Credit and Securities Purchase Transaction

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Credit and Securities Purchase Transaction

Credit and Securities Purchase Transaction

Credit and Guaranty Agreement (“Credit Agreement”)

Delayed Draw Term Loan

On June 21, 2024, the Company entered into the following agreements with CCM Denali Debt Holdings, LP, an affiliate of Cerberus Capital Management LP (herein after referred to as“Denali”, “Lender”, “Denali Lender”, “Holder”, “Purchaser”). As a result of this transaction, the Lender is deemed a related party. Pursuant to the Credit Agreement, the Lender has agreed to provide a $210,500 secured multi-draw facility to be made in four installments (the “Delayed Draw Term Loan”) as well as a $105,000 revolving credit facility (“Revolving Facility”), to be made available at the Lenders’ sole discretion and only if the Delayed Draw Term Loan is fully funded. On June 21, 2024 the initial $75,000 installment was funded (the “Initial Draw”). The Initial Draw is included in Notes payable - related party on the Unaudited Condensed Consolidated Balance Sheets and is measured at fair value (pursuant to the fair value option elected by the Company in accordance with ASC 825). See Note 13, Borrowings, for further discussion.

Delayed Draw Term Loan Commitments (“Loan Commitment Assets”)

Pursuant to the terms of the Credit Agreement, Denali has committed to fund to the Company, additional amounts up to $135,500 to be made available to the Company by the Lender in three tranches ($30,000, $65,000 and $40,500 on August 31, 2024, October 31, 2024 and January 31, 2025, respectively), subject to the achievement of certain performance milestones, and subject to terms and conditions set forth in the Credit Agreement. As of June 30, 2024, the Loan Commitment Assets amounted to $76,091 on the Company’s Condensed Consolidated Balance Sheets, which was the fair value on the issuance date.

Securities Purchase Agreement

On June 21, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with CCM Denali Equity Holdings, LP (the “Purchaser”).

SPA Warrant

Under the SPA, the Company issued a warrant to purchase 43,276,194 shares of Common Stock representing a collective ownership of 19.9% (the “SPA Warrant”). The SPA Warrant has a ten-year term and an exercise price of $0.01 per share. The SPA Warrant includes anti-dilutive rights, subject to certain excluded issuances, in the event any shares of Common Stock, options, warrants, convertible securities or other equity or equity equivalent securities payable in Common Stock are issued at a price per share of less than the fair market value (as defined in the Warrant) of a share of Common Stock on the issuance date of the Warrant, subject to adjustment. Until or unless the Company receives stockholder approval, the Company may not issue additional shares of Common Stock exceeding 19.99% of shares of Common Stock issued and outstanding as of the date of the Initial Draw (such percentage, as may be adjusted in accordance with the terms of the Warrant, the “Warrant Conversion Cap”) upon exercise of the Warrant, and is required to issue, at the option of the Lender, Series A Preferred Stock or additional warrants on Common Stock upon a draw under the Delayed Draw Credit Facility. Prior to stockholder approval, in lieu of receiving such anti-dilution protection, the liquidation value of the Series A-1 Preferred Stock (discussed below) will be proportionately increased to give effect to such anti-dilution protection. Following stockholder approval, the Warrant Conversion Cap increases to 49.9% of the number of shares of Common Stock issued and outstanding as of the applicable measurement date; provided that, following stockholder approval, the holder of the Warrant has the option to amend the Warrant Conversion Cap to any percentage less than 49.9%.

The SPA Warrant is exercisable at the holder’s discretion for cash or on a cashless basis. The SPA Warrant is subject to automatic cashless exercise on the expiration date if the fair market value of one share is greater than the exercise price then in effect. Upon an acceleration under the Credit Agreement, the Company may be required to purchase the SPA Warrant from the holder at an amount equal to the closing sale price less the SPA Warrant price at the request of the holder. The SPA Warrant meets the criteria for liability classification under ASC 480 and is recognized at fair value with changes in fair value included in Change in fair value of derivatives - related parties in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

Contingent Warrants

Upon the achievement of performance milestones on dates specified in the Credit Agreement, the Company will receive additional funds and will issue at the option of the Lender, Preferred Stock (Series A-1 Preferred Stock, if prior to shareholder approval or Series B Preferred stock if after shareholder approval) or warrants on common stock (collectively “Contingent Warrants”) under the SPA in an amount equal to the applicable percentage, up to an aggregate of 33.0% ownership limitation on a fully diluted basis at such time the Delayed Draw Term Loan is fully drawn. The Contingent Warrants meet the criteria for liability classification under ASC 480. As such, the Contingent Warrants are included in Warrants liability - related party on the Unaudited Condensed Consolidated Balance Sheets at fair value as of June 30, 2024. The change in fair value of the Contingent warrants is included in Change in fair value of derivatives - related parties on the Company’s Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. See Note 14, Warrants Liability, for further discussion of the SPA Warrant and Contingent Warrants.

Series A-1 Preferred Stock

On June 21, 2024, the Company filed with the Secretary of State of the State of Delaware the Series A-1 Certificate of Designation and issued 59 shares of Series A-1 Preferred Stock to satisfy the terms of the Credit Agreement. Under the terms of the Series A-1 Certificate of Designation, each share of Series A-1 Preferred Stock has an original issue price of $455,822.59 (the “A-1 Original Issue Price”) and a liquidation value, payable with the Common Stock, as if such shares were convertible into 541,357 shares, or an aggregate of 31,940,063 shares of Common Stock, subject to adjustment. The Series A-1 Preferred Stock is non-voting and non-convertible into Common Stock. Holders of the Series A-1 Preferred Stock are entitled to receive dividends or distributions on each share of Series A-1 Preferred Stock equal to dividends or distributions actually paid on each share of Common Stock, multiplied by the number of shares of Common Stock represented by the Series A-1 Preferred Stock Liquidation Value (as defined in the Series A-1 Certificate of Designation). If stockholder approval of the issuance of additional shares of Common Stock in connection with the SPA Warrant described above is obtained, then the Series A-1 Preferred Stock will become convertible into shares of Series B-1 Preferred Stock.

At any time after the fifth (5th) anniversary of the original issue date (which is the date on which the Series A-1 Certificate of Designation filed with the Secretary of State of Delaware), the outstanding shares of Series A-1 Preferred Stock held by any holder become redeemable for cash at the redemption price. The redemption price will be an amount per share equal to the greater of (i) A-1 Original Issue Price plus all accrued and unpaid dividends thereon, up to and including the date of redemption and (ii) the number of shares of Common Stock represented by the Series A-1 Liquidation Value (as defined in the Series A-1 Certificate of Designation) multiplied by the average of the closing sale price of the Common Stock for the five (5) business days immediately prior to the date of redemption plus all accrued and unpaid dividends thereon, up to and including the date of redemption. Subject to certain excluded issuances (as defined in the Series A-1 Certificate of Designation), the Series A-1 Preferred Stock is subject to anti-dilution protection in the number of shares of Common Stock represented by the liquidation preference. Additionally, the Series A-1 Preferred Stock provides that, to the extent any Warrant so requires, the number of shares of Common Stock represented by the Series A-1 Liquidation Value will be increased as set forth in the SPA Warrant.

The terms of any additional shares of Series A Preferred Stock issued pursuant to the terms of the Credit Agreement and SPA will be substantially similar to the Series A-1 Preferred Stock, but for the number of shares constituting such shares, the original issue price of such series and the liquidation value of such shares. Series A Preferred Stock can only be issued prior to shareholder approval.

As of June 30, 2024, the Series A-1 Preferred Stock is classified as mezzanine equity on the Unaudited Condensed Consolidated Balance Sheets at its redemption value because it is probable of becoming redeemable. The Company recorded accretion of the Series A-1 Preferred Stock, which reduces additional paid-in capital, on the Unaudited Condensed Statements of Shareholders' Equity (Deficit).

Series B-1 Preferred Stock

If stockholder approval of the issuance of additional shares of Common Stock in connection with the SPA warrant described above is obtained, then the Series A-1 Preferred Stock will become convertible into shares of Series B-1. The Series B-1 Preferred Stock will contain substantially similar terms to the Series A-1 Preferred Stock except that each share of Series B-1 Preferred Stock will be convertible into 1,000,000 shares of Common Stock.

As of and for the three and six months ended June 30, 2024, there were no shares of Series B-1 Preferred Stock issued or outstanding.

Atlas Payoff Letter and Insurer Letter Agreement

On June 21, 2024 (the “Atlas Facility Termination Date”), the Company entered into a payoff letter agreement (the “Atlas Payoff Letter”), by and among the Company, ACP Post Oak Credit I LLC (“Atlas”) and the Atlas Lenders (as defined below) relating to the Company’s Senior Secured Term Loan (see Note 13, Borrowings), dated as of July 29, 2022 (the “Atlas Credit Agreement”), by and among the Company and Atlas, as lender, administrative agent and collateral agent, and the lenders from time to time party thereto (collectively with Atlas, the “Atlas Lenders”). Pursuant to the Atlas Payoff Letter, as of the Atlas Facility Termination Date, all outstanding obligations under the Atlas Credit Agreement and the related facility documents were deemed paid and satisfied in full and all security interests and other liens granted to or held by the Atlas Lenders were terminated and released. Under the Atlas Payoff Letter, the Company agreed to pay to the Atlas Lenders on the Atlas Facility Termination Date (a) approximately $11,900 (which was released from the interest escrow account maintained pursuant to the Atlas Credit Agreement, and (b) $8,000. Atlas also agreed, in lieu of amounts due from the Company, to receive a $1,000 participation in the Credit Agreement, as negotiated between Atlas and the Denali Lender. The Company has no obligation under the participation agreement between Atlas and the Lender. The payoff of the Senior Secured Term Loan resulted in a restructuring gain. These amounts are included in Gain (loss) on debt extinguishment on the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss. See Note 13, Borrowings, for further discussion.

In connection with the termination of the Atlas Credit Agreement, the Company entered into an insurer letter agreement, dated as of June 21, 2024 (the “Insurer Letter Agreement”), with the insurance companies that issued insurance policies to certain Atlas Lenders in connection with the Atlas Credit Agreement (the “Atlas Insurers”) pursuant to which the Company and the Atlas Insurers agreed that the Company shall pay to the Atlas Insurers, subject to the terms and conditions of the Insurer Letter Agreement (i) on December 31, 2024, subject to the absence of certain events of default under the Credit Agreement, $3,000 and (ii) on June 30, 2025, subject to the absence of certain events of default under the Credit Agreement, $4,000. These amounts are included in Accrued expenses on the Unaudited Condensed Consolidated Balance Sheets.