DEBT |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT | CONVERTIBLE NOTES Convertible notes as of June 30, 2022 and December 31, 2021 were as follows (in thousands):
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 (“Notes”) in the aggregate original principal amount of up to $5.3 million (the “Offering”). On November 17, 2021, at the initial closing of this Offering, the Company sold and issued $1.06 million in aggregate principal amount of Notes to the Investor pursuant to a prospectus supplement to its effective shelf registration statement Form S-3 (Registration No. 333-237772) (the "Registration Statement"). The Notes have an OID of 6%, resulting in net proceeds to the Company of $1.0 million before other debt issuance costs, 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; provided, however, that in the event that such event of default is subsequently cured (and no other default then exists (including, without limitation, for the Company's failure to timely pay such interest at the default rate)), interest shall cease to accrue as of the calendar day immediately following the date of such cure. 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 closing, the fixed conversion price of all outstanding Notes is subject to downward adjustment if greater than the lower of (i) 120% of the closing bid price of the Company's common stock on the trading day immediately preceding such additional closing date; and (ii) 120% of the arithmetic average of the volume weighted average prices of the Company's 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 (i) the fixed conversion price then in effect; (ii) 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 (iii) the greater of the floor price and 97% of the lowest sale price of the Company's 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 Company 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, at any time, 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.
On March 25, 2022, the Company sold and issued an additional $1.06 million in principal amount of the Notes under this Offering (the "Second Tranche"), which Notes were offered pursuant to a prospectus supplement to the Registration Statement. The Notes issued in the Second Tranche also have an OID of 6%, resulting in net proceeds of the Company of $1.0 million, before other debt issuance costs. The Notes issued in the Second Tranche have the same material terms as those issued in the first tranche, but mature on September 25, 2022. The Notes issued in the second tranche have an initial conversion price of $0.1508, and pursuant to the Notes, upon closing of second tranche, the initial conversion price of the Notes issued in the first tranche in November 2021 was adjusted down from $0.2611 to $0.1508 as well.
The Company did not repay the Notes issued in November in full on May 17, 2022, the maturity date, resulting in an event of default under such Notes. As a result of such default, the Notes issued in November, in the principal amount of $130,000 as of such date, began accruing interest at a rate of 15% per annum. Additionally, the default triggered the investor’s right under the Notes to require the Company to redeem all or any portion of the November Notes, in cash, at a price not less than the face value of such Notes plus a 15% redemption premium (the “Redemption Premium”).
On May 18, 2022, the Company entered into a Forbearance Agreement with the investor, pursuant to which the investor agreed to forebear exercising any rights or remedies that it may have under the November Notes that arise as a result of the default until the earlier of (i) the date immediately prior to the date of occurrence of a Bankruptcy Event of Default (as defined in the Notes), (ii) the date of occurrence of any other event of default under Section 4(a) of the Notes, (iii) the time of any breach by the Company pursuant to the Forbearance Agreement, and (v) June 1, 2022 (such period, the “Forbearance Period”). In accordance with the Forbearance Agreement, the Company agreed to pay the investor the aggregate outstanding principal on the November Note at the Redemption Premium, including all accrued and unpaid interest, upon expiration of the Forbearance Period. As of May 31, 2022, prior to expiration of the Forbearance Period, the investor had converted the outstanding balance (including the redemption premium and accrued interest) due under the Notes issued in November, amounting to $151,772, into an aggregate of 3,751,971 shares of Company common stock at a conversion price of $0.04 per share. As a result, the Notes issued in November terminated.
During the three and six months ended June 30, 2022, the volume weighted average price ("VWAP") of the Company's common stock was below $0.10 for more than 5 days, which constitutes a price default in accordance with the Notes. As a result, from the date of such default and for so long as such default remains uncured, the Notes that remain outstanding will accrue interest at a rate of 15% per annum. Following such default, the holder also added a 15% per annum default premium to the outstanding balance in accordance with the Notes. In addition, the holder now has the right to 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 a price not less than the face value of the Notes and a 10% redemption premium, as determined in accordance with the terms of the Notes. The Company is in communications with the holder of the Notes regarding the default, and anticipates to come to a mutually agreeable resolution related thereto, although no assurances can be given. The Company recorded accrued interest of $29,000 as of June 30, 2022. There was no accrued interest as of December 31, 2021.
During the three and six months ended June 30, 2022, holders of certain Notes converted amounts payable under such Notes into an aggregate of 7,172,244 and 13,976,525 shares of Company common stock at a weighted average conversion price of $0.05 and $0.07 per share, resulting in a reduction of the Note balance of $0.4 million and $1.0 million, respectively. In addition, the Company recognized additional interest expense associated with the conversion $0.6 million during the six months ended June 30, 2022. Additional interest expense for the three months ended June 30, 2022 were immaterial. Subsequent to June 30, 2022, holders of certain of the Notes converted amounts payable under such Notes into an additional 7,308,876 shares of Company common stock at a weighted average conversion price of $0.03 per share, resulting in a further reduction of the Note balance of $0.2 million, and the recognition of additional interest expense was immaterial. DEBTIn October 2021, the Company entered into a financing agreement with First Insurance Funding in order to fund a portion of its insurance policies. The amount financed is $0.4 million, which incurs interest at an annual rate of 4.17%. The Company is required to make monthly payments of $45,000 from November 2021 through July 2022. The outstanding balance as of June 30, 2022 was $0.1 million.
In October 2020, 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 $0.7 million and incurred interest at a rate of 3.60%. The Company was required to make monthly payments of $63,000 from November 2020 through July 2021. There was no outstanding balance as of June 30, 2022.
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