NuRAN Wireless Inc. (NUR.CN) is a supplier of mobile and broadband wireless infrastructure solutions. Its innovative radio access network (RAN), core network, and backhaul products dramatically drop the total cost of ownership, thereby creating new opportunities for established, as well as emerging mobile network operator.
Coverage was initiated January 2020 with a recent update in August 2020. Below is an update.
New Releases
Aug. 26 - Seeks to Reach Agreement for Extension of Senior Debenture: Although the Company is currently in default towards its obligations, it is negotiating with the lenders to reach agreement on the terms of a new forbearance.
No regulatory authority has approved or reviewed the contents of the information contained in this news release.
Aug. 28 - IIROC Trading Halt - NUR. Reason: At the request of the Company Pending News.
Aug. 31 -Provides Corporate Update: Announce that its wholly-owned subsidiary and operating company Nutaq Innovation, Inc. (""Nutaq"") has ceased its operations in view of filing an insolvency proceeding with the Office of the Superintendent of Bankruptcy under the Bankruptcy and Insolvency Act (Canada).
Further to the Company's news release dated August 26, 2020, the Company has still not reached an agreement to receive a forbearance in connection with its outstanding senior secured convertible debentures (the “Debentures”) and is currently in material default of the Debentures in the principal amount of $2,835,000 plus accrued interest.
In connection with Nutaq’s cease of operation and upcoming filing for insolvency, a total of 33 employees at its head office in Quebec were laid off. Nutaq's liquidity position has deteriorated as a result of various factors, including, but not limited to, negative cash flow from operations, an inability to secure additional sources of financing and increasing pressure to make payments to its creditors.
The Company also announces that all current board members and officers of NuRAN except for Francis Létourneau have resigned from their respective positions. Mr. Létourneau has been appointed as CEO and CFO of the Company to fill the vacancy of the departing officers, and continues to explore various options to resolve the working capital deficiency including restructuring, completing an equity or debt financing, or the sale of the Company’s assets.
To meet such funding requirements, the Company may be required to undertake additional equity financing, which would be dilutive to shareholders. Debt financing, if available, may also involve restrictions on financing and operating activities. There is no assurance that such additional financing will be available on terms acceptable to the Company or at all. If the Company is unable to obtain additional financing as needed, it may be required to seek creditor protection. No assurances can be given that the Company will be able to raise the additional funding that may be required for such activities. The Company will provide further updates on the course of action as developments occur.
Summary
The news of Nutaq's cease of operation toward insolvency proceedings has been a shock to many. For one, the amount of the default in secured convertible debentures of $2.8M is not typically an insurmountable barrier in venture markets. At face value, it's difficult to understand why NuRAN did not seek additional financing with the market prior defaulting.
It appears that the source of this issue stems from February 23, 2017.
Each Debenture matures 18 months following closing, bears interest an annual rate of 12% and is convertible, at the option of the Debentureholder, in whole or in part, into common shares in the capital of NuRAN at any time before the maturity date at a price of $0.25.
Then, at maturity (August 23rd, 2018), the first amendment:
"it has amended the terms of its previously issued 12% Senior Secured Convertible Debentures (the "Debentures") to extend the maturity date of the Debentures from August 23, 2018 to August 23, 2019."
A year later, the second amendment:
In consideration of, and conditional to the confirmation from the Majority of Holders on the execution of the forbearance agreement, the Company offered to grant Holders a share purchase warrant (each a "Warrant") entitling the holder to purchase one common share of the Company at an exercise price of $0.10 until August 23, 2021 for each $1.00 of principal amount owing to the Holder under the Debenture for an aggregate total of 3,090,000 warrants.
February 26, 2020 release represented the third amendment:
The Company offered to grant holders a decrease of the Debenture conversion price from $0.10 to $0.05, as well as a share purchase warrant entitling the holder to purchase one common share of the Company at an exercise price of $0.05 for a term of three years for each $0.50 of principal amount owing to the holder under the Debenture for an aggregate total of 6,180,000 warrants.
Hence, the August 26 release stating a default with the unfortunate outcome of August 31, 2020.
Going back to the FY2019 earnings: " In accordance with the Agency and Interlender Agreement dated February 23, 2017, once a majority of debenture holders agreed to forbear any default, all debenture holders waived that default.
Evidently, one can conclude that the majority of debenture holders did not agree to forebear default.
Looking back, the number of insider sales in the "Early Warning Report", were a possible indicator but only a few insiders sold in the past three months but these transactions were significant and mostly by 9369-5864 Quebec, Inc.
Overall, the current outcome is unfortunate for many (employees, vendors, shareholders) and comes at a time when NuRAN seems to be about to make in roads in a market that is emerging providing a solutions that is essential to many.
To which extent did the Convertible Debenture agreement prevented NuRAN to raise funds before it was too late? Especially because this was done in the past in both 2018. and 2019, just prior to the due dates.
For now, options are: "restructuring, completing an equity or debt financing, or the sale of the Company’s asset". We'll see.
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