Term Loan

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Term Loan

TERM LOAN

On June 28, July 3, July 17, and August 5, 2019, the Company entered into term loan subscription agreements with certain accredited investors, pursuant to which the Company issued secured promissory notes (the “Notes”) in the aggregate principal amount of approximately $5.7 million. The Company paid $707,000 in debt issuance costs which was recorded as a debt discount to be amortized as interest expense over the term of the loan using the straight line method.

The Notes accrue interest at a rate of 12% per annum. Interest is payable quarterly with the first interest payment to be made on December 28, 2019, and each subsequent payment every three months thereafter.

The unpaid principal balance of the Notes, plus accrued and unpaid interest thereon, will mature on the earliest to occur of: (i) June 28, 2020 (subject to extension for up to (60) days based upon the mutual agreement of the Company and the holders of a majority of the unpaid principal balance of all outstanding Notes) or (ii) at any time following an Event of Default. The Notes may not be prepaid without the prior written consent of the holders of the Notes. The Notes are secured by a first lien and security interest on all the assets of the Company and certain of its wholly owned subsidiaries.

On December 28, 2019 the Company defaulted on the initial interest payment on the loan and the interest rate per annum increased to the default rate of 15%.

The Company recognized approximately $682,000 in interest expense related to the Notes for the twelve months ended December 31, 2019 including $360,000 related to the amortization of debt issuance costs.