Molekule : Bankruptcy - Form 8-K

Item 1.03 Bankruptcy or Receivership

On October 3, 2023, Molekule Group, Inc. (the "Company") and its wholly-owned subsidiary, Molekule, Inc., filed a voluntary petition in the United States Bankruptcy Court for the Southern District of Florida (the "Bankruptcy Court") for relief under the provisions of Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). The Company's case will be administered under the caption In re Molekule Group, Inc., Case No: 23-18094 (the "Chapter 11 Case"). The Company will continue to operate its business as a debtor in possession ("DIP") under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. To ensure its ability to continue ordinary course operations during the Chapter 11 Case, the Company will file with the Bankruptcy Court motions seeking a variety of customary "first-day" relief including DIP Financing.

The proposed financing consists of a credit facility in the aggregate principal amount of $5,000,000 (the "DIP Facility"). The funding will come from Foundry Group Next, L.P. ("Foundry"), Armistice Capital Master Fund Ltd. ("Armistice"), SVBC, and Bridge Coast Capital, LLC ("BCC") (together, the "DIP Lenders"). Foundry is Molekule Group's largest shareholder and an affiliate of Brad Feld, a member of the board of directors. BCC is an affiliate of Amin J. Khoury, another director and the second-largest shareholder. Armistice is the third-largest shareholder of Molekule Group. SVBC holds roughly $15,000,000 of mezzanine debt. As of May 15, 2023, Foundry owned 21.2%, Khoury owned 12.1%, and Armistice owned 9.9% of Molekule Group's outstanding shares.

As previously disclosed in its Form S-1 filing, dated September 1, 2023, the Company had intended to conduct a rights offering, with minimum aggregate proceeds of $10.0 million, by distributing to its existing holders of the Company's common stock subscription rights to participate in the rights offering for certain securities of the Company (the "Rights Offering"). Mr. Khoury, Armistice Capital Master Fund Ltd. (an approximate 9.9% shareholder), and an affiliate of Mr. Feld had all had informed the Company of their interest in participating in the Rights Offering in an amount based on their pro rata ownership of the Company. Certain conditions to the Rights Offering were not satisfied and the Rights Offering was withdrawn by the Company on September 19, 2023. The amounts provided by Mr. Khoury, Armistice Capital Master Fund Ltd., and Mr. Feld (or their respective affiliates) in the DIP Facility are approximately the amounts they had indicated purchasing in the Rights Offering.