The foregoing description of the Restated Notes and the Restated Security Agreements does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the form of Restated Note and form of Restated Security Agreement filed hereto as Exhibits 99.1 and 99.2, respectively, and incorporated herein by reference.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth in Item 1.01 of this Current Report is incorporated by reference into this Item 2.03.
| Item 7.01 | Regulation FD Disclosure. |
On January 4, 2023, the Company issued a press release announcing, among other things, the issuance of the C5 Note. A copy of that press release is attached hereto as Exhibit 99.3 and is incorporated herein by reference.
The information provided in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.3 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
On December 28, 2022, the Company and C5 entered into an agreement pursuant to which they have agreed to a mutual exclusivity period through January 31, 2023 to seek to negotiate definitive agreements with respect to a potential offer by C5 to acquire all of the outstanding common stock of the Company not presently owned by C5 and certain of its affiliates (the “Proposed Transaction”). Commencement of the exclusivity period was subject to C5 providing the $2.0 million of bridge financing described in Item 1.01 above. Continuation of the exclusivity period after January 9, 2023 is subject to C5 entering into additional Restated Notes providing $3.5 million of additional bridge financing by January 9, 2023. The January 31, 2023 expiration date is subject to an automatic extension of an additional seven days if C5 provides additional bridge financing sufficient to fund the Company’s operations for such seven-day period (up to a maximum additional amount of $3.5 million).
The Company plans to use the proceeds of the Restated Notes to fund its ongoing operations. However, management anticipates that, in the absence of additional sources of liquidity (which may include additional Restated Notes to be issued to C5 as described in the preceding paragraph), the Company’s existing cash and cash equivalents and anticipated cash flows from operations will not be sufficient to meet the Company’s operating and liquidity needs through the end of January 2023.
In the event the Company does not issue any additional Restated Notes to C5 and determines that additional sources of liquidity will not be available to it or will not allow it to meet its obligations as they become due, the Company may need to file a voluntary petition for relief under the United States Bankruptcy Code in order to implement a plan of reorganization, court-supervised sale and/or liquidation. Furthermore, in the event the Company is unable to pursue bankruptcy protection under Chapter 11 of the United States Bankruptcy Code, it may be necessary to pursue bankruptcy protection under Chapter 7 of the United States Bankruptcy Code, in which case a Chapter 7 trustee would be appointed or elected to liquidate the Company’s assets for distribution in accordance with the priorities established by the United States Bankruptcy Code. The Company expects that liquidation under Chapter 7 would result in significantly smaller distributions being made to stakeholders than those it might obtain under Chapter 11 primarily because of the likelihood that the Company’s assets would have to be sold or otherwise disposed of by a Chapter 7 trustee in a distressed fashion over a short period of time rather than sold by existing management as a going concern business. In the event that the Company pursues bankruptcy protection under Chapter 7, the Company’s material business activities will cease, and the Company will no longer have the capability to prepare financial statements and other disclosures required for periodic reports for filing with the Securities and Exchange Commission. The Company expects that no distributions would be available for stockholders in a Chapter 7 liquidation.
