We invite you gentle readers, to see if you can calculate, from this document — whether Mattersight is in compliance with its continued eligibility for lending covenants, here in near the middle of 2017. Or from the companies quarterly results. I looked. I cannot.
The relevant exhibit, to the Hercules lending packet, was never filed.
And management hasn’t disclosed the projections which drive the tests for whether Mattersight has met (or is able to meet, in the future) its covenants, under this Hercules Capital loan agreement.
How can this be?
Please help us out. Interps to SEC Reg S-K, Item 303 require:
…Where financial statements presented or incorporated by reference in the registration statement [Ed. Note: as they are, now — an S-3 is active] are required by § 210.4-08(e)(3) of Regulation S-X [ 17 CFR part 210] to include disclosure of restrictions on the ability of both consolidated and unconsolidated subsidiaries to transfer funds to the registrant in the form of cash dividends, loans or advances, the discussion of liquidity shall include a discussion of the nature and extent of such restrictions and the impact such restrictions have had and are expected to have on the ability of the parent company to meet its cash obligations….
And Item 2.04 of SEC Form 8-K requires this — under which the Hercules agreement was disclosed:
…Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
(a) If a triggering event causing the increase or acceleration of a direct financial obligation of the registrant occurs and the consequences of the event, taking into account those described in paragraph (a)(4) of this Item 2.04, are material to the registrant, disclose the following information:
(1) the date of the triggering event and a brief description of the agreement or transaction under which the direct financial obligation was created and is increased or accelerated…
(2) a brief description of the triggering event;
(3) the amount of the direct financial obligation, as increased if applicable, and the terms of payment or acceleration that apply; and
(4) any other material obligations of the registrant that may arise, increase, be accelerated or become direct financial obligations as a result of the triggering event or the increase or acceleration of the direct financial obligation….
[I’ve updated the above, with more specific provisions of applicable SEC rules and black letter law, to make plain that the metrics — and the actual values — under the Hercules lending, are definitively MATERIAL — and thus must be promptly disclosed. Numerous case citations available.]
Knowing whether this cash-constrained company will be able to borrow from Hercules — at any rate, high or very high — in the fall of 2017, to meet its liquidity needs, is plainly a material fact. One the SEC has declared the investors are to know about, as soon as the company knows. And the company has clearly given Hercules its 2017 projections.
So — where are they? And… God forbid that the “street” expectations Bob mentions in comments are not as optimistic as what the company has told Hercules. More on that sort of arguable securities fraud — in a future post. [Who knows? Just like Trump’s tax forms, the fact that this exhibit is missing, causes quite a bit of reasonable concern, as to what is really going to happen, in about five weeks. And I’ll bet that Hercules doesn’t very often grant waivers — the way SVB used to, regularly. ]
Anyone? Bueller? … Bueller?!…