Securities Purchase Agreement
In connection with its strategic commercial partnership, the Company issued a Note in an aggregate principal amount of $5.5 million to Era. Pursuant to a Securities Purchase Agreement, dated December 8, 2023, by and between the Company and Era (the “Purchase Agreement”), the Company has also agreed to issue up to $2.0 million of additional Notes to Era at Era’s election prior to February 6, 2024, subject to certain limitations. The Notes mature on December 8, 2027 (the “Maturity Date”).
The Notes will bear cash interest at a rate equal to the applicable federal rate published by the Internal Revenue Service beginning on the six-month anniversary of the Issuance Date. The Notes are contractually subordinated to the Company’s obligations under its senior secured indebtedness, and accordingly the Company’s right to make certain cash payments in connection therewith is limited by the terms of such subordination agreement (the “Subordination Agreement”). Era may convert the Notes into shares of Common Stock (the “Underlying Shares”), beginning on the six-month anniversary of the Issuance Date based on the volume weighted average price of the trailing 30 trading day period prior to the conversion. In addition, the Company may elect to convert the Note into the Underlying Shares if the Underlying Shares are registered for resale under the Securities Act of 1933, as amended (the “Securities Act”).
The Co-Pilot Agreement requires the Company to issue additional shares of Common Stock (“Additional Shares”) to Era if Era’s sales of the Partnership Shares and the Underlying Shares during the Redemption Period do not generate aggregate cash proceeds to Era that equal or exceed the sum of (1) the aggregate principal amount of Notes purchased by Era, plus (2) up to $3.75 million. Any such Additional Shares would be valued based on the volume weighted average price of the trailing 30 trading day period, calculated prior to the date of any such issuance.
The Notes provide for customary events of default including failure to pay amounts due and owing under the Notes, failure to deliver the Underlying Shares, and other customary events of default similar to those provided under the terms of the Company’s senior secured indebtedness.
The Purchase Agreement included certain customary representations, warranties and covenants with respect to the Company and Era. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties therein, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Purchase Agreement is incorporated herein by reference only to provide investors with information regarding the terms of the Purchase Agreement, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the SEC.
The foregoing descriptions of the Purchase Agreement and the Notes do not purport to be complete and are qualified in their entirety by reference to the Purchase Agreement and the form of Note, copies of which are filed as Exhibit 10.2 and Exhibit 10.3, respectively, to this Current Report on Form 8-K and are incorporated by reference into this Item 1.01.
Registration Rights Agreement
On the Issuance Date, in connection with the Purchase Agreement and the AI Co-Pilot Agreement, the Company also entered into a registration rights agreement with Era (the “Registration Rights Agreement”), requiring the Company to register for resale the Underlying Shares, Partnership Shares and Additional Shares, if any, by filing with the SEC a resale registration statement under the Securities Act within 30 days of the Issuance Date with respect to the Underlying Shares and Partnership Shares. Additionally, the Company is required to file a second resale registration statement within 15 days of the issuance of any Additional Shares.
The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is filed as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated by reference into this Item 1.01.
Certain statements in this Current Report on Form 8-K may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements generally relate to future events or the Company’s future financial or operating performance. For example, statements regarding the Company’s future expectation regarding acceleration of its ongoing growth and expansion strategy, advancement of its new product development, and optimization of sales and marketing efforts are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “pro forma,” “may,” “should,” “could,” “might,” “plan,” “possible,” “project,” “strive,” “budget,” “forecast,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue,” or