NOTES PAYABLE |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTES PAYABLE |
NOTES PAYABLE
The Company’s notes payable as of December 31, 2018 and 2017 were as follows:
Unsecured Note Payable
In November 2017, the Company entered into a finance agreement with First Insurance Funding in order to fund a portion of its insurance policies. The amount financed was $149 and bore interest at a rate of 4.65%. The Company was required to make nine monthly payments of $17. The outstanding balance as of December 31, 2017 was $116. The note was fully repaid during the year ended December 31, 2018.
In October 2018, the Company entered into another finance agreement with First Insurance Funding in order to fund a portion of its insurance policies. The amount financed was $533 and bears interest at a rate of 5.15%. The Company is required to make monthly payments of $69 through July 2019. The outstanding balance was $474 as of December 31, 2018.
Convertible Note Payable
On May 25, 2016 (the “Purchase Price Date”), the Company entered into a securities purchase agreement with Iliad Research and Trading, L.P. (the “Lender”). The Company issued to the Lender a secured convertible promissory note (the “Iliad Note”) in the principal amount of $2,055, which included debt issuance costs of $80. The Company received net proceeds of $1,975. The Iliad Note required the repayment of all principal and any interest, fees, charges and late fees on the date that is thirteen months after the Purchase Price Date (the “Maturity Date”). Interest was to be paid on the outstanding balance at a rate of ten percent (10%) per annum from the Purchase Price Date until the Iliad Note was paid in full. Interest was accrued during the term of the Iliad Note and all interest calculations were computed on the basis of a 360-day year comprised of twelve (12) thirty (30)-day months and compounded daily. Subject to adjustment as set forth in the Iliad Note, the conversion price for each Lender conversion was $0.50 (the “Lender Conversion Price”), convertible into shares of the Company. Beginning on the date that is six months after the Purchase Price Date and continuing until the Maturity Date, the Lender had the right to redeem a portion of the Iliad Note in any amount up to the maximum monthly redemption amount of $275, for which payments were permitted to be made in cash or by converting the redemption amount into shares of Company common stock at a conversion price which was the lesser of (a) the Lender Conversion Price of $0.50 and (b) the Market Price, defined as 70% (“the Conversion Factor”), subject to adjustment as follows: if at any time (1) the average of the three lowest closing bid prices in the previous twenty (20) trading days is below $0.25 per share then the Conversion Factor would have been reduced by 10%, (2) the Company was not Deposit/Withdrawal At Custodian eligible, then the Conversion Factor would have been reduced by an additional 5%, or (3) there occurred a major default then the Conversion Factor would have been reduced by an additional 5%. The Company was permitted to prepay the Iliad Note at any time by payment to Lender of 125% of the principal, interest and other amounts then due under the Note. The Company was permitted to prepay the Iliad Note notwithstanding an earlier notice of conversion from the Lender, provided that in such event the Lender could have convert an amount not to exceed $300 under the Iliad Note. The Iliad Note was securitized by the Company’s accounts receivable, inventory and equipment.
The Lender and the Company entered into subsequent amendments to the Iliad Note to adjust, besides other things, the monthly maximum redemption amounts and additional redemption amounts. In addition, in August 2017, the Lender and the Company agreed to extend the maturity date of the Iliad Note to April 1, 2018.
On the Purchase Price Date, the Company recorded a beneficial conversion feature of $370 (the “Iliad Instrument”), which was originally recorded in additional paid-in capital (“APIC”) and was scheduled for amortization over six months. The Company determined in 2017 that the Iliad Instrument qualifies for derivative accounting treatment. The $370 fair value of the Iliad Instrument at the Purchase Price Date is unchanged as a result of the change in derivative accounting treatment, however, in 2017 the Company reclassified the Iliad Instrument from APIC to a liability in accordance with derivative accounting treatment. During the year ended December 31, 2017, the Company recorded a gain of $223, for the change in fair value of the Iliad Instrument as part of Selling, General and Administrative expense in the Company’s Consolidated Statement of Operations. The assumptions used by the Company for calculating the fair value of the Iliad Instrument at the Purchase Price Date using the Binomial Lattice valuation model were: (i) Volatility of 74.0%; (ii) Risk-Free Interest Rate of 0.4%; and (iii) Expected Term of 5 months; and as of December 31, 2017 were (i) Volatility of 61.0%, (ii) Risk-Free Interest Rate of 0.7%; and (iii) Expected Term of 0 months.
During the year ended December 31, 2017, the Company issued 8,370 shares of its common stock to Iliad in connection with the conversions of the Iliad Note in the aggregate principal amount of $1,728 and $77 of accrued interest. The total of $1,805 was allocated to common stock and additional paid-in capital. In addition, the Company paid the Lender $341 during the year ended December 31, 2017. There was no amount outstanding under the Iliad Note as of December 31, 2017.
In March 2017, the Company entered into another securities purchase agreement to which the Lender loaned the Company $750. On March 1, 2017 (the “Subsequent Purchase Price Date”), the Company issued to the Lender a secured convertible promissory note (the “Iliad Note 2”) in the principal amount of $770 which included debt issuance costs of $20. The Iliad Note 2 required the repayment of all principal and any interest, fees, charges and late fees by April 30, 2018 (the “Maturity Date”). Interest was to be paid on the outstanding balance at a rate of eight percent (8%) per annum from the Subsequent Purchase Price Date until the Iliad Note 2 was paid in full. Interest accrued during the term of the Iliad Note 2 and all interest calculations were computed on the basis of a 360-day year comprised of twelve (12) thirty (30)-day months and compounded daily. Subject to adjustment as set forth in the Iliad Note 2, the conversion price for each Lender conversion was the Lender Conversion Price, convertible into shares of fully paid and non-assessable common stock. Beginning on the date that was six months after the Subsequent Purchase Price Date and continuing until the Maturity Date, Iliad had the right to redeem a portion of the Iliad Note 2 in an amount not to exceed $100. The Company was permitted to make payments on such redemptions in cash or by converting the redemption amount into shares of Company common stock at a conversion price which was the lesser of (a) $0.50 per share and (b) 70% (“the Conversion Factor”) of the average of the three (3) lowest closing bid prices in the previous 20 trading days, subject to adjustment as follows: if at any time (1) the average of the three lowest closing bid prices in the previous twenty (20) trading days was below $0.25 per share then the Conversion Factor would have been reduced by 10%, (2) the Company was not Deposit/Withdrawal At Custodian eligible, then the Conversion Factor would have been reduced by 5%, (3) the Company was not DTC eligible, then the Conversion Factor would have been reduced by an additional 5% or (4) there occurred a major default then the Conversion Factor would have been reduced by an additional 5% for each of the first three major defaults that occurred after the effective date. The Company was permitted to prepay the Iliad Note 2 at any time by payment to Lender of 125% of the principal, interest and other amounts then due under the Note. The Company was permitted to prepay the Iliad Note 2 notwithstanding an earlier notice of conversion from the Lender, provided that in such event the Lender could have converted an amount not to exceed $200 under the Iliad Note 2. The Iliad Note 2 was securitized by the Company’s accounts receivable, inventory and equipment.
On March 1, 2017, the Company recorded a derivative liability for the beneficial conversion feature of $29 which was scheduled for amortization over 8 months. During the year ended December 31, 2017, the Company recorded a gain of $29, for the change in fair value of the derivative liability as part of Selling, General and Administrative expense in the Company’s Consolidated Statement of Operations. The assumptions used by the Company for calculating the fair value of the derivative liability as of March 1, 2017 using the Binomial Lattice valuation model were: (i) Volatility of 85.0%; (ii) Risk-Free Interest Rate of 0.8%; and (iii) Expected Term of 8 months; and at December 31, 2017 were (i) Volatility of 84.0%, (ii) Risk-Free Interest Rate of 0.9%; and (iii) Expected Term of 4 months.
During the year ended December 31, 2017, the Lender redeemed $75 and as a result the Company issued 398 shares of common stock to the Lender. In addition, the Company made cash payments to the Lender of $131. As of December 31, 2017, the outstanding balance of the Iliad Note 2 was $610, which included accrued interest of $4 and unamortized debt issuance costs of $6. The Company incurred interest expense of $50 and $169 for the years ended December 31, 2018 and 2017, respectively. During the year ended December 31, 2018, the Company repaid all amounts outstanding under the Iliad Note 2.
Long-Term Note Payable
On January 29, 2016, the Company issued an unsecured promissory note to Wiltshire, LLC (“Wiltshire”) in the principal amount of $850 (the “Promissory Note”) in consideration of a loan provided to the Company by Wiltshire. The Promissory Note bore interest at 12% per annum, and the Company was obligated to make monthly interest-only payments in the amount of $9, for which the interest-only payments obligation commenced on March 1, 2016. All principal and accrued and unpaid interest was due under the Promissory Note on February 1, 2018. In connection with the Promissory Note, the Company incurred an original issue discount of $30 and $19 of other debt issuance costs, which were to be amortized over the Promissory Note term.
Pursuant to the terms of the Promissory Note, the Company issued to Wiltshire a common stock purchase warrant providing Wiltshire with the right to purchase up to 2,000 shares of the Company’s common stock (the “Warrant”). The Warrant is exercisable, subject to certain limitations, subsequent to July 1, 2017 and before the date that is five years from the date of issuance at an exercise price of $0.20 per share, subject to adjustment upon the occurrence of certain events such as stock split and dividends. The Company recorded the fair value of the Warrant of $267 as a debt discount associated with the Promissory Note. During the years ended December 31, 2018 and 2017, the Company recorded interest expense of $98 and $111, respectively, for the amortization of the Warrant fair value. The assumptions used by the Company for calculating the fair value of the Warrant at inception using the Black-Scholes valuation model were: (i) Volatility of 83.3%; (ii) Risk-Free Interest Rate of 2.1%; and (iii) Expected Term of 5 years.
On November 9, 2017, the Company extinguished and replaced the Promissory Note with a new note to Wilshire in the principal amount of $850 (the “Wiltshire Note 2”) in consideration of a new loan to the Company by Wiltshire. The Wiltshire Note 2 bears interest at 16% per annum, the Company is obligated to make monthly interest-only payments of $11, for which the interest-only payments obligation commenced on November 9, 2017. All principal and accrued interest is due under the Wiltshire Note 2 on May 9, 2019. In connection with the Wiltshire Note 2, the Company incurred legal expenses of $13.
Pursuant to the terms of the Wiltshire Note 2, the Company issued to Wiltshire a common stock purchase warrant providing Wiltshire with the right to purchase up to 750 shares of the Company’s common stock (the “Warrant 2”). The Warrant 2 is exercisable at any time subsequent to the date of issuance on November 9, 2017, and before the date that is five years from the date of issuance at an exercise price of $0.248 per share, subject to adjustment upon the occurrence of certain events such as stock splits and dividends. The Company used extinguishment accounting to record the repayment of the Promissory Note and Issuance of the Wiltshire Note 2. As a result, the fair value of the Warrant 2 of $137 was included in the loss on extinguishment of debt amount totaling $189 that was included in Selling, General and Administrative expense in the Company’s Consolidated Statement of Operations for the year ended December 31, 2017. The assumptions used by the Company for calculating the fair value of the Warrant 2 at inception using the Black-Scholes valuation model were: (i) Volatility of 95.9%; (ii) Risk-Free Interest Rate of 2.59%; and (iii) Expected Term of five years.
On August 22, 2018, the Company repaid all amounts outstanding under the Wiltshire Note 2.
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