8-K: Cyber App Solutions Corp. Reaches Forbearance Agreement to Settle $21.7 Million Debt

Cyber App Solutions Corp. has entered into a forbearance agreement with its note holders to settle approximately $21.7 million in debt through a combination of stock issuance and cash payments.

Summary

• Cyber App Solutions Corp. has reached a Forbearance and Settlement Agreement with Kips Bay Select LP and Cyber One, Ltd. to address existing defaults on convertible promissory notes.
• The agreement involves the issuance of 1,708,320 shares of common stock to Kips Bay and 1,254,986 shares to Cyber One.
• The company will also pay up to $13,700,000 in cash to the note holders in installments by December 15, 2024.
• The total amount owed under the notes was approximately $21,724,318 as of the agreement date.
• Upon full payment and stock issuance, the debt will be considered fully settled, except for the existing warrants.

Sentiment

Score: 3

Explanation: The document indicates significant financial distress and reliance on a forbearance agreement to avoid immediate action by creditors. The need to issue a large number of shares and make substantial cash payments suggests a weak financial position.

Positives

• The agreement provides a path to resolve the company's existing debt defaults.
• The forbearance agreement allows the company to temporarily avoid amortization and interest payments.
• The settlement, if completed, will release the company from its obligations under the notes and purchase agreement.
• The company has secured a temporary reprieve from the note holders exercising their rights and remedies.

Negatives

• The company is required to issue a significant number of shares, potentially diluting existing shareholders.
• The company must make substantial cash payments totaling up to $13,700,000 by December 15, 2024.
• The company acknowledges existing defaults and events of default under the original agreements.
• Failure to meet the payment schedule will immediately terminate the forbearance agreement.

Risks

• The company's ability to make the required cash payments by the deadlines is a significant risk.
• Failure to comply with the terms of the agreement will result in the note holders pursuing their full rights and remedies.
• The issuance of a large number of shares could negatively impact the stock price.
• The company is still subject to the terms of the warrants issued under the original agreement.

Future Outlook

The company's future is contingent on its ability to meet the payment schedule outlined in the forbearance agreement. Successful completion of the agreement will result in the full settlement of the debt, while failure will lead to the note holders pursuing their rights and remedies.

Management Comments

• The Company deems it to be in its best interests and the best interests of the shareholders of the Company to enter into this Agreement with the Holders pursuant to the terms and conditions herein contained.

Industry Context

This type of agreement is common for companies facing financial difficulties, particularly those with outstanding convertible debt. It allows the company to avoid immediate legal action while providing a path to resolve the debt. The agreement is a sign of financial distress and may indicate a need for restructuring or further capital raising.

Comparison to Industry Standards

• Forbearance agreements are a common tool used by companies in financial distress to negotiate with creditors.
• The terms of this agreement, including the combination of stock issuance and cash payments, are typical in such situations.
• The specific terms, such as the amount of stock issued and the payment schedule, are unique to the company's circumstances and the negotiation with the note holders.
• Similar agreements can be seen in other small-cap companies facing debt issues, such as those in the technology or biotech sectors.

Stakeholder Impact

• Shareholders will experience dilution due to the issuance of new shares.
• Creditors (Kips Bay and Cyber One) will receive a combination of cash and equity to settle their debt.
• The company's employees and other stakeholders are indirectly affected by the company's financial stability.

Next Steps

• The company must issue the agreed-upon shares of common stock by September 17, 2024.
• The company must make the first cash payments of $350,000 to each holder by September 17, 2024.
• The company must make subsequent cash payments by October 15, 2024, November 15, 2024, and December 15, 2024.
• The company must deliver a unanimous consent of the board of directors approving the agreement.

Key Dates

Keywords

Forbearance Agreement, Debt Settlement, Convertible Notes, Share Issuance, Cash Payments, Default, Cyber App Solutions, Kips Bay Select LP, Cyber One Ltd