Convertible Preferred Stock held by such holders in reliance on an exemption from registration under the Securities Act of 1933, as amended. The terms of the new series of preferred stock will be identical to those of the Series B Convertible Preferred Stock except that the initial conversion price will be $0.17 per share and the Series B-1 Convertible Preferred Stock will be subject to a limitation on conversion so that the holders cannot convert into common stock if and until the receipt of stockholder approval if such conversion would cause more than 19.9% of the outstanding shares of common stock to be issued to the holders of either series to date.



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