Item 8.01. Other Events.
For the quarter ended September 30, 2022, the Company expects to report total
revenue of approximately $4.6 million, representing approximately 13% year over
year growth relative to the third quarter of 2021 (excluding the Computex
business segment divested in March 2022). While the Company has not yet
finalized its costs of revenue or other expenses for the third quarter, the
Company has taken actions to date that it believes will result in annualized
cost savings going forward of over $7 million, with partial impact expected to
be realized in the third quarter of 2022 (and before related costs of
implementation). These savings have been generated from the Company's ongoing
operating restructuring initiatives including, but not limited to, selective
reductions in force and the negotiated conversion of certain material vendor
support costs from fixed to variable expense thereby eliminating prior cost
burdens related to previously expensed but unused capacity. In conjunction with
the Company's ongoing focus to enhance its enterprise value as a going concern
business, the Company has also obtained the strategic and operating
restructuring support services of SOLIC Capital Advisors and expects to pursue
additional cost savings initiatives in the fourth quarter of 2022.
As of October 6, 2022, all of the shares of its common stock issuable pursuant
to the terms of the Settlement Agreement dated as of September 26, 2022, as
reported in the Current Report on Form 8-K filed by the Company on September 26,
2022 (the "Settlement Agreement"), had been issued in accordance with the terms
of the Settlement Agreement. As a result, the Company's senior secured
convertible notes issued in April 2022 (the "Convertible Notes") have been
satisfied in full, and all liens and security interests granted to the holders
of the Convertible Notes have been terminated and released. In addition, as
previously reported, the Company's Series A Warrants issued in November 2021,
Series D Warrants issued in December 2021 and Warrants issued pursuant to a
Securities Purchase Agreement dated as of February 28, 2022 (collectively, the
"Existing Warrants") have been canceled and terminated. Since the filing of the
Company's Quarterly Report on Form 10-Q for the second quarter of 2022 (the "Q2
10-Q") on August 16, 2022, the Company has issued an aggregate of 14,515,912
shares of its common stock (after giving effect to the reverse stock split
implemented effective September 30, 2022) to the holders of the Convertible
Notes, the Existing Warrants and the Company's Series B convertible preferred
stock (and, as previously disclosed, no shares of Series B convertible preferred
stock remain outstanding as a result). During that same period, the Company
canceled 913,361 shares (on a post-reverse split basis) of common stock
previously held by Ribbon Communications Inc.
On October 10, 2022, the Company entered into an amendment to a Master
Development Services Agreement with a significant suppler that converted an
existing trade payable balance into a promissory note with a principal balance
of approximately $2.43 million due the earlier of (i) March 31, 2023; (ii) a
sale transaction by the Company requiring shareholder approval, including a
transfer of a majority of the capital stock of Borrower; or (iii) a payment
default by the Company. The promissory note is unsecured and bears interest at a
rate of 6% per annum, compounded semi-annually. Additionally, the amended Master
Development Services Agreement provides for new payment terms, with a $400,000
monthly prepayment for actual costs incurred (with any excess of that prepayment
reducing the promissory note balance), changes to the notice provisions for work
force reductions, and a new agreed loaded labor rate.
As previously disclosed, the Company has retained Northland Capital Markets to
advise the Company in connection with the review of its strategic alternatives.
The Company does not intend to make further public comment regarding these
matters unless and until its Board of Directors has approved a specific
transaction or alternative or otherwise concludes its review of strategic
alternatives. No assurance can be given that the Company's review of strategic
alternatives will result in one or more transactions being entered into or
consummated, or if any transaction is undertaken, as to its terms, structure or
timing of such transaction. Furthermore, any ultimate sale transaction(s), if
any, may require a shareholder or judicial approval process that may or may not
result in such approval being obtained.
In support of its ongoing strategic, operating and capital restructuring
initiatives the Company has incurred increased expenses associated with
non-recurring items related to legal, operating, and financial advisory
professional fee expenses. Since the filing of the Q2 10-Q, the Company sold
4,515,000 shares of common stock in its previously reported at-the-market equity
offering (on a post-reverse split basis). As of October 11, 2022, taking into
account the aforementioned shares previously issued, the Company has
approximately 27.5 million shares of common stock outstanding.
The Company anticipates that it will need additional capital to fund its current
operations including research and development and capital investment
requirements until the Company scales to a revenue level that generates cash
self-sufficiency. As a result, the Company needs to raise additional capital or
secure debt funding to support on-going operations until such time. Any of the
foregoing may not be available on favorable terms, if at all.
Cautionary Note Regarding Forward-Looking Statements
This document includes certain statements that are not historical facts but are
forward-looking statements for purposes of the safe harbor provisions under the
United States Private Securities Litigation Reform Act of 1995. Forward-looking
statements generally are accompanied by words such as "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect," "should," "would,"
"plan," "predict," "potential," "seem," "seek," "future," "outlook," and similar
expressions that predict or indicate future events or trends or that are not
statements of historical matters. These forward-looking statements include, but
are not limited to, statements regarding the Company's anticipated financial
results, cost savings and other future prospects and the Board's review of
potential strategic alternatives, including a potential sale of the Company's
business or selected assets, the timing of such review, and the possible
outcomes of such review. The Company's actual results or outcomes and the timing
of certain events may differ significantly from those discussed in any
forward-looking statements, including as a result of the uncertainty associated
with being able to identify, evaluate and complete any strategic transaction or
alternative, the impact of the announcement of the Board's review of strategic
alternatives, as well as any strategic transaction or alternative that may be
pursued, on the Company's business, including its financial and operating
results and its employees and clients. These statements are based on various
assumptions and on the current expectations of the Company's management and are
not predictions of actual performance. These forward-looking statements are
provided for illustrative purposes only and are not intended to serve as, and
must not be relied on by any investor as, a guarantee, an assurance, a
prediction or a definitive statement of fact or probability.
Actual events and circumstances are difficult or impossible to predict and will
differ from assumptions. Many actual events and circumstances are beyond the
control of the Company. These forward-looking statements are subject to a number
of risks and uncertainties, including the Company's need for additional funding
to continue as a going concern; the possibility that Nasdaq may delist the
Company's securities; changes in the Company's clients' preferences, prospects
and the competitive conditions prevailing in the industries in which the Company
operates? risks associated with the potential effects of COVID-19 on the
Company's business; ability to retain key personnel; and those factors discussed
in the Company's annual report on Form 10-K filed with the Securities and
Exchange Commission (the "SEC") on April 15, 2022 and quarterly report on Form
10-Q filed with the SEC on August 16, 2022, in each case under the heading "Risk
Factors," and other documents of the Company filed, or to be filed, with the
SEC. If the risks materialize or assumptions prove incorrect, actual results
could differ materially from the results implied by these forward-looking
statements. There may be additional risks that the Company presently does not
know or that the Company currently believes are immaterial that could also cause
actual results to differ from those contained in the forward-looking statements.
In addition, forward-looking statements reflect the Company's expectations,
plans or forecasts of future events and views as of the date of this document.
The Company anticipates that subsequent events and developments will cause its
assessments to change. However, while the Company may elect to update these
forward-looking statements at some point in the future, the Company specifically
disclaims any obligation to do so. These forward-looking statements should not
be relied upon as representing the Company's assessments as of any date
subsequent to the date of this document. Accordingly, undue reliance should not
be placed upon the forward-looking statements.
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