Item
2.04. Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement.
As
reported in the Current Report on Form 8-K/A filed by Longfin Corp. (the “Company” or “Longfin”) on February
14, 2018, on February 13, 2018, the Company closed a private placement (the “Private Placement”) of convertible notes
in aggregate principal amount of $52,700,000 (each, a “Note” and collectively, the “Notes”), consisting
of a Series A Note in the principal amount of $ 10,095,941.18, and (ii) a Series B Note in the principal amount of $ 42,604,058.82,
and (2) a warrant to purchase 751,894 shares of Longfin’s Class A common stock, par value $0.00001 per share (the “Class
A Stock”), exercisable for a period of five years at an exercise price of $38.5493 per share (the “Warrant”),
for consideration consisting of (i) a cash payment of $5,000,000, and (ii) a secured promissory note payable by the Investor to
Longfin (collectively, the “Financing”). The Notes and the Warrant were issued pursuant to a Securities Purchase Agreement
January 22, 2018, as amended by amendment No. 1 thereto dated February 12, 2018 (as so amended, the “Purchase Agreement”),
by and among Longfin and an accredited investor within the meaning of the Securities Act of 1933, as amended (the “Purchaser”).
Upon the closing of the Private Placement, the Company received net proceeds of $3.7 million after payment of placement agent
fees and other expenses associated with the transaction. The Company used the net proceeds from the transaction for general business
and working capital purposes.
As
previously disclosed, on April 6, 2018, Longfin received a notice from the NASDAQ Stock Market LLC (“NASDAQ”), indicating
that the Company was no longer in compliance with the NASDAQ Listing Rule 5250(c)(1) due to the Company’s inability to timely
file its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 and also on April 6, 2018, NASDAQ instituted
a trading halt (the “Trading Halt”) in the Company’s Class A Stock. The continuance of the Trading Halt for
a period of five trading days constituted an Event of Default under the Notes. Following the occurrence of an Event of Default,
among other things, at the Purchaser’s election, the outstanding principal amount of the Notes, plus accrued but unpaid
interest at a default interest rate of 18%, liquidated damages and other amounts owed through the date of acceleration, shall
become, immediately due and payable in either cash or stock pursuant to the terms of the Notes. On April 13, 2018, the Purchaser
notified the Company that it had elected to exercise its remedies with respect to requiring the Company to redeem the Series A
Notes (the “Default Notice”). Pursuant to the Default Notice, the Purchaser has demanded that the Company pay the
Event of Default Redemption Price of the Series A Note not later than Friday, April 20, 2018, which the Purchaser has calculated
as $33.6 million if paid by such date. The Purchaser has not exercised its remedies with respect to requiring the Company to redeem
the Series B Note, but in the Default Notice has reserved its rights with regard to such remedy regarding the Event of Default
under the Series B Note. In addition to other remedies available to the Purchaser, the Company’s obligation to repay amounts
due under the Series B is secured by a first priority security interest in and lien on the Investor Note, and such remedies can
be exercised by the Purchaser without additional notice to the Company.
Following
receipt of the Default Notice, the Company has entered into discussions with the Purchaser regarding the renegotiation of the
terms of the Financing in light of the Trading Halt. If the Company is unable to successfully renegotiate the terms of the Financing,
including receiving one or more waivers with respect to the ongoing default under the Notes, it will negatively impact its business
and operations and could also lead to the reduction or suspension of the Company’s operations and ultimately force the Company
to cease operations.