|12 Months Ended|
Dec. 31, 2020
|Debt Disclosure [Abstract]|
2020 Secured Notes
On January 29, 2020 (the “Closing Date”), the Company completed a financing transaction (the “2020 Financing Transaction”) with the 2020 Convertible Noteholders whereby the Company issued an aggregate principal amount of $17,500,000 of the First Closing Notes pursuant to the SPA dated January 11, 2020. Unless earlier converted or redeemed, the First Closing Notes will mature on the fifth anniversary of the Closing Date, and bear interest at a rate equal to the sum of (i) the greater of (a) the three (3)-month London Interbank Offered Rate (“LIBOR”) and (b) two percent (2%), plus (ii) a margin of 2% on the outstanding balance of the First Closing Notes, payable quarterly on the first business day of each calendar quarter. The First Closing Notes may not be pre-paid without the consent of the noteholder, provided that the Company must offer to pre-pay such other noteholder on the same terms and conditions.
At the Closing Date, the SPA gave the Company the right, but not the obligation, to request, at any time on or prior to January 11, 2022, that one of the 2020 Convertible Noteholders purchase an additional $5,000,000 in aggregate principal amount of the Second Closing Note and an additional $10,000,000 in aggregate principal amount of the Third Closing Note (as defined in the SPA; together, with the Second Closing Note, the “Additional Closing Notes”), provided that such 2020 Convertible Noteholder has the right, but not the obligation, to purchase such notes. The Additional Closing Notes would also mature on the fifth anniversary of the Closing Date.
On December 29, 2020, the Company and the 2020 Convertible Noteholders entered into an amendment to the SPA (the “Amendment”), the terms of which, among other provisions, provided for: (a) an increase in the principal amount of the Second Closing Note to $7.5 million; (b) a revision of the interest rate to be borne by the Second Closing Note to consist of: (i) cash interest of 2% per annum, payable quarterly; and (ii) payment-in-kind interest of 5% per annum, accruable quarterly as an addition to the unpaid principal balance of the Second Closing Note; and (c) an increase in the conversion price of notes issued under the terms of the SPA, as amended, to $10.14, such conversion subject to certain adjustments set forth in the SPA. Upon execution of the Amendment, the Company issued the Second Closing Note.
The aggregate carrying amount of the First Closing Notes in the accompanying December 31, 2020 consolidated balance sheet is presented net of: (a) financing costs, comprised of commissions and legal expenses, having an unamortized balance of approximately $0.4 million; and (b) a discount, comprised of a commitment fee paid to one of the 2020 Convertible Noteholders, having an unamortized balance amounting to approximately $0.2 million at that date. The unamortized balance of the financing costs and the discount are charged to interest expense over the term of the First Closing Notes under the effective interest method.
The carrying amount of the Second Closing Note in the accompanying December 31, 2020 consolidated balance sheet is presented net of a discount, amounting to approximately $3.1 million at December 31, 2020, and representing the value of the deemed beneficial conversion feature embedded in the Second Closing Note. Under GAAP, such conversion feature is deemed to be beneficial when the conversion price, discussed above, is lower than the closing price per share of the Company’s common stock, which was $14.34 on the date of issuance of the Second Closing Note. In such instances, the resulting discount is calculated as the product of (i) the number of shares into which the Second Closing Note can be converted, multiplied by (ii) the difference between the closing price per share and the conversion price. Upon recordation of the discount, a corresponding amount was added to additional paid-in capital. The unamortized balance of the discount is charged to interest expense over the term of the Second Closing Note under the effective interest method.
Under the terms of the SPA, as amended, the Company retains the right, but not the obligation, to request the 2020 Convertible Noteholder to purchase the Third Closing Note, and the 2020 Convertible Noteholder has the right, but not the obligation, to purchase such note. As of December 31, 2020, the Company had not made such a request.
The 2020 Secured Notes are secured by all the assets of the Company.
An executive officer of one of the 2020 Convertible Noteholders is a member of the Company’s Board of Directors, and, pursuant to the terms of the SPA and a Board Observer Agreement entered into by the other 2020 Convertible Noteholder and the Company, the other 2020 Convertible Noteholder appointed an individual to attend and observe meetings of the Company’s Board of Directors.
On January 27, 2020, as a condition to completion of the 2020 Financing Transaction, the Company entered into the Fourth Omnibus Amendment to the 2010 Secured Notes, whereby the 2010 Secured Notes were subordinated to the Company’s obligations under the terms of the 2020 Secured Notes and the Additional Convertible Notes, as applicable. During its first fiscal quarter of 2020, the Company repaid in full the aggregate outstanding principal amount of the 2010 Secured Notes, amounting to approximately $2.8 million, which, along with the Company’s payment of accrued interest amounting to approximately $0.9 million, resulted in the full retirement of the 2010 Secured Notes.
2014 Junior Secured Notes Payable
On June 6, 2019, the Company repaid in full all the outstanding principal, which, together with accrued and unpaid interest, totaled approximately $2.0 million, of its 12% Second-Priority Secured Non-Convertible Promissory Notes due 2019, as amended (the “2014 Secured Notes”). The 2014 Secured Notes had a maturity date of September 30, 2020, and interest was payable semi-annually in arrears. In connection with the repayment, the security agreement under which the 2014 Secured Note had been collateralized by all the assets of the Company was terminated.
2010 Junior Secured Notes Payable
As discussed above, the Company repaid in full the aggregate principal amount outstanding of the 2010 Secured Notes which, together with the Company’s payment of the related accrued interest, resulted in the retirement of the 2010 Secured Notes.
The Company’s then-chairman of the board of directors and one of the Company’s officers held 2010 Secured Notes, which they purchased at the date of original issuance having an aggregate principal balance of $0.2 million.
PPP Loan Payable
In April 2020, the Company received $0.9 million in proceeds through an unsecured loan funded under the Payroll Protection Program as part of the CARES Act, which was enacted by the U.S. Congress in response to the COVID-19 pandemic. In November 2020, prior to the otherwise scheduled payments under the terms of the loan, the Company was notified by the U.S. Small Business Administration that the loan had been forgiven under the provisions of the CARES Act. The gain realized from such forgiveness is included in other income in the accompanying consolidated statement of operations for the year ended December 31, 2020.
Scheduled Notes Payable Maturities.
Scheduled principal payments as of December 31, 2020 with respect to notes payable are summarized as follows:
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef