Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Perseon Corp (320174) 10-Q published on Oct 27, 2015 at 7:17 am
Reporting Period: Sep 29, 2015
Pursuant to the Merger Agreement, upon the terms and subject to the conditions set forth therein, Merger Sub will commence a tender offer (the “Offer”) no later than November 5, 2015 to acquire (i) all outstanding shares of Common Stock at a purchase price of $1.00 per share (the “Shares Offer Price”) and (ii) all outstanding Public Warrants at a purchase price of $0.02 per Public Warrant (the “Public Warrants Offer Price”), with each payment in cash without interest, subject to any deduction or withholding of taxes required by applicable law. The Merger Agreement further provides that upon the terms and subject to the conditions set forth therein, following completion of the Offer, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Galil (the “Merger”). The Merger will be governed by Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”), with no vote of the Company’s stockholders required to consummate the Merger. In the Merger, each (i) outstanding share of Common Stock (other than shares of Common Stock held by the Company, Galil, Merger Sub or any of their respective subsidiaries or held by stockholders who are entitled to demand, and who properly demand, appraisal rights under Delaware law) and (ii) Public Warrant (other than Public Warrants held by the Company, Galil, Merger Sub or any of their respective subsidiaries), will be converted into the right to receive cash in an amount equal to the Shares Offer Price and Public Warrants Offer Price, respectively, without interest.
From inception through September 30, 2015, we have generated an accumulated deficit of $65,320,586 where our operating revenues have been insufficient to cover our operating expenses. We have financed our operations primarily through the sale of our common stock. As of September 30, 2015, we had cash and cash equivalents of $3,026,606, and total current assets of $4,728,975. This includes the proceeds from our August 2015 follow-on public offering in which we raised $4,304,029 after expenses. We believe these cash resources will only be sufficient to sustain our operations for up to four months from September 30, 2015 without substantial cost cutting to a level that would include fewer sales resources and compliance levels of staffing and activities across the Company. In addition, we have been advised by our financial advisors that our prospects of raising additional equity on acceptable terms are not likely favorable. Further, to become profitable we would need to significantly increase the revenues we receive from sales of our MicroThermX products and substantially reduce expenses. We do not expect that sales of MicroThermX products will increase sufficiently to cover our total costs of operations before the time we run out of cash and cash equivalents. Substantially reducing costs may impair our ability to increase revenue. If we run out of cash and cash equivalents we may have no alternative but to discontinue operations. Accordingly, we have entered into the Merger Agreement with Galil and Merger Sub, pursuant to which Merger Sub will tender for our outstanding shares of Common Stock followed by the Merger, which we believe will provide the best value for our stockholders. See “Tender Offer and Merger” above.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry-specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016; however, in July 2015, the FASB agreed to delay the effective date by one year. The proposed deferral may permit early adoption, but would not allow adoption any earlier than the original effective date of the standard. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We are currently assessing the impact the adoption of ASU 2014-09, including possible transition alternatives, will have on our financial statements.
We will incur substantial expenses in connection with and as a result of completing the Merger. While we have assumed that a certain level of transaction expenses will be incurred, factors beyond our control could affect the total amount or the timing of these expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately. Moreover, in the event that the Merger is not consummated, payment of these expenses would further impact our already deteriorating financial condition and liquidity. While the Merger Agreement grants us the right, in certain circumstances, to receive a $250,000 fee in the event the Merger is not consummated due to Galil’s inability to acquire adequate financing, this fee (i) may not be sufficient to cover all of our expenses, (ii) is only payable in the event adequate financing is not obtained and other conditions are satisfied and is not payable for any other breach of the Merger Agreement by Galil, and (iii) may be contested by Galil.
Consummation of the Offer is subject to certain conditions, which, if not satisfied, may prevent, delay or jeopardize the consummation of the Offer, and in turn the Merger.