Just brutal:
The Company expects that its results of operations for the last fiscal quarter and nine months ended February 29, 2024 as compared to the comparable prior year periods will be negatively impacted by a non-recurring losses of approximately $9.4 million incurred from the recognition of certain expenses and liabilities related to the termination of its SPAC merger that was signed on March 1, 2024 and simultaneously the Company and the lenders entered into a waiver and amendment to financing agreement (the “Waiver”). As part of this Waiver, the Company agreed to issue warrants exercisable for a period of 7.5 years. The warrants were recorded as a derivative liability at initially estimated fair market value of $7.4 million. The loss resulted from recognition of this derivative was offset by the reduction from another derivative liability arising from an anti-dilution provision in the convertible Preferred Stock Series A, C and D in the amount of $4.1 million. The resulting net loss of $3.3 million is recorded in Other Expenses as a change in fair value of derivative liabilities.
In addition, in consideration for the Waiver, the Company agreed to pay certain of its lenders a non-refundable fee to waive certain events of default, in an aggregate amount equal to $3,000,000, which was deemed fully earned on the effective date.
As a result of the termination of its SPAC merger, the Company also recognized an impairment charge of previously deferred offering costs in the amount of $3.1 million as reflected on the statement of operations for the period ended February 29, 2024.
As a result of these losses, the Company expects that the Quarterly Report on Form 10-Q will reflect a change in the results of operations from the fiscal quarter and nine months ended February 29, 2024. The foregoing financial information is unaudited and preliminary and is subject to change based upon the Company’s completion of the year end audit.
