6. Debt

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

6. Debt

6. Debt

December 2020 Convertible Note and Private Placement

On December 11, 2020, the Company entered into a Securities Purchase Agreement (the “Lind Securities Purchase Agreement”) with Lind Global Asset Management II, LLC (“Lind”) pursuant to which, among other things, on December 11, 2020, the Company issued and sold to the Investor, in a private placement transaction, in exchange for the payment by Lind of $10,000,000, (1) a convertible promissory note (the “Note”) in an aggregate principal amount of $12,000,000 (the “Principal Amount”), which will bear no interest and mature on December 11, 2022 (the “Maturity Date”), and (2) 975,000 shares of the Company’s common stock. At any time following June 11, 2021, and from time to time before the Maturity Date, the Investor had the option to convert any portion of the then-outstanding Principal Amount of the Note into shares of common stock at a price per share of $1.60, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions (the “Conversion Price”). Prior to June 11, 2021, the Company had the right to prepay up to sixty-six and two-thirds percent (66 2/3%) of the then-outstanding Principal Amount of the Note with no penalty. Subject to certain exceptions, the Company was required to direct proceeds from any subsequent debt financings (including subordinated debt, convertible debt or mandatorily redeemable preferred stock but other than purchase money debt or capital lease obligations or other indebtedness incurred in the ordinary course of business) to repay the Note, unless waived by the Investor in advance. The Note began amortizing in June 2021 and was to amortize in eighteen monthly installments equal to the quotient of (i) the then-outstanding Principal Amount of the Note, divided by (ii) the number of months remaining until the Maturity Date. All amortization payments were to be payable solely in cash, plus a 2% premium. On June 14, 2021, the Company and Lind entered into an Acknowledgment and Termination Agreement, pursuant to which the Company agreed to issue to Lind an aggregate of 406,250 additional shares of its common stock (the “Lind Shares”) and pay Lind the remaining principal amount of $790,804 (the “Final Payment”) in full satisfaction the Company’s remaining obligations to Lind under the Note. The Company issued the Lind Shares and made the Final Payment to Lind, and the Lind Securities Purchase Agreement and the Note terminated, effective June 15, 2021. The Company recorded a loss on extinguishment of debt of $1.4 million for the issuance of the 406,250 shares during the three and six months ended June 30, 2021.

On December 17, 2020, the Company entered into three separate securities purchase agreements with certain accredited investors on substantially the same terms as the Lind Securities Purchase Agreement (the “December 17 SPAs”), pursuant to which the Company sold, in private placement transactions, in exchange for the payment by the accredited investors of an aggregate of $1,138,023, (1) convertible promissory notes (the “December 17 Notes”) in an aggregate principal amount of $1,365,628, which will bear no interest and mature on December 17, 2022, and (2) an aggregate of 110,956 shares of its common stock. On December 18, 2020, the Company entered into an additional securities purchase agreement with an accredited investor on substantially the same terms as the Lind Securities Purchase Agreement (the “December 18 SPA” and, together with the December 17 SPAs, the "Subsequent Securities Purchase Agreements"), pursuant to which the Company sold, in a private placement transaction, in exchange for the payment by the accredited investor of $269,373, (1) a convertible promissory note in an aggregate principal amount of $323,247, which will bear no interest and mature on December 18, 2022 (the “December 18 Note” and, together with the December 17 Notes, the “Subsequent Notes”), and (2) 26,263 shares of the Company’s common stock. The Subsequent Securities Purchase Agreements have substantially the same terms as the Lind Securities Purchase Agreement, and the Subsequent Notes have substantially the same terms as the Note.

The Company received aggregate net proceeds of $10.9 million from the convertible note offerings, net of $0.5 million of issuance costs. The total gross proceeds were allocated to the convertible notes and common stock issued under the agreements based on their relative fair values. The Company recognized a beneficial conversion feature discount on the convertible notes of approximately $0.1 million. Due to the principal payments made during the year, the Company remeasured the beneficial conversion feature discount at each payment date and recorded a loss on extinguishment of debt of approximately $1.0 million during the three and six months ended June 30, 2021 as well as a reduction in additional paid-in capital of $1.5 million as of June 30, 2021.

During the six months ended June 30, 2021, the Company paid approximately $13.7 million in principal payments on the outstanding convertible notes and approximately $27,000 of the convertible notes remain outstanding as of June 30, 2021.

The components of our convertible notes are as follows (in thousands):

		June 30,		December 31,
		2021		2020
Convertible notes due 2022	$	13,689	$	13,689
Unamortized debt discount / debt issuance costs		(20)		(4,112)
Less principal payments		(13,661)		-
Less current portion of long-term debt		(4)		(2,431)
Convertible debt, long-term, net of discount and issuance costs	$	4	$	7,146

The discounts on the convertible notes are being amortized to interest expense, using the effective interest method over the term of the convertible notes. Interest expense recognized related to the discount was approximately $575,000 and $1.6 million for the three and six months ended June 30, 2021, respectively. 

PPP Loan

On May 4, 2020, the Company qualified for and received a loan pursuant to the Paycheck Protection Program, a program implemented by the U.S. Small Business Administration under the Coronavirus Aid, Relief, and Economic Security Act, from a qualified lender (the “PPP Lender”), for an aggregate principal amount of approximately $147,000 (the “PPP Loan”). The PPP Loan bears interest at a fixed rate of 1.0% per annum, with the first six months of interest deferred, has a term of two years, and is unsecured and guaranteed by the U.S. Small Business Administration. The principal amount of the PPP Loan is subject to forgiveness under the Paycheck Protection Program upon the Company’s request to the extent that the PPP Loan proceeds are used to pay expenses permitted by the Paycheck Protection Program, including payroll costs, covered rent and mortgage obligations and covered utility payments incurred by the Company. The Company applied for and received full forgiveness of the PPP Loan with respect to these covered expenses and recorded a gain on forgiveness of debt during the three and six months ended June 30, 2021.