SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 19. SUBSEQUENT EVENTS

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

Restructuring Support Agreement

On April 21, 2023, the Company entered into the Restructuring Support Agreement with (i) certain holders of the Notes (together with holders that subsequently execute a Joinder or Transferee Agreement (each as defined in the Restructuring Support Agreement, the “Consenting Noteholders”), (ii) the holder (together with any holders that subsequently execute a Transferee Agreement, the “Consenting Senior Secured Lenders”) of claims arising from the Secured Note (the “Senior Secured Claims”) and (iii) the holders (together with any holders that subsequently execute a Transferee Agreement the “Consenting Preferred Shareholders,” and collectively with the Consenting Noteholders and Consenting Senior Secured Lenders, the “Consenting Stakeholders”) of the Company’s Series A Preferred Stock (the “Existing Preferred Interests”). Pursuant to the transactions contemplated by the Restructuring Support Agreement, the Company will be relieved of approximately $92.2 million of outstanding indebtedness and will incur approximately $67.3 million of indebtedness in the form of New Senior Secured Convertible Notes (as defined below) which are expected to have a term of 3.5 years, in each case subject to increase on account of interest accrued from March 15, 2023, and will receive up to approximately $14 million of additional funding (plus up to an additional $20 million of equity funding pursuant to the additional securities purchase agreement referred below). These transactions are expected to result in the issuance of significant amounts of common Stock and securities convertible into significant amounts of common Stock as described below.

On the Effective Date (as defined in the Restructuring Support Agreement), the Company expects to enter into the transactions described in this paragraph pursuant to the Restructuring Support Agreement. The Company expects to issue approximately $57.3 million aggregate principal amount of New Senior Secured Convertible Notes to the Consenting Noteholders in exchange for a like aggregate amount of the outstanding existing Notes (plus additional New Senior Secured Convertible Notes in respect of interest accrued on the from March 15, 2023). Separately, subject to agreed allocations, certain Consenting Noteholders have committed to purchase $10 million of additional New Senior Secured Convertible Notes, in the aggregate. The New Senior Secured Convertible Notes are expected to have a term of 3.5 years and would be convertible at the election of the holder into up to approximately 93.5 million shares of Company’s common stock (without giving effect to interest accrued on the Notes since March 15, 2023) at a conversion price of approximately $0.72 per share and would bear interest at a rate of 5% per annum, payable in kind. Interest on the New Senior Secured Convertible Notes would be convertible into up to approximately 18.0 million shares of the Company’s common stock if held to maturity. The conversion price is subject to adjustment based on the difference between the 31 to 90 day volume-weighted average price, subject to a cap of $0.83 per share. The foregoing amounts are based on the amount of principal and accrued but unpaid interest on the Notes as of March 15, 2023 and the final amounts will be adjusted based on interest accrued on the Notes after March 15, 2023. Pursuant to the Restructuring Support Agreement, the Senior Secured Claims in the aggregate principal amount of $35.9 million (inclusive of accrued interest) would be converted into the Company’s common stock at a price of $1.06 per share or approximately 34.0 million shares valued at $1.06 per share and the Existing Preferred Interests would be converted into 3,954,546 shares of the Company’s common

stock. Also pursuant to the Restructuring Support Agreement, the Company would enter into an amendment to the March 2022 Securities Purchase Agreement that it entered into with the Schuler Trust in March 2022. Pursuant to this amendment, the Company would issue approximately 5.0 million shares of the Company’s common stock valued at $0.82 per share to the Schuler Trust for proceeds of $4.0 million, with the closing date under the March 2022 Securties Purchase Agreement also being extended to the effective date. Also pursuant to the Restructuring Support Agreement, the Company would enter into an additional securities purchase agreement with the Schuler Trust that would require the Schuler Trust at the Company’s option to either purchase approximately 14.0 million shares of common stock from the Company for aggregate proceeds of $10.0 million or to backstop a public offering by the Company of common stock at market prices for proceeds of $10.0 million. If other investors purchase $10 million of common stock in the public offering, the Schuler Trust will have the right, but not the obligation, to purchase up to $10 million of additional shares of common stock at the public offering price for the backstopped offering.

The Company and the Consenting Stakeholders agreed to negotiate in good faith to effect the Restructuring Transactions as an Out-of-Court Restructuring. The Consenting Noteholders party to the Restructuring Support Agreement held 91% in aggregate principal amount of the Notes as of April 21, 2023. In connection with the Out-of-Court Restructuring, holders of no less than 99% (the “Consent Condition Milestone”) in principal amount of the outstanding Notes must agree to exchange their existing Notes for a like aggregate amount of senior secured convertible notes (“New Senior Secured Convertible Notes”). In the event that the requisite consents for the Out-of-Court Restructuring are not obtained by the date provided for in the Restructuring Support Agreement, the Company and Consenting Stakeholders have agreed to consummate the Restructuring Transactions pursuant to a pre-packaged plan of reorganization under chapter 11 of the U.S. Bankruptcy Code.

The Restructuring Support Agreement may be mutually terminated by the Company and certain Consenting Stakeholders by written agreement. The Restructuring Support Agreement will automatically terminate immediately upon (a) the date that is 10 days after any third party files involuntary bankruptcy petitions in respect of the Company unless such petitions have been dismissed or (b) the consummation of the Restructuring Transactions on the terms and conditions set forth in the Restructuring Support Agreement. The Company and the Consenting Stakeholders each have termination rights if certain conditions are not met.

In connection with the Restructuring Support Agreement and the transactions contemplated thereby, on April 14, 2023, the Company’s board of directors approved an amendment to the Company’s Certificate of Incorporation to increase the total number of authorized shares of the Company’s capital stock to 455,000,000 shares, of which 450,000,000 shares are to be designated as common stock and 5,000,000 shares are to be designated as preferred stock. The adoption of this amendment is subject to the consent of the stockholders of the Company. The Company filed a Preliminary Proxy Statement on April 21, 2023 and a Definitive Proxy Statement on May 1, 2023 (the “Proxy Statement”) seeking stockholder approval of the amendment in order to enable the Company to restructure the Company’s outstanding Notes, including to be able to reserve for issuance shares of common stock that would underlie the New Senior Secured Convertible Notes to be issued in connection with the restructuring. In the Proxy Statement, the Company is also seeking stockholder approval prior to the issuance of the Company’s common stock or securities convertible or exercisable into common stock in connection with the restructuring in accordance with the NASDAQ Listing Rule 5635(d). These proposals in the Proxy Statement provide additional details concerning the transactions contemplated by the Restructuring Support Agreement.

On May 12, 2023, the Company and the Consenting Noteholders agreed to extend the Consent Condition Milestone to no later than 11:59 P.M. (Eastern Daylight Time) on May 16, 2023.