DEBT |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT | CONVERTIBLE NOTES Convertible notes as of December 31, 2021 were as follows (in thousands):
The Company did not have any convertible debt as of December 31, 2020.
On November 14, 2021, the Company entered into a securities purchase agreement (the “SPA”), with an institutional investor (the “Investor”) providing for the sale and issuance in series of registered direct offerings of senior convertible notes (the “Notes”) due in the aggregate original principal amount of up to $5.3 million (the “Offering”). At the initial closing of this Offering, the Company issued $1.06 million in aggregate principal amount of Notes. The Notes have an original issue discount of 6% and mature on May 17, 2022. The Notes shall not bear interest except upon the occurrence of an event of default. After the occurrence of an event of default, the Notes will accrue interest at the rate of 15% per annum. The Notes are senior to other indebtedness of the Company.
The Notes have an initial fixed conversion price of $0.2611. The initial fixed conversion price is subject to proportional adjustment upon the occurrence of any stock split, stock dividend, stock combination and/or similar transactions and full-ratchet adjustment in connection with a subsequent offering at a per share price less than the fixed conversion price then in effect. Upon each additional close, the fixed conversion price of all Notes are subject to downward adjustment if greater than the lower of 120% of the closing bid price of the common stock on the trading day immediately preceding such additional closing date; and 120% of the arithmetic average of the volume weighted average prices of the common stock on the five trading days preceding the additional closing.
The holder may convert any part of the Notes into shares of common stock at an “Alternate Conversion Price” equal to the lesser of a) the fixed conversion price then in effect; b) the greater of the floor price of $0.01 and 90% of the arithmetic average of the three lowest daily volume weighted average prices of the Company's common stock during the ten trading days immediately prior to such conversion; and c) the greater of the floor price and 97% of the lowest sale price of the common stock on the applicable conversion date.
In connection with a change of control of the Company, each holder may require the Company to redeem in cash any portion of the Notes at the greater of the face value, a 15% redemption premium to the equity value of our common stock underlying the Notes and the equity value of the change of control consideration payable to the holder of common stock underlying the Notes. The equity value of our common stock underlying the Notes is calculated using the greatest closing sale price of common stock during the period immediately preceding the consummation or the public announcement of the change of control and ending the date the holder gives notice of such redemption. The equity value of the change of control consideration payable to the holder of
common stock underlying the Notes is calculated using the aggregate cash consideration per share of common stock to be paid to the holders of common stock upon the change of control.
If an event of default occurs, each holder may require the Company to redeem all or any portion of the Notes (including all accrued and unpaid interest and late charges thereon), in cash, at the greater of the face value and a 15% redemption premium or (10% if such event of default is a price default) to the greater of the face value and the equity value of the common stock underlying the Notes. The equity value of the common stock underlying the Notes is calculated using the greatest closing sale price of the common stock on any trading day immediately preceding such event of default and the date the entire payment is made.
If the Company consummates a subsequent public or private offering of securities, each holder of Notes may require the Company to use up to 20% of the gross proceeds of such subsequent placement (less any reasonable placement agent, underwriter and/or legal fees and expenses) to redeem in cash all, or any portion, of the Notes, at a 5% redemption premium.
The Company may redeem any portion of the outstanding Notes in cash with a 15% redemption premium to the greater of the face value of the Notes or the equity value of its common stock.
During the year ended December 31, 2021, holders of the convertible notes converted amounts payable under such notes into 1,794,291 shares of common stock at a weighted average conversion price of $0.13 per share, resulting in a reduction of the convertible note balance of $0.2 million and the recognition of additional interest expense of $38,000. Subsequent to December 31, 2021, holders of the convertible notes converted amounts payable under such notes into an additional 6,804,281 shares of common stock at a weighted average conversion price of $0.10 per share, resulting in a further reduction of the convertible note balance of $0.7 million and the recognition of additional interest expense of $0.6 million. On March 25, 2022, the Company issued an additional $1.06 million principal amount of the Notes under this Offering (the "Second Tranche"). As a result, the Company received gross proceeds of $1.06 million, before OID of 6% and other debt issuance costs. The Second Tranche matures on September 25, 2022.DEBTDebt as of December 31, 2021 and 2020 was as follows (in thousands):
Paycheck Protection Program
On April 15, 2020, the Company applied for a loan from JPMorgan Chase Bank, N.A. (the "Lender"), pursuant to the Paycheck Protection Program of the CARES Act as administered by the U.S. Small Business Administration. On April 17, 2020, the loan was approved, and the Company received proceeds in the amount of $2.9 million (the “PPP Loan”).
The PPP Loan, which took the form of a promissory note, was scheduled to mature on April 15, 2022 and bore interest at a rate of 0.98% per annum (the “Promissory Note”). The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any facility charge to obtain the PPP Loan. The Promissory Note provides for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company had the right to prepay the principal of the PPP Loan at any time without incurring any prepayment charges.
Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, and covered utilities during the covered period of eight weeks beginning on the date of loan approval. For purposes of the CARES
Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal.
The Paycheck Protection Program Flexibility Act of 2020 (the “PPP Flexibility Act”), enacted on June 5, 2020, amended the Paycheck Protection Program, among others, as follows: (i) extended the covered period from 8 weeks to 24 weeks from the date the PPP Loan is originated, during which PPP funds needed to be expended in order to be forgiven. A borrower may submit a loan forgiveness application any time on or before the maturity date of the loan – including before the end of the covered period – if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness. (ii) at least 60% of PPP funds must be spent on payroll costs, with the remaining 40% available to spend on other eligible expenses. (iii) payments are deferred until the date on which the amount of forgiveness determined is remitted to the lender. If a borrower fails to seek forgiveness within 10 months after the last day of its covered period, then payments will begin on the date that is 10 months after the last day of the covered period. In addition, the PPP Flexibility Act modified the CARES Act by increasing the maturity date for loans made after the effective date from two years to a minimum maturity of five years from the date on which the borrower applies for loan forgiveness. Existing PPP loans made before the new legislation retain their original two-year term, but may be renegotiated between a lender and a borrower to match the 5-year term permitted under the PPP Flexibility Act.
On September 8, 2021, the Company received confirmation from the Lender that the SBA approved the Company’s PPP Loan forgiveness application for the entire PPP Loan, including all accrued interest to date. The forgiveness of the PPP Loan was recognized as a gain on debt extinguishment in the financial results for the year ended December 31, 2021.
Unsecured Note Payable
In October 2020, the Company entered into a finance agreement with First Insurance Funding ("First Insurance") in order to fund a portion of its insurance policies. The amount financed is $0.7 million and incurs interest at a rate of 3.60%. The Company is required to make monthly payments of $0.1 million through July 2021. There was no outstanding balance as of December 31, 2021.
In October 2021, the Company entered into a financing agreement with First Insurance in order to fund a portion of its current insurance policies. The amount financed is $0.4 million and incurs interest at a rate of 4.17%. The Company will be required to make monthly payments of $45,000 from November 2021 through July 2022. The outstanding balance as of December 31, 2021 was $0.3 million.
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