In a letter to investors obtained by Buzzfeed News, Theranos founder Elizabeth Holmes explained how Theranos is falling behind on the development milestones it needs to hit.
- Theranos CEO Elizabeth Holmes is asking her investors for more money to keep the company afloat, according to a letter obtained by Buzzfeed News.
- In a letter sent on Tuesday, Holmes explains how Theranos is falling behind on the development milestones it needs to hit under its agreement with Fortress Investment Group, which provided the blood-testing company with $100 million in funding to get it through 2018.
- "The most viable option that we have identified to forestall a near-term sale or a potential default under our credit agreement is further investment by one or more of you," Holmes said in the letter.
Theranos is asking its investors for more money to save it from defaulting on its credit agreement that was meant to get the company through 2018, according to a letter obtained by Buzzfeed News.
In December, Theranos said in a letter to investors that it had raised $100 million in secured debt financing from Fortress Investment Group.
"Based on our present projections, we believe we will have sufficient liquidity through 2018, by which point we hope to have secured regulatory approval for miniLab testing for the Zika virus and begun submissions for additional assays," Theranos CEO Elizabeth Holmes wrote in the investor letter in December.
However, it seems Theranos is falling behind in that work.
In a letter to investors on Tuesday obtained by Buzzfeed News, Holmes explains how Theranos is falling behind on the development milestones it needs to hit under its agreement with Fortress.
Development of the Zika test has taken longer than expected, and getting its approval was a contingency to getting more funding from Fortress that had been tranched. By the end of July, Theranos will fall below the $3 million liquidity line it needs to maintain or else it will default on its agreement with Fortress. Should that happen, Fortress can take control of Theranos's assets.
So, Holmes is asking her investors — which have already poured more than $700 million into the company — for more money.
"The most viable option that we have identified to forestall a near-term sale or a potential default under our credit agreement is further investment by one or more of you," Holmes said in the letter. "In light of where we are, this is no easy ask. However, given your support of the company over the years, we wanted to provide this opportunity before we proceed too far down the current path."
Theranos has been under fire since October 2015 when The Wall Street Journal published an investigation that called into question the accuracy of its blood test.
The Journal reported on Tuesday that the blood-testing company, which was recently charged with fraud by the SEC, has laid off another 100 employees. It's the third round of layoffs in the past two years for the blood-testing company. At one point, the company had more than 700 employees.
That brings Theranos' headcount to about 24 employees, The Journal reported.
The company's decision Tuesday to lay off the majority of its staff was a step to cut costs, leaving only "financial, legal and administrative personnel alongside a core technical team," Holmes said in the letter.