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Item 1A. RISK FACTORS
Our results of operations and financial condition are subject to various risks and uncertainties as disclosed in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Form 10-K). There have bee following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, Risk Factors of our 2023 Form 10-K, which are incorporated herein by reference. You should carefully consider the risks set forth in our 2023 Form 10-K and the following risks, together with all the other information in this report, including our condensed consolidated financial statements and notes thereto. If any of the risks actually materialize, our operating results, financial condition and liquidity could be materially and adversely affected. Except as disclosed below, there have been no material changes ifrom the risk factors disclosed in our ri2023 Form 10-K.
The following risk factors from those disclosed below are hereby added to the risk factors disclosed in our 2023 Form 10-K.
Our negative cash flows and current lack of financial resources raise substantial doubt as to our ability to continue as a going concern.
Based on the definitions in the relevant accounting standards, we evaluated whether there are certain Part I, Item 1A. of our Annualconditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern. If we are unable to raise additional funding to meet our operational needs, we may be forced to limit or cease our operations and/or liquidate our assets. Although our condensed consolidated interim financial statements have been prepared assuming we will continue as a going concern, our negative cash flows from operations and current lack of financial resources raise substantial doubt as to our ability to satisfy our obligations as they become due within one year from the date of filing of this Quarterly Report on Form 10-Q. Based on our current plans and projections, our unrestricted cash resources of $22.2 million and $26.4 million in working capital at September 30, 2024 and forecasted cash flows are not expected to be sufficient liquidity to fund our operations for the next twelve months from the issuance date of this Quarterly Report on Form 10-K for the yeaQ. We anticipate significant near-term revenue growth from recent customer awards and through organic growth in 2025, however these revenues are uncontracted, and we do not currently anticipate our existing liquidity is sufficient to sustain us until our ended Decembxpected revenues and resulting cash returns on revenue occur. Given the uncertainties around our liquidity, our ability to execute our business plan,and ability to comply with the covenants under our Senior Secured Term Loan, Convertible Notes and Revolving Credit Agreement, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of these Condensed Consolidated Financial Statements. Refer to Note 9. Debt.
We may need to further increase our cash balance by issuing additional shares of our Common Stock, debt or other 3securities, including senior or subordinated notes, debt securities convertible into equity, or shares of preferred stock, and we may need to do so sooner than we currently expect. There is no assurance that sources of financing will be available on a timely basis, or on satisfactory terms, or at all, and any additional financing may result in substantial dilution to our stockholders. We may be forced to seek protection from our creditors through bankruptcy proceedings, discontinue operations, or liquidate our assets, and we may receive less than the carrying value of those assets. Any of these outcomes could cause our shareholders to lose some or all of their investment.
We have used a substantial portion of our capacity to incur secured debt without seeking consent from the lenders of our Senior Secured Term Loan, certain other secured lenders, and other stakeholders. Consequently, our ability to raise additional secured debt without such consent as part of a restructuring is significantly limited.
Even if we are able to raise significant additional capital necessary to continue our operations over the next year, if we are unable to obtain additional adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives, develop our technology and products, and respond to business opportunities, challenges, unforeseen circumstances
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or developments could be significantly limited, and our business, financial condition, results of operations and prospects could be materially and adversely affected.
We may not be able to access the liquidity needed to meet our operating requirements and to service our debt instruments, which could have a material adverse effect on our business and financial condition. If we cannot maintain adequate liquidity, we may undertake restructuring transactions and/or seek bankruptcy protection to undertake restructuring efforts, and we may have to liquidate our assets and may receive less than the value at which those assets are carried on our condensed consolidated interim balance sheet.
At September 30, 2024, we had $22.2 million in unrestricted cash and cash equivalents and $4.8 million of availability under the Revolving Credit Agreement, which resulted in a total liquidity position of $27.0 million. We expect our liquidity position to be impacted by (i) the Senior Secured Term Loans monthly interest payments ($1.6 million based on the principal amount outstanding at September 30, 2023, except for the following which supersedes 4), (ii) the Convertible Notes semi-annual interest payments ($3.8 million based on amounts outstanding at September 30, 2024), which will next occur on December 15, 2024 and (iii) the Revolving Credit Agreements monthly interest payments ($0.1 million based on the principal amount outstanding at September 30, 2024).
To address a potential future liquidity shortfall, we are evaluating sources of incremental liquidity including additional debt issuances or refinancings and/or asset sales, none of which have been implemented at this time. Any such financing transaction may not be consummated on terms that are favorable to our existing debt holders and equity holders, or at all.
Our ability to obtain incremental liquidity, make scheduled payments and/or to refinance our outstanding debt obligations may depend on our financial and operating performance, which may be affected by prevailing economic, industry, and competitive conditions and by financial, business, and othe risk factor having the same heading disclosed in our r factors beyond our control. We may not be able to achieve, a sufficient level of cash flow from operating activities to permit us to pay the principal, premium, if any, and interest on our debt. If we are unable to fund our debt service obligations, operating expenses and capital expenditures, we may pursue restructuring transactions, including refinancing all or part of our debt, selling assets, seeking to raise additional capital, and pursuing one or more internal reorganizations or other restructuring activities, strategic corporate alignment and cost-saving initiatives or other significant corporate transactions, any of which could have a material adverse effect on our operations and financial condition. Any refinancing of debt could be at higher interest rates and may require us to comply with more onerous covenants, which may negatively impact our ability to manage our business and raise additional capital. These alternative measures may not be successful, and we may be unable to meet our scheduled debt service obligations. Even if these alternative measures are successful, such measures could result in a material dilution to our public shareholders.
In addition, the maturity of certain of our debt may be accelerated in certain situations, including if we cannot meet our debt service obligations, and, to the extent such debt is secured, lenders may foreclose on the assets securing such debt. The Indenture requires us to offer to repurchase the Convertible Notes upon certain Fundamental Change events, including specified change of control transactions and any delisting of our Common Stock. Upon the occurrence of certain events, including a Fundamental Change or our filing of an Annual Report on Form 10-K forcontains a Report of Independent Registered Public Accounting Firm the year ended December 31, 2023:
at includes disclosure regarding going concern, the lenders under the Senior Secured Term Loan may accelerate the maturity of the borrowings, and such acceleration could cause a cross-default or cross-acceleration of all of our other debt. Such a cross-default or cross-acceleration could have a wider impact on our liquidity than might otherwise arise from a default or acceleration of a single debt instrument. If an event of default occurs, or if other debt agreements cross-default, and the lenders under the affected debt agreements accelerate the maturity of any loans or other debt outstanding, we may not have sufficient liquidity to repay all of our debt and we could be forced into bankruptcy or liquidation.
If any of these risks are realized, our business and financial condition would be adversely affected.
There can be no assurance that we will be able to comply with the continued listing standards of the NYSE.
On May 21, 2024, we were notified by NYSE Regulation that we were not in compliance with the NYSEs continued listing criteria because the average closing price of our Common Stock was less than $1.00 over a 30-day consecutive trading day period ending May 20, 2024. We are subject to a 180-day cure period and we cannot be certain that we will be able to cure our non-compliance, absentdespite completing a reverse-stock split, which would require the approvas approved by our stockholders at a Special Meeting of our sStockholders held on October 23, 2024.
If the NYSE delists our securities from trading on its exchange for failure to meet the listing standards, we and our security holders could face significant material adverse consequences including:
a limited availability of market quotations for our securities;
a determination that our common stock is a penny stock, which will require brokers trading in common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our common stock;
a limited amount of analyst coverage;
a decreased ability to issue additional securities or obtain additional financing in the future; and
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the occurrence of a Fundamental Change under the Indenture governing our 3.250% cConvertible senior noNotes due 2026, in which case the holders of the cConvertible nNotes could require us to repurchase their convertible notes at a purchase price equal to m for the principal amount plus any accrued interest and the lenders under our Senior Secured Term Loan could accelerate the maturity of borrowings thereunder. Such accelerations could result in the lenders under the Revolving Credit Agreement declaring all obligations under the Revolving Credit Agreement immediately due and payable.
In addition, if our total market capitalization falls below an average of $50 million for 30 consecutive trading days and we are unable to regain compliance during an 18-month cure period, the NYSE may commence suspension and de-listing procedures. As of November 18, 2024, our 30-day average market capitalization was approximately $43 million.
Lastly, if (i) the principal amount of and any accrued and unpaid interest ce per share of our common stock falls to an abnormally low price, (ii) our market capitalization falls below an average of $15 million for 30 consecutive trading days, or (iii) we choose to liquidate the Company, the NYSE may immediately commence suspension and de-listing procedures.
Due to the Reverse Stock Split, we expect to regain compliance with the NYSEs continued listing criteria with regard to both (i) the average closing price of our Common Stock being greater than $1.00 over a 30-day consecutive trading day period and (ii) the price per share of our Common Stock being above an abnormally low price.
If the NYSE delists our Common Stock from trading, we and our stockholders could face significant material adverse consequences, including: a limited availability of market quotations for our securities; triggering a Fundamental Change under the Indenture controlling the Convertible Notes, which could result in the holders of our Convertible Notes requiring us to repurchase them; the acceleration of the Senior Secured Term Loan and/or Revolving Credit Agreement; reduced liquidity for our securities; a determination such convertible notes. that our common stock is a penny stock, which will require brokers trading in our common stock to adhere to more stringent rules and regulations, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our common stock; a limited amount of analyst coverage; a decreased ability to issue additional securities or obtain additional financing in the future; and a negative impact to, or termination of, our critical business relationships.