Subsequent Events |
12 Months Ended |
|---|---|
Dec. 31, 2019 | |
| Subsequent Events [Abstract] | |
| Subsequent Events |
Subsequent Events
Draw Down on the Revolving Credit Facility
On February 28, 2020, as a precautionary measure to ensure financial flexibility and maintain maximum liquidity in response to the COVID-19 pandemic, we further leveraged our balance sheet, and drew down the remaining $41.8 million under our Revolving Credit Facility with a corresponding increase in our cash on hand. Following the Drawdown, we have no remaining borrowing under the Revolving Credit Facility.
Adoption of Shareholder Rights Plan
On March 19, 2020, our Board adopted a stockholder rights plan, as set forth in a Rights Agreement between the Company and American Stock Transfer and Trust Company, LLC (the “Rights Agreement”), and issued the rights contemplated thereby (the “Rights”) on March 30, 2020. The Rights Plan is intended to promote the fair and equal treatment of all of our stockholders and ensure that no person or group can gain control of us through open market accumulation or other tactics without paying a control premium and potentially disadvantaging the interest of all stockholders. The Rights Plan ensures that our Board has sufficient time to exercise its fiduciary duties to make informed judgments about the actions of third parties that may not be in the best interests of us and our stockholders.
In general terms, the Rights will become exercisable if a person or group becomes the beneficial owner of 20% or more of the Company’s outstanding Common Stock. Stockholders who beneficially owned 20% or more of Global Eagle’s outstanding common stock prior to the issuance of this press release will not trigger the exercisability of the Rights so long as they do not acquire beneficial ownership of any additional shares of common stock at a time when they still beneficially own 20% or more of such common stock, subject to certain exceptions as described in the Rights Plan. In the event that the Rights become exercisable due to the triggering ownership threshold being crossed, each Right will entitle its holder to purchase a number of shares of Common Stock or equivalent securities having a market value at that time of twice the Right’s purchase price. The Rights Agreement is attached to this Annual Report on Form 10-K as Exhibit 4.14.
CARES Act
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, allows employers to defer payment of employer Social Security taxes that are otherwise owed for wage payments made after March 27, 2020, through the end of the calendar year. In addition, the CARES Act provides for various grants, loans and other financial support for certain companies that are affected by the COVID-19 pandemic. We are currently evaluating the impact of this legislation on our consolidated financial position, results of operations, and cash flows. It is possible that further regulatory guidance under the CARES Act will be forthcoming. There is no assurance that any sources of financings under the CARES Act will be available to us on favorable terms or at all.
The COVID-19 pandemic is having a significant negative impact on the Company’s financial performance. The pandemic is ongoing and dynamic in nature and, to date, the travel industry has experienced temporary closures in key regions globally. The extent of the COVID-19 pandemic’s effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the issue, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. The Company’s management is assessing goodwill and long-lived assets for impairment on an ongoing basis as a result of a significant decline in the Company’s market capitalization subsequent to the year ended December 31, 2019, which they believe is driven by investor uncertainty around the Company’s liquidity position, and lower than expected projected financial results in its Media & Content, Aviation Connectivity, Maritime & Land Connectivity reporting units stemming from the COVID-19 pandemic, management has determined that an impairment triggering event occurred in the fiscal quarter ended March 31, 2020. Given these indicators, the Company’s management has determined there is a higher degree of risk in achieving the Company’s financial projections for each reporting unit and as such, decreased projected operating performance and increased the discount rate, which will reduce the fair value of each reporting unit when compared to their respective carrying values. In addition, the extent to which the COVID-19 pandemic will impact the Company’s operations or financial results is uncertain as management is unable to accurately predict the severity and the duration of the pandemic. As a result of these changing factors and uncertainties, the Company continues to evaluate its estimates that have a material adverse impact on the results of operations. As of the filing of Form 10-K on May 14, 2020, a significant goodwill impairment in the first quarter of 2020 is possible. However, we are unable to estimate the magnitude of a potential impairment in our reporting units and potential impairment of our long-lived assets.
Although, the Company’s management is unable to determine with any degree of accuracy the length and severity of the pandemic, they do expect it will have a material adverse impact on the Company’s consolidated financial position, consolidated results of operations, and consolidated cash flows in the first quarter of fiscal 2020. The extent and duration of the pandemic remains uncertain and may impact consumer purchasing activity if disruptions continue throughout the year which could continue to impact the Company. Due to the developing pandemic, the results of the first quarter ending March 31, 2020 and the full fiscal year ending December 31, 2020 could be impacted in ways management is not able to predict today, including, but not limited to, non-cash write-downs and impairments; unrealized gains or losses related to investments; foreign currency fluctuations; and collections of accounts receivables. Additionally, payments to certain vendors have not been made in accordance with payment terms. To date, no critical vendors have stopped providing goods or services. However, there is no assurance that this will continue. If a critical vendor were to discontinue doing business with us this could have a material adverse impact on the Company’s results. Management is continuing to monitor the potential impact of the COVID-19 pandemic.
The Company is also implementing a number of other measures to help mitigate the operating and financial impact of the pandemic, including: (i) temporary salary reductions for all employees, including our executive officers; (ii) deferral of annual merit increases; (iii) accelerate WMS dividend payments; and (iv) working globally with country management teams to maximize our participation in all eligible government or other initiatives available to businesses or employees impacted by the COVID-19 pandemic. In addition, the Company’s management has a number of other mitigating actions it is pursuing, including (i) executing additional substantial reductions in expenses, capital expenditures and overall costs; and (ii) accessing alternative sources of capital, in order to generate additional liquidity.
Reverse Stock Split
On November 6, 2019, we received a letter from the Listing Qualifications staff (the “Staff”) of Nasdaq that, based upon our non-compliance with the minimum $1.00 bid price requirement for continued listing on The Nasdaq Capital Market required to maintain continued listing under the Nasdaq listing rules (the “Bid Price Rule”), our common stock would be subject to delisting from Nasdaq unless we timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”). In accordance with Nasdaq’s procedures, we timely appealed Nasdaq’s determination by requesting a hearing before the Panel to seek continued listing of our common stock. The hearing was held on December 5, 2019.
On December 16, 2019, the Panel granted the Company’s request for continued listing of the Company’s common stock on The Nasdaq Capital Market pursuant to an initial extension through April 15, 2020 or, in certain circumstances, through May 4, 2020. On March 17, 2020, we received notification that the Panel granted a further extension through May 4, 2020 in which to regain compliance with the Bid Price Rule in light of the extreme volatility in financial markets resulting from COVID-19.
On April 13, 2020, we received another letter from the Staff notifying us that we were not in compliance with Nasdaq Listing Rule 5550(b)(2) (the “MVLS Rule”) for continued listing on The Nasdaq Capital Market, because the market value of our listed securities was less than $35 million for the previous 30 consecutive business days.
On April 15, 2020, the Board of Directors approved a reverse stock split of the Company’s outstanding and authorized shares of common stock at a ratio of 1-for-25 (the “Reverse Stock Split”). As a result of the Reverse Stock Split, the number of the Company’s issued and outstanding shares of common stock was decreased from 92,944,935 to 3,717,797, all with a par value of $0.0001. The effective date of the Reverse Stock Split was April 16, 2020. The Reverse Stock Split affects all stockholders uniformly and will not alter any stockholder’s percentage interest in the Company’s common stock, except for adjustments that may result from the treatment of fractional shares as follows: (i) no fractional shares will be issued as a result of the Reverse Stock Split; and (ii) stockholders who would have been entitled to a fractional share as a result of the Reverse Stock Split will instead receive a cash payment from the transfer agent in an amount equal to the fractional share multiplied by the closing price of our common stock the day before the Reverse Stock Split became effective. All amounts presented in these financial statements, have been adjusted for this Reverse Stock Split.
On April 30, 2020, we were notified that we had regained compliance with the Bid Price Rule; however, we remain non-compliant with the MVLS Rule. Under the Nasdaq listing rules, we have until October 12, 2020 to regain compliance with the MVLS Rule by demonstrating that the market value of our listed securities is $35 million or more for a minimum of 10 consecutive business days. If we do not regain compliance with the MVLS Rule by the required date, we may appeal for an extension to regain compliance with no assurance that we will be successful in obtaining the extension. If we do not regain compliance by October 12, 2020 or by the extended compliance date, if applicable, Nasdaq would delist our common stock from The Nasdaq Capital Market.
On April 10, 2019, S&P Global downgraded the Company’s credit rating by two notches from B- to CCC, and on April 10, 2020 they downgraded the Company an additional notch to CCC-. On April 6, 2020 Moody’s downgraded the Company’s credit rating one notch from B3 to Caa2.
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