Debt

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

DEBT

12. DEBT

In order to consummate the Acquisition and support the combined business thereafter, SOC Telemed entered into a term loan facility with SLR Investment Corp. (“Solar”) and a related-party subordinated financing with SOC Holdings LLC, an affiliate of Warburg Pincus, for $100.0 million and $13.5 million, respectively. See Note 4, Business Combinations, for more information about the Acquisition.

Solar Term Loan Facility

The table below represents the components of outstanding debt (in thousands):

	2021			2020
Term loan facility, effective interest rate 9.31%, due 2026	$	91,831		$	-
Less: Unamortized discounts, fees and issue costs		(5,122	)		-
Balance at	$	86,709		$	-

In March 2021 the Company entered into a term loan agreement with Solar acting as a collateral agent on behalf of the individual lenders that committed to provide a senior secured term loan facility of up to $100.0 million. The term loan facility was structured into Term A1 Loan, Term A2 Loan, Term B Loan and Term C Loan, which are detailed in the table below. $85.0 million, consisting of Term A1 Loan and Term A2 Loan, was immediately available and borrowed on March 26, 2021. As discussed below, the Company repaid the $10.0 million borrowed under Term A2 Loan on June 4, 2021. The remaining amounts under Term B Loan and Term C Loan are available subject to no event of default and the Company achieving the respective net revenue milestones on a trailing six-month basis detailed in the table below.

	Original Amount		Available as of December 31, 2021 (in thousands)		Original Trailing Six-Month Net Revenue Milestone
Term A1 Loan	$	75,000	$	-	N/A
Term A2 Loan		10,000		-	N/A
Term B Loan*		2,500		-	$55.0 million by June 20, 2022
Term C Loan		12,500		12,500	$65.0 million by December 20, 2022
	$	100,000	$	12,500

* In accordance with the terms in the term loan agreement, the amount available under the Term B Loan increased to $12.5 million as the Term A2 Loan was repaid prior to June 20, 2022 (on June 4, 2021, as discussed below).

The term loan facility also provides for an uncommitted term loan in the principal amount of up to $25.0 million (“Term D Loan”), which availability is subject to the sole and absolute discretionary approval of the lenders and the satisfaction of certain terms and conditions in the term loan agreement.

On November 10, 2021, the Company entered into an amendment to the term loan agreement, pursuant to which the net revenue milestone for the Term B Loan was reduced from $55.0 million to $51.5 million on a trailing six-month basis, which made the tranche immediately available to be drawn. In connection with the amendment, the Company borrowed the full $12.5 million of the Term B Loan on November 10, 2021.

The term loan facility bears interest at a rate per annum equal to 7.47% plus the greater of (a) 0.13% and (b) the London Interbank Offered Rate (“LIBOR”) published by the Intercontinental Exchange Benchmark Administration Ltd., payable monthly in arrears beginning on May 1, 2021. The Company incurred approximately $2.1 million of loan origination costs in connection with the term loan facility. The Company will also be liable for a payoff fee of 4.95% of the principal balance payable at maturity or upon prepayment. The Company estimates the payoff fee to be $4.3 million, which is included as a debt discount offset against the Company’s outstanding debt balance on the consolidated balance sheets and amortized as a component of interest expense over the term of the term loan facility.

Until May 1, 2024, the Company will pay only interest monthly. However, the term loan agreement has an interest-only extension clause which offers to SOC the option to extend the interest-only period for six months until November 1, 2024, after having achieved two conditions: (i) a minimum of six months of positive EBITDA prior to January 31, 2024; and (ii) being in compliance with the revenue financial covenant, as described in this note. In either case, the maturity date is April 1, 2026.

The following reflects the contractually required payments of principal under the term loan facility (in thousands):

Years ending December 31,	Amount (in thousands)
2022	$	-
2023		-
2024		29,167
2025		43,750
2026		18,914

The term loan agreement includes two financial covenants requiring (i) the maintenance of minimum liquidity level of at least $5.0 million at all times; and (ii) minimum net revenues measured quarterly on a trailing twelve-month basis of at least $81.8 million on March 31, 2022, $88.2 million on June 30, 2022, $94.5 million on September 30, 2022, $100.9 million on December 31, 2022, and then 60% of projected net revenues in accordance with an annual plan to be submitted to the lenders commencing on March 31, 2023, and thereafter. The term loan agreement contains affirmative covenants which include the delivery of monthly consolidated financial information no later than 30 days after the last day of each month, quarterly consolidated balance sheet, income statement and cash flow statement covering such fiscal quarter no later than 45 days after the last day of each quarter, audited consolidated financial statements no later than 90 days after the last day of fiscal year or within 5 days of filing of the same with the SEC. The term loan agreement also contains negative covenants which, in certain circumstances, would limit the Company’s ability to engage in mergers or acquisitions and dispose of any of its subsidiaries. The Company was in compliance with all financial and negative covenants at December 31, 2021.

The term loan agreement contains a material adverse change provision which permits the lenders to accelerate the scheduled maturities of the obligations under the term loan facility. The conditions which would permit this acceleration are not objectively determinable or defined within the agreement.

The term loan facility is guaranteed by all of the Company’s wholly owned subsidiaries, including the entities acquired pursuant to the Acquisition, subject to customary exceptions. The term loan facility is secured by first priority security interests in substantially all of the Company’s assets, subject to permitted liens and other customary exceptions.

On June 4, 2021, Term A2 Loan of the term loan facility was partially repaid for a total of $10.8 million, including $10.0 million of principal, $0.5 million of payoff fee, and $0.3 million of related prepayment premium and accrued interest, in connection with the issuance of Class A common stock. Refer to Note 18, Stockholders’ Equity, for further discussion on the equity raise. As a result, the Company accelerated the amortization of $0.7 million of debt issuance costs plus $0.3 million of prepayment premium as of June 4, 2021 and recognized as interest expenses on the statement of operations for the year ended December 31, 2021.

The Company recognized the following interest expense related to the Solar term loan facility for the year ended December 31, 2021 (in thousands):

	2021
Interest expense	$	4,754
Amortization of loan origination costs		564
Amortization of payoff fee		1,210
Prepayment premium		300
	$	6,828

The Company determines the fair value of the term loan facility using discounted cash flows, applying current interest rates and current credit spreads, based on its own credit risk. Such instruments are classified as Level 2. The fair value amount was approximately $87.2 million as of December 31, 2021.

CRG Term Loan Agreement (only in 2020)

In June 2016, the Company entered into a Term Loan Agreement with CRG Servicing LLC (“CRG”). In addition to the principal and paid-in-kind interest balances, the Company was also liable for a final payoff fee of 6% of the principal balance payable at maturity or upon prepayment. The Company estimated the payoff fee to be $4.7 million, which was included as a debt discount offset against the Company’s outstanding debt balance on the consolidated balance sheets and amortized as a component of interest expense over the term of the loan.

Interest expense related to the long-term debt agreements, including acceleration of the amortization of debt issuance costs and discount and prepayment premium, for the year ended December 31, 2020, was $12.2 million. Of the $12.2 million of interest expense, cash interest expense was $5.9 million, paid-in-kind interest was $2.6 million, and amortization of debt issuance costs and backend facility fees was $2.6 million for the year ended December 31, 2020.

On October 30, 2020, the Term Loan was extinguished in connection with the closing of the Merger Transaction. Refer to Note 4 for further discussion on the Merger Transaction. As a result, the amortization of the balance of $1.4 million of debt issuance costs as of October 30, 2020, was accelerated and a prepayment premium associated with the payoff of the debt of $1.2 million were recognized as interest expenses on the statement of operations for the year ended December 31, 2020.

Related party - Unsecured Subordinated Promissory Note

On March 26, 2021, the Company entered into a subordinated financing agreement (the “Unsecured Subordinated Promissory Note” or “Subordinated Note”) with a significant stockholder, SOC Holdings LLC (“SOC Holdings”), an affiliate of Warburg Pincus. SOC Holdings constitutes a related party of the Company, pursuant to ASC 850, Related Parties.

The Company borrowed the aggregate principal amount of $13.5 million under the Subordinated Note on March 26, 2021, net of an original issue discount of $2.0 million, resulting in aggregate proceeds of $11.5 million.

The terms of the Subordinated Note state that if equity was raised for an amount greater than $10.0 million, the excess amount would have to be used for repayment of the Subordinated Note. On June 4, 2021, the Subordinated Note was extinguished in connection with the issuance of Class A common stock. Refer to Note 18, Stockholders’ Equity, for further discussion on the equity raise. As a result, the amortization of the balance of $2.0 million of discount and debt issuance costs as of June 4, 2021 was accelerated and recognized as interest expenses on the statements of operations for the year ended December 31, 2021.

The terms of the Subordinated Note are summarized as follows:

● The Subordinated Note bore interest at a rate per annum equal to the greater of (a) 0.13% and (b) LIBOR, plus the applicable interest rate of 7.47% prior to September 30, 2021.

● All outstanding principal and interest under the Subordinated Note were due and payable on the Maturity Date;

● Interest was computed on the basis of a year of 365/366 days, as applicable, and was added to the principal amount of the Subordinated Note on the last day of each calendar month.

The Company incurred less than $0.1 million of loan origination costs in connection with the Subordinated Note and amortized the balance as interest expense during the year ended December 31, 2021.

Interest expense related to paid-in kind interest of $0.2 million was recognized in the statements of operations for the year December 31, 2021.

Related party - Convertible Bridge Notes Payable (only in 2020)

On September 1, 2020, Legacy SOC Telemed entered into a convertible bridge note purchase agreement (the “Bridge Notes”, the “Bridge Note Agreement”) with its controlling stockholder, SOC Holdings LLC (“SOC Holdings” and “the Lead Investor”). SOC Holdings constitutes a related party of the Company, pursuant to ASC 850, Related Parties. Under the Bridge Note Agreement, Legacy SOC Telemed was permitted to borrow aggregate principal of up to $8.0 million, pursuant to an initial closing and potential additional closings on or before January 29, 2021. The initial closing of $2.0 million occurred on September 3, 2020. Two additional closings of $2.0 million each occurred on September 28, 2020 and October 13, 2020 respectively. The Bridge Notes bore an annual interest rate of 13% paid “in-kind”, compound quarterly based on a 365 day per year. For the year ended December 31, 2020, interest expense of less than $0.1 million was recognized.

On October 30, 2020, the Bridge Notes were extinguished in connection with the closing of the Merger Transaction. Refer to Note 4 for further discussion on the Merger Transaction. As a result, the amortization of the balance of less than $0.1 million of debt issuance costs as of October 30, 2020 was accelerated and recognized as interest expenses on the statement of operations for the year ended December 31, 2020.