Convertible Bonds

12 Months Ended

Dec. 31, 2021

Convertible Bonds

Convertible Bonds

15. Convertible Bonds

	December 31, 2021		December 31, 2020
Brilliant King Group Limited (1)	$	12,000	$	12,000
Poseidon Sports Limited (1)		3,000		3,000
Magical Glaze Limited (2)		–		13,400
Vision Edge Limited (1)		20,000		20,000
Streeterville Capital, LLC (3)		13,603		1,973
Total convertible bonds, current	$	48,603	$	50,373

(1) 2014 and 2015 Convertible Promissory Note and Amendments

In December 2014 and June 2015, the Group entered into three convertible promissory note purchase agreements with Brilliant King Group Limited (“Brilliant King”), Poseidon Sports Limited (“Poseidon”) and Vision Edge Limited (“Vision Edge”), respectively whereby the Group agreed to sell and issue to these three investors convertible promissory notes in an aggregate principal amount of $35,000. The convertible notes bore no interest, and might be partially or wholly converted into shares of the Group’s ordinary shares at any time prior to maturity at the option of the investor.

The convertible promissory notes with Brilliant King and Poseidon were due and payable on June 11, 2016; the convertible promissory notes with Vision Edge was due and payable on June 29, 2016, the conversion option of these convertible bonds had expired after the due dates.

The Group defaulted the payment for all above outstanding convertible bonds of $35,000 in June 2016. The convertible notes bore no interest, and there were no default terms including default interest or penalty stated in the above convertible promissory notes. None of these bond holders has attempted any recourse for payment or conversion. While the Group has been in negotiations with these bond holders, no updated settlement arrangements have been reached.

(2) Convertible Promissory Note and Amendment with Union Sky/ MGL

In December 2014, the Group entered into a convertible promissory note purchase agreement with Union Sky Holding Group Limited (“Union Sky”) whereby the Group agreed to sell and issue to the investor convertible promissory notes in an aggregate principal amount of $20,000. On June 29, 2018, the Group entered into an amendment agreement with Union Sky and Magical Glaze Limited (“MGL”), who are under common control. The amendment transferred all the rights and obligations of the convertible bond to MGL and the maturity date of the note was extended with the repayment of $6,600, $6,700 and $6,700 of the principal amount of the convertible bond and interest thereon due by December 2019, June 2020 and December 2020, respectively.

On October 7, 2020, the Group entered into another amendment agreement with MGL and the maturity date of the note was further extended with the repayment of $6,600 and $13,400 of the principal amount due by October 8, 2020 and March 31, 2021, respectively. The Group made $6,600 and $13,400 repayment on October 8, 2020 and March 31, 2021, respectively. 

(3) 2020 and 2021 Convertible Promissory Note with Streeterville Capital, LLC

On November 3, 2020, the Group entered into a convertible promissory note purchase agreement with Streeterville Capital, LLC (the “2020 Note”), with an initial principal amount of $2,110. On February 1, 2021, June 9, 2021, September 30, 2021 and November 12, 2021, the Group furtherly entered into convertible promissory notes purchase agreement with Streeterville Capital, LLC with an aggregate principal amount of $16,840. (the “2021 Note”). Both 2020 Note and 2021 Note had a 12-month term and carried interest at 10% per annum. The Group’s obligations under the 2020 Note and 2021 Note may be prepaid at any time, provided that in such circumstance the Group would pay 115% of any amounts outstanding under the note and being prepaid. The note could be convertible into shares of the Group’s ordinary share at a conversion price of $26 per share for 2020 Note and $20 per share for 2021 Note at any time after the issuance date.

Streeterville Capital, LLC could redeem any portion of the note, at any time after six months from the issue date, subject to a maximum monthly redemption amount of $350 for 2020 Note and $700 for 2021 Note, the Group have the option to pay such redemptions in cash or the Group’s ordinary shares at the redemption conversion price, or by a combination thereof. The redemption conversion price for the 2020 Note should be the lesser of $26 or 80% of the lowest closing trade price during the ten trading days immediately preceding the applicable measurement date, while for 2021 Note should be the same with conversion price.

The Group determines that the redemption feature embedded within the 2020 Note meets the definition of a derivative and the Group estimates a fair value of the derivative liability using the Binomial Model at the date of issuance.

The Group recorded a total of $164 debt discount upon the issuance of 2020 Note, including the $54 fair value of the embedded derivative liability, $10 of direct transaction costs incurred, and $100 discount at issuance. Amortization of the debt discount was $136 and $28 for the years ended December 31, 2021 and 2020, respectively.

The Group recorded a total of $840 debt discount upon the issuance of 2021 Note, including $40 of direct transaction costs incurred, and $800 discount at issuance. Amortization of the debt discount was $403 for the year ended December 31, 2021.

As of December 31, 2021 and 2020, the carrying amounts of the Group’s convertible bonds are $48,603 and $50,373, net of unamortized debt discount of $438 and $137, respectively.