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TOPIC: Nuo Therapeutics (Formerly Cytomedix) Chapt 11

Nuo Therapeutics (Formerly Cytomedix) Chapt 11 29 Apr 2016 12:10 #6883

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It got approval for wound healing but ran out of cash...

Item 1.03 Bankruptcy or Receivership
As previously reported on a Form 8-K filed by Nuo Therapeutics, Inc. (the "Company"), on January 26, 2016, the Company filed a voluntary petition in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") seeking relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"), which is being administered under the caption "In re:
Nuo Therapeutics, Inc.", Case No. 16-10192 (MFW) (the "Chapter 11 Case").

On April 25, 2016 (the "Confirmation Date"), the Bankruptcy Court entered an Order Granting Final Approval of Disclosure Statement and Confirming Debtor's Plan of Reorganization (the "Confirmation Order"), which confirmed the Company's Modified First Amended Plan of Reorganization under Chapter 11 of the Bankruptcy Code (as confirmed, the "Plan").

The Company expects that the effective date of the Plan will occur as soon as all conditions precedent to the Plan have been satisfied, but no later than May 5, 2016 (defined in the Plan as the "Effective Date"). Although the Company anticipates that all conditions that the Company must satisfy before the Effective Date, other than the passage of time, will have been satisfied on or prior to such date, the Company can make no assurances as to when, or ultimately if, the Plan will become effective. It is also possible that technical amendments could be made to the Plan.

The following is a summary of the material terms of the Plan. This summary highlights only certain substantive provisions of the Plan and is not intended to be a complete description of the Plan. This summary is qualified in its entirety by reference to the full text of the Plan and the Confirmation Order, which are attached hereto as Exhibits 2.1 and 99.1, respectively, and incorporated by reference herein. All capitalized terms used herein but not otherwise defined in this Current Report on Form 8-K have the meanings set forth in the Plan.

General

The Plan contemplates that, prior to the Effective Date, the Company will seek to raise not less than $10,500,000 in funding (of which $3,000,000 may be in the form of backstop irrevocable capital call commitments from creditworthy obligors in the reasonable judgment of the Lenders (the "Backstop Commitments")) through a private placement of common stock of the Reorganized Company (in such event, a "Successful Capital Raise"). If the Debtor is unable to achieve a Successful Capital Raise (in such event, an "Unsuccessful Capital Raise"), then the Plan contemplates alternative treatment of certain claims and equity interests. The proposed treatment of claims and equity interests in the event of a Successful Capital Raise is described herein under "Scenario A", and the proposed treatment of claims and equity interests in the event of an Unsuccessful Capital Raise is described herein under "Scenario B".

As of the date of this Form 8-K, the Company has received commitments from investors (the "New Investors") to purchase $7,500,000 in the aggregate value of shares of New Common Stock (as defined below) in a private placement and to provide $3,000,000 in Backstop Commitments, in each case as required by Scenario A for a Successful Capital Raise. If the New Investors fund their commitments on or prior to the Effective Date, the Company will effect Scenario A of the Plan on the Effective Date.

Treatment of Common Stock Outstanding Prior to the Effective Date

Pursuant to the Plan, under both Scenario A and Scenario B, each share of the Company's common stock outstanding immediately before the Effective Date ("Old Common Stock") and all options and warrants to purchase such Old Common Stock will be cancelled and have no further force or effect after the Effective Date. Under the Plan, the Company will file a new Certificate of Incorporation (the "New Charter") on the Effective Date and new Bylaws will become effective on the Effective Date. The New Charter will authorize the reorganized company (the "Reorganized Company") to issue shares of new common stock ("New Common Stock"), certain shares of which will be issued as described below. Under Scenario A only, the New Charter will authorize the issuance by the Reorganized Company of Series A preferred stock to Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P. and Deerfield Special Situations Fund, L.P. (the "Lenders").

Proposed Treatment of Claims and Equity Interests under Scenario A

In the event of a Successful Capital Raise, each holder of an allowed general unsecured claim will receive: (i) if total allowed unsecured claims are less than $2,000,000, an amount necessary to pay such allowed claim in full in cash without post-petition interest; (ii) if total allowed unsecured claims are between $2,000,000 and $3,000,000, the lesser of (a) an amount necessary to pay such allowed claim in full in cash without post-petition interest or (b) a pro rata share of a cash fund in the amount of $2,250,000; (iii) if total allowed unsecured claims are between $3,000,001 and $4,000,000, a pro rata share of a cash fund in the amount of $2,500,000; or (iv) if total allowed unsecured claims are greater than $4,000,001, a pro rata share of a cash fund in the amount of $2,750,000.

In the event of a Successful Capital Raise, the New Investors will receive 100% of the New Common Stock of the Reorganized Company on the Effective Date, and will be deemed to allocate to existing holders of Old Common Stock in the Debtor as of the record date of March 28, 2016 who execute and timely deliver a release document no later than sixty (60) days after the Effective Date a percentage of the New Common Stock, which percentage, in the aggregate, is presently expected to represent approximately 29% of the New Common Stock based on the total number of shares of New Common Stock expected to be outstanding immediately after the Effective Date ("Scenario A Allocated New Common Stock"). This percentage will be reduced if the Company issues additional shares of New Common Stock after the Effective Date, including upon the exercise of the warrants described below that are being issued to certain of the New Investors and upon the Reorganized Company exercising its rights under the Backstop Commitments. The allocation of Scenario A Allocated New Common Stock of the Reorganized Company among existing holders of Old Common Stock who execute and timely deliver a release document will be based on a pro rata share of such holders' existing Old Common Stock on the record date of March 28, 2016. Any such holder who does not execute and timely deliver a release document shall not receive its pro rata share of the Scenario A Allocated New Common Stock and such shares shall be cancelled by the Reorganized Company.

Certain of the New Investors are also receiving warrants to purchase additional shares of New Common Stock in the future in exchange for their agreement to purchase shares of New Common Stock. A significant majority of the New Investors have indicated that they will participate in their pro rata share of the Backstop Commitments. The terms of the Backstop Commitments provide that the shares of New Common Stock to be issued if the Reorganized Company exercises its rights under the Backstop Commitments will be priced at a significant discount to the price of the New Common Stock being issued on the Effective Date to cause the average per share price on the total investment made by a New Investor who participates in the Backstop Commitments to be equal to 50% of the per share price being paid on the Effective Date.

In the event of a Successful Capital Raise, on the Effective Date, the Lenders will receive non-convertible, non-dividend paying, preferred equity interests in the Reorganized Debtor in the amount of such balance (estimated to be approximately $29.3 million), which shall have a liquidation preference senior to all other equity interests (the "Series A Preferred Equity"), which terms shall be set forth in the New Charter, and the Lenders shall receive no New Common Stock or other equity interest. Holders of the Series A Preferred Equity interests will be entitled to voting rights representing one percent (1%) of the voting rights of the Reorganized Company. Holders of the Series A Preferred Equity will have the right to nominate a director to the Reorganized Company's board of directors.

Proposed Treatment of Claims and Equity Interests under Scenario B

In the event of an Unsuccessful Capital Raise, each holder of an allowed general unsecured claim will receive the lesser of (i) an amount necessary to pay such allowed claim in full in cash without post-petition interest or (ii) a pro rata share of a cash fund in the amount of $2,000,000.

In the event of an Unsuccessful Capital Raise, Lenders will receive 100% of the New Common Stock of the Reorganized Debtor on the Effective Date in exchange for a portion of the Lenders' Secured Claims. The Lenders will allocate to existing holders of Old Common Stock who execute and timely deliver a release document no later than sixty (60) days after the Effective Date their pro rata share (based on their existing holdings of Old Common Stock on the record date of March 28, 2016) of a 5% pool of the Lenders' New Common Stock (the "Scenario B Allocated New Common Stock") on the Effective Date. Any such holder who does not execute and timely deliver a release document shall not receive its pro rata share of the Scenario B Allocated New Common Stock and such shares shall be distributed to Lenders.

Release Document to be Executed by Holders of Old Common Stock

In either Scenario A or Scenario B, in order for any holder of Old Common Stock as of the record date of March 28, 2016 to receive its pro rata share of Scenario A Allocated New Common Stock or Scenario B Allocated New Common Stock of the Reorganized Company, such holder must execute and timely deliver a release document no later than sixty (60) days after the Effective Date. Holders of Old Common Stock who execute and timely deliver a release document shall receive their pro rata share of the Scenario A Allocated New Common Stock or Scenario B Allocated New Common Stock, as the case may be, by the later of (i) thirty (30) days after the Effective Date or (ii) thirty (30) days after execution and timely delivery of a release document to the Reorganized Company. Any portion of the Scenario A Allocated New Common Stock not allocated pursuant to the procedures and timeframe above shall be cancelled. Any portion of the Scenario B Allocated New Common Stock not allocated pursuant to the procedures and timeframe above shall be returned to the Lenders.

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