Subsequent events

3 Months Ended

Mar. 31, 2024

Stock Purchase Agreement for Global Cooling Divestiture

The Company has evaluated events subsequent to March 31, 2024 through the date of this filing to assess the need for potential recognition or disclosure.

On April 17, 2024, the Company entered into the Purchase Agreement by and between the Company and GCI Holdings, which is wholly owned by an consulting contractor of Global Cooling, for the sale of all of the issued and outstanding shares of common stock of Global Cooling to GCI Holdings for an aggregate purchase price of $1.00. In addition, at the closing of the GCI Divestiture, Global Cooling was required to have $7.0 million in cash on its balance sheet, of which, $4.9 million in cash funded by the Company, and the Company was required to repay approximately $2.6 million of outstanding indebtedness of Global Cooling, and assume certain other liabilities of Global Cooling. Following the execution of the Purchase Agreement, the GCI Divestiture was consummated on April 17, 2024. The Company expects to recognize a loss on the GCI Divestiture, calculated as follows:


(In thousands)	April 17, 2024
Selling price: $1	$	—
Cash to Global Cooling funded by Company	(4,910)
Approximate costs to sell Global Cooling(1)	(2,409)
Negative selling price	(7,319)
Global Cooling carrying basis as of December 31, 2023(2)	(963)
Estimated net loss on disposal	$	(8,282)

(1) Represents the costs incurred in connection with the GCI Divestiture, including fees to be paid to the broker, attorneys, and other external parties.

(2) The Company is utilizing the carrying basis of Global Cooling as of December 31, 2023 as an estimate for its carrying basis as of the date of divestiture. The carrying basis to calculate the loss on disposal will utilize the carrying basis as of the date of divestiture on April 17, 2024, and may differ from the estimate noted here upon disclosure in the second quarter of 2024.

The Company’s estimates are subject to a number of assumptions, and actual results may differ.

In connection with the Company’s entry into the Purchase Agreement, the Company implemented a reduction in force (the “RIF”) related to the business of Global Cooling, which reduced the Company’s workforce by 47 employees (representing approximately 11% of its full-time employees). The Company’s Board of Directors approved the RIF on March 29, 2024, and all affected employees were informed by April 18, 2024, following the execution of the Purchase Agreement. The Company expects to recognize approximately $1.6 million of charges in connection with the RIF, comprised of approximately $1.3 million of stock compensation expense and approximately $0.3 million in cash expenditures, substantially all of which are expected to be related to employee severance costs. The Company expects to recognize most of these expenditures in the second quarter of 2024. The Company’s estimates are subject to a number of assumptions, and actual results may differ. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the RIF. In addition, the Company expects to recognize approximately $4.5 million in stock compensation expense in connection with the acceleration of unvested shares for all former employees of the Company that remained with Global Cooling upon the closing of the GCI Divestiture.

The following table summarizes the additional costs incurred by the Company in connection with closing the GCI Divestiture and expected to be recorded during the second quarter of 2024:


(In thousands)	April 17, 2024
Global Cooling Term Notes payoff(1)	$	2,596
Assumed liabilities from Global Cooling(2)	2,353
RIF compensation expenses(3)	1,595
Global Cooling employee stock based compensation expense(4)	4,106
Total	$	10,650

(1) As a condition to close the GCI Divestiture, the Company repaid the balance of the Global Cooling Amended Term Notes. For additional information on the terms of the Global Cooling Term Notes, see Note 13: Long-term debt.

(2) As a condition to close the GCI Divestiture, the Company assumed certain accounts payable and accrued expenses from Global Cooling, totaling to approximately $1.8 million and $0.6 million, respectively.

(3) The Company expects to recognize approximately $1.6 million of charges in connection with the RIF, comprised of approximately $1.3 million of stock compensation expense and approximately $0.3 million in cash expenditures, substantially all of which are expected to be related to employee severance costs.

(4) The Company expects to recognize approximately $4.5 million in stock compensation expense in connection with the acceleration of unvested shares for all former employees of the Company that remained with Global Cooling upon the closing of the GCI Divestiture.

In addition, upon the closing of the Transaction, the Company and Global Cooling entered into a transition services agreement, pursuant to which the Company will provide certain transition services to Global Cooling for up to 90 days following the Closing Date.

Second Amendment to Loan and Security Agreement with Silicon Valley Bank

Additionally, on April 17, 2024, the Company entered into the Amendment by and among Bank and Borrower. Pursuant to the Amendment and subject to the conditions set forth therein, Bank consented to the GCI Divestiture and released its security interests in the assets of Global Cooling and the shares of capital stock of Global Cooling arising under the Loan Agreement. In addition, effective as of the closing of the GCI Divestiture, the Amendment amended the Loan Agreement to remove Global Cooling as a party to the Loan Agreement and provide for a non-refundable termination fee in the amount of $500,000 payable by Borrower to Bank in the event that the Loan Agreement is terminated prior to the Term Loan Maturity Date (as defined in the Loan Agreement) for any reason. The Amendment additionally contained a financial covenant requiring the Company to limit cash outflows and unsecured indebtedness in connection with the Transaction to $15 million or less. The Amendment also contains customary representations and warranties of Borrower and provides for a release of Bank by Borrower for any claims existing or arising through the date of the Amendment, including, without limitation, those arising out of or in any manner connected with or related to the Loan Agreement.