| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of Registrant. |
On April 29, 2022, the Company entered into an
agreement to repay $5 million of its outstanding convertible promissory notes (the “Notes”) on May 9, 2022, the date
of maturity of such Notes, and amend and restate the remaining principal amount of $15 million of the Notes to extend the maturity date
of such notes (the “Amended Notes”) until May 9, 2025 (with three principal payments of $5 million due on each of May
9, 2023, May 9, 2024 and May 9, 2025), provided the Company completes a contemplated Exchange Offer and provides notice of redemption
of its remaining outstanding Series B Preferred Stock and Series C Preferred Stock by October 31, 2022, as described in Item 1.01 above.
If the Company does not satisfy such exchange and redemption conditions, the Amended Notes will be due on November 9, 2022.
Interest on the Amended Notes remains at 7.0% per
annum payable quarterly and computed on the basis of a 360 day year of twelve (12) months each comprised of thirty (30) days. The
Amended Notes contain customary affirmative and negative covenants of the Company, including covenants not to incur certain indebtedness
that is not subordinated and not to make optional payments on its indebtedness (other than on the Amended Notes) or amend material indebtedness
in a manner that is adverse in any material manner to the Noteholders.
Noteholders may convert at any time all or a portion
of the outstanding principal amount of the Notes into shares of the Company’s Common Stock (“Conversion Shares”)
at a rate of $21.50 per share (up to 697,674 shares in the aggregate), subject to adjustment for stock splits and dividends (the “Conversion
Price”). The Company has the right to convert the entire outstanding principal of the Notes into Conversion Shares at the Conversion
Price if the market price per share of the Common Stock, as measured by the average volume-weighted closing stock price per share of the
Common Stock on the NYSE MKT (or any other U.S. national securities exchange then serving as the principal such exchange on which the
shares of Common Stock are listed) for any twenty (20) trading days in any period of thirty (30) consecutive trading days, reaches the
level of $30.10. Upon conversion of the Amended Notes by the Company, the entire amount of accrued and unpaid interest (and all
other amounts owing) under the Amended Notes are immediately due and payable.
Upon a change of control of the Company, the holders
of a majority of the outstanding principal balance of the Amended Notes have the right to either (a) cause all unpaid principal and
accrued but unpaid interest and other amounts owing to become immediately due and payable in full, (b) cause the entire unpaid principal
balance of the Amended Notes to be converted into shares of the Common Stock at the Conversion Price then in effect, with the entire
amount of accrued but unpaid interest and other amounts owing under the Notes to be immediately due and payable in cash, or (c) cause
the Amended Notes to continue in full force and effect.
The Amended Notes include customary events of default
including: failure to pay principal on any Amended Notes when due; failure to pay interest on the Amended Notes for two business days
after it becomes due; failure in the performance of any other covenant contained in the terms of the Amended Notes for a period of thirty
(30) days after written notice from any Noteholder; acceleration of other debt agreements representing in excess of $3 million of indebtedness
at any one time; the entry of judgments in excess of $3 million against the Company and certain bankruptcy events. Upon an event
of default, holders of 66 2/3% of the aggregate unpaid principal balance of all outstanding Notes may declare the Notes immediately due
and payable.
The description above is qualified in its entirety
by reference to the form of Amended Note and related Note Purchase Agreement, dated as of May 8, 2015, attached hereto as Exhibits 10.2
and 10.3, respectively, and incorporated herein by reference.
Forward-Looking Statements
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements, some of which are based on various assumptions and events that are beyond our control, may be identified by reference to a
future period or periods or by the use of forward looking terminology, such as “may,” “capable,” “will,”
“intends,” “believe,” “expect,” “likely,” “potentially”” appear,”
“should,” “could,” “seem to,” “anticipate,” “expectations,” “plan,”
“ensure,” “desire,” or similar terms or variations on those terms or the negative of those terms. The forward-looking
statements are based on current management expectations. Actual results may differ materially as a result of several factors, including,
but not limited to the following: ability to complete the Exchange Offer and the consent solicitation in the manner and within the timeframe
currently contemplated by the Company; impact on the U.S. economy and financial markets due to the outbreak and continued effect of the
COVID-19 pandemic, and any adverse impact or disruption to the Company’s operations; successful development, marketing, sale and
financing of new and existing financial products, including NonQM products; ability to successfully re-engage in lending activities, recruit
and hire talent to rebuild our TPO NonQM origination team, and increase NonQM originations; ability to successfully sell loans to third-party
investors; volatility in the mortgage industry; unexpected interest rate fluctuations and margin compression; performance of third-party
sub-servicers; our ability to manage personnel expenses in relation to mortgage production levels; our ability to successfully use warehousing
capacity and satisfy financial covenants; increased competition in the mortgage lending industry by larger or more efficient companies;
issues and system risks related to our technology; ability to successfully create cost and product efficiencies through new technology
including cyber risk and data security risk; more than expected increases in default rates or loss severities and mortgage related losses;
ability to obtain additional financing through lending and repurchase facilities, debt or equity funding, strategic relationships or otherwise;
the terms of any financing, whether debt or equity, that we do obtain and our expected use of proceeds from any financing; increase in
loan repurchase requests and ability to adequately settle repurchase obligations; failure to create brand awareness; the outcome of any
claims we are subject to, including any settlements of litigation or regulatory actions pending against us or other legal contingencies;
our compliance with applicable local, state and federal laws and regulations; the effects of any acquisitions or dispositions of assets
we may make; and other general market and economic conditions.
For a discussion of these and other risks and uncertainties that
could cause actual results to differ from those contained in the forward-looking statements, see our latest Annual Report on Form 10-K
and Quarterly Reports on Form 10-Q we file with the Securities and Exchange Commission and in particular the discussion of “Risk
Factors” therein. This document speaks only as of its date and we do not undertake, and expressly disclaim any obligation, to release
publicly the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated
events or circumstances after the date of such statements except as required by law.