8-K: Cyber App Solutions Corp. Secures Third Amendment to Forbearance Agreement, Issues Shares and Sets Payment Terms

Cyber App Solutions Corp. has reached a third amendment to its forbearance agreement, issuing shares and agreeing to a cash payment to settle outstanding debts.

Summary

• Cyber App Solutions Corp. has entered into a third amendment to its forbearance agreement with Kips Bay Select LP and Cyber One, Ltd.
• The amendment involves the issuance of 7,500,000 shares of common stock to each holder, with a provision to hold back shares exceeding a 9.99% ownership limit.
• The company has also agreed to pay $8,000,000 in cash to each holder by January 31, 2025, to fully settle the amounts owed under the 2023 convertible notes and the Securities Purchase Agreement.
• The agreement includes a beneficial ownership limitation, preventing holders from owning more than 9.99% of the company's outstanding common stock through conversion of the notes.
• The company is restricted from incurring additional debt until its stock is listed on a national exchange or all obligations to the holders are settled.
• The holders gain the right to appoint a representative with access to the company's CEO, CFO, and board meetings until all terms of the agreement are met.
• Holders have agreed not to convert any portion of their notes before January 31, 2025.

Sentiment

Score: 3

Explanation: The document indicates financial distress and the need for further negotiations with creditors. While a settlement is reached, the terms are not particularly favorable for existing shareholders due to dilution and debt restrictions.

Positives

• The agreement provides a path to settle outstanding debts with the holders.
• The forbearance agreement prevents the holders from exercising their rights and remedies due to existing defaults.
• The beneficial ownership limitation provides some protection against excessive dilution.
• The agreement provides a clear timeline for the settlement of the debt.
• The holders have agreed not to convert any portion of their notes prior to January 31, 2025.

Negatives

• The company is issuing a significant number of shares, which could dilute existing shareholders.
• The company is restricted from incurring additional debt, which could limit its operational flexibility.
• The company is required to pay a substantial amount of cash by January 31, 2025.
• The holders have increased influence over the company through the appointment of a representative.

Risks

• The company may face challenges in meeting the $16,000,000 cash payment obligation by January 31, 2025.
• The issuance of 15,000,000 shares could significantly dilute existing shareholders.
• The debt restriction could hinder the company's ability to pursue growth opportunities.
• The increased influence of the holders could potentially impact the company's strategic direction.
• The company's ability to list on a national exchange is uncertain.

Future Outlook

The company aims to settle its outstanding obligations with the holders by January 31, 2025, and is working towards a potential listing on a national exchange. The company is restricted from incurring additional debt until the listing or full settlement of obligations.

Management Comments

• The company has represented that it will not be able to meet certain of the conditions to the forbearance set forth in the Forbearance Agreement.
• The company has requested that the Holders continue to forbear from exercising their rights and remedies under the Purchase Agreement and Notes.

Industry Context

This announcement reflects a company facing financial challenges and negotiating with its creditors to avoid further defaults. The use of forbearance agreements and amendments is common in situations where companies are struggling to meet their debt obligations. The agreement also highlights the importance of beneficial ownership limitations in convertible debt agreements.

Comparison to Industry Standards

• The use of forbearance agreements is a common practice for companies facing financial distress, similar to other companies in the small-cap and micro-cap space.
• The issuance of shares in exchange for debt is a typical strategy for companies with limited cash flow, similar to other companies in the technology sector.
• The beneficial ownership limitation is a standard clause in convertible debt agreements to prevent hostile takeovers, similar to other companies with convertible debt.
• The appointment of a creditor representative to the board is a common practice in distressed situations, similar to other companies with significant debt.

Stakeholder Impact

• Shareholders will experience dilution due to the issuance of new shares.
• Creditors (Holders) will receive cash payments and shares to settle outstanding debts.
• The company's management will have to work with the appointed representative of the holders.
• The company's ability to raise capital in the future may be impacted by the debt restrictions.

Next Steps

• The company needs to issue the remaining shares to the holders, subject to the beneficial ownership limitation.
• The company needs to make the $16,000,000 cash payment to the holders by January 31, 2025.
• The holders will appoint a representative to the company's board.
• The company needs to work towards a potential listing on a national exchange.

Key Dates

Keywords

forbearance agreement, convertible notes, share issuance, debt settlement, beneficial ownership, cash payment, debt restriction, corporate governance