Senior Secured Debt, in Default

12 Months Ended

Dec. 31, 2022

Senior Secured Debt, in Default [Abstract]

Senior Secured Debt, in Default

10. Senior Secured Debt, in Default

The following table summarizes outstanding senior secured debt:

	December 31, 2022										December 31, 2021
(In thousands)	Principal			Debt Discount				Carrying Value			Principal			Debt Discount				Carrying Value
Senior secured debt		$	19,211		$	(4,795	)		$	14,416		$	15,000		$	(3,414	)		$	11,586

Senior secured promissory note payable, in default (“Senior Secured Note”) – In August 2020, the Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”). In accordance with the NWPSA, the Company issued a $15 million Senior Secured Promissory Note Payable (the “Senior Secured Note”) and a warrant exercisable into shares of the Company’s common stock in exchange for cash to support operations, repay outstanding debt and close on the acquisition of the UltraMIST assets from Celularity Inc. (Celularity) among other transactions.

In February 2022, the Company entered into a Second Amendment to Note and Warrant Purchase and Security Agreement (the “Second NWPSA”) for $3.0 million, for a total of $18.0 million outstanding. Along with the issuance of the note, the Company also issued warrants to purchase 16.2 million shares of common stock with an exercise price of $0.18 and 20.6 million shares of common stock.  Since the combined fair value of the warrants and common stock issued as part of the Second NWPSA exceeded the face value of the note, the additional amount beyond the face value was recorded as a loss on issuance totaling $3.4 million.

Interest is charged at the greater of prime rate or 3% plus 9%, paid quarterly.  Principal increases at a rate of 3% of the outstanding principal balance (PIK interest) on each quarterly interest payment date.  Original maturity date of the Senior Secured Note is September 20, 2025, and it can be prepaid.

In June 2022, the Company entered into the Third Amendment to the Note and Warrant Purchase and Security Agreement (the “Third NWPSA”). The Third NWPSA provides for (i) the extension of the agent’s and holder’s forbearance of exercising its remedies arising from Existing Defaults (as defined in the NWPSA) to the earlier of (x) the occurrence of an Event of Default (as defined in the NWPSA) or (y) August 30, 2022, and (ii) the extension to file a registration statement with the Securities and Exchange Commission to register the resale of the Advisor Shares (as defined in the NWPSA) no later than August 30, 2022.

As of December 31, 2022, the Company is in default of the minimum liquidity provisions in the Senior Secured Note and, as a result, it is classified in current liabilities in the accompanying consolidated balance sheets. The Company is accruing interest at the default interest rate of an incremental 5%.

The debt issuance costs, and debt discount related to the Senior Secured Note were capitalized as a reduction in the principal amount and are being amortized to interest expense over the life of the Senior Secured Note. The amortization of the debt issuance costs and debt discount, included in interest expense, for the years ended December 31, 2022, and 2021, totaled $1.6 million and $910 thousand, respectively. Accrued interest related to the Senior Secured Note was $1.9 million and $1.6 million on December 31, 2022, and December 31, 2021, respectively. Interest expense on the Senior Secured Note totaled $5.9 million and $3.1 million for the years ended December 31, 2022, and 2021, respectively.