Note 17 - Subsequent Events

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Subsequent Events [Text Block]

17. Subsequent Events

On March 28, 2024, the Company agreed to and accepted a non-binding letter of intent (the “letter of intent”) from KARL STORZ to engage in diligence and negotiations regarding the terms of a proposed acquisition of the Company by KARL STORZ (the “Potential Acquisition”). KARL STORZ proposed to acquire 100% of the Company's outstanding shares for $0.35 per share in cash. The letter of intent provides an exclusivity period that began on March 28, 2024, and extended for one week. KARL STORZ has the right to extend the exclusivity period in one-week increments, up to a total of ten weeks (the “Exclusivity Period”); provided that KARL STORZ makes the weekly payments under the Note described below. During the Exclusivity Period, the Company will not engage in negotiations for alternative transactions, KARL STORZ will be conducting diligence and the parties will be negotiating a definitive merger agreement. KARL STORZ has the right to elect not to extend the Exclusivity Period on a weekly basis.

On April 3, 2024, the Company issued a promissory note in favor of KARL STORZ in the principal amount of up to $20 million (the “Note”). The Note provides bridge funding for the Company as it pursues a potential transaction with KARL STORZ. Under the Note, KARL STORZ provides $1 million of funding to the Company for each week the Exclusivity Period is extended. The first payment under the Note occurred on April 3, covering the first week of the Exclusivity Period. As of the date of this filing, KARL STORZ has extended the Exclusivity Period six times, paying $1 million each week. The Exclusivity Period will currently end on May 15, 2024, if not extended. If a definitive merger agreement for the Potential Acquisition is executed by the parties, the Company will have the option to secure two $5 million payments under the Note as it seeks to secure stockholder approval for the Proposed Acquisition.

The Note is secured by a first priority security interest on all tangible and intangible assets of the Company and each of its direct and indirect subsidiaries. Each of its subsidiaries also serves as a guarantor under the Note. The Note bears interest at a rate of SOFR plus 10%, compounded monthly on the outstanding principal, and accrues interest until paid. The Maturity Date under the Note is the earliest of (i) the date that is thirty days after the Company ceases discussions with respect to the Potential Acquisition or determines not to proceed with the Potential Acquisition on the terms set forth in the letter of intent, (ii) the date that is sixty days after the lapse of the Exclusivity Period due to KARL STORZ’s election not to extend such period, (iii) the date that is thirty days after a definitive merger agreement is terminated in connection with (A) any breach of the definitive merger agreement by the Company, (B) a change of recommendation or failure to publicly reconfirm the Board of Director’s recommendation in favor of the Potential Acquisition under the definitive merger agreement by the Board of Directors of the Company, or (C) the Company entering into an Alternative Transaction (as defined in the letter of intent), (iv) the date that is sixty days after the definitive merger agreement is terminated under any other circumstances not set forth in the preceding subclause (iii) and (v) October 30, 2024.

In addition, on April 3, 2024, each of the Company and its subsidiaries Asensus Surgical US, Inc., Asensus Surgical Europe S.à r.l. and Asensus Surgical Italia S.r.l. entered into an Intellectual Property Security Agreement as grantors to secure the obligations under the Note with a security interest in the U.S. patents held by such grantors.