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Related-Party Arrangements | 9 Months Ended
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Sep. 30, 2018
Related Party Transactions [Abstract] |
Related-Party Arrangements | 6. Related Party Arrangements Related party debt consist of the following (in thousands):
|  | September 30, 2018 |  |  | December 31, 2017 |
Principal amount |  | $ | 71,506 |  |  | $ | 79,666 |
Unamortized premium |  |  | 699 |  |  |  | — |
Unaccreted debt issuance costs |  |  | (62 | ) |  |  | — |
Net carrying amount |  | $ | 72,143 |  |  | $ | 79,666 |
In October 2007, the Company entered into a loan arrangement (the “Mann Group Loan Arrangement”) with The Mann Group LLC (the “The Mann Group”), which has been amended from time to time. At that time, Alfred Mann, the Company’s then Chairman and Chief Executive Officer, was the managing member of The Mann Group LLC. On October 31, 2013, the promissory note underlying the Mann Group Loan Arrangement, described in the Company’s condensed consolidated balance sheets as Note Payable to Related Party, was amended to, among other things, extend the maturity date of the loan to January 5, 2020, extend the date through which the Company can borrow under the Mann Group Loan Arrangement to December 31, 2019, increase the aggregate borrowing amount under the Mann Group Loan Arrangement from $350.0 million to $370.0 million and provide that repayments or cancellations of principal under the Mann Group Loan Arrangement will not be available for reborrowing. At various times over the years that the Mann Group Loan Arrangement has been outstanding, the Company and The Mann Group have agreed to exchange portions of the outstanding principal for shares of the Company’s common stock. On June 27, 2017, the Company entered into an agreement with The Mann Group, pursuant to which the parties agreed to, among other things, (i) capitalize $10.7 million of accrued and unpaid interest as of June 30, 2017, resulting in such amount being classified as outstanding principal under The Mann Group Loan Arrangement; (ii) advance to the Company approximately $19.4 million of cash, the remaining amount available for borrowing by the Company under The Mann Group Loan Arrangement after the foregoing capitalization of accrued and unpaid interest; and (iii) defer all interest payable on the outstanding principal until July 1, 2018, unless such payments are otherwise permitted under the subordination agreement with Deerfield, and subject to further deferral pursuant to the terms of the subordination agreement with Deerfield which terms are more fully disclosed below. On March 11, 2018, the Company amended and restated the Mann Group Loan Arrangement with The Mann Group to, among other things, (i) reflect the current outstanding principal balance of the existing loan of $71.5 million, after giving effect to the partial cancellation of principal in exchange for shares of the Company’s common stock described below; (ii) extend the maturity date of the loan to July 1, 2021; (iii) for periods beginning after April 1, 2018 require interest to compound quarterly; and (iv) permit the principal and any accrued and unpaid interest under the Mann Group Loan Arrangement to be converted, at the option of The Mann Group, at any time on or prior to close of business on the business day immediately preceding the stated maturity date, into shares of the Company’s common stock. The conversion rate of 250 shares per $1,000 principal amount of the Note, which is equal to $4.00 per share subject to adjustment under certain circumstances as described in the Mann Group Loan Arrangement. The Company analyzed this amendment and concluded that the transaction represented an extinguishment of the related party note and recorded a $0.8 million loss on extinguishment of debt. As a result of the extinguishment the Company recorded a debt premium of $0.7 million and debt issuance costs of $0.1 million during the nine months ended September 30, 2018. On March 11, 2018, the Company and The Mann Group entered into a common stock purchase agreement pursuant to which the Company agreed to issue to The Mann Group and The Mann Group agreed to purchase 3,000,000 shares of the Company’s common stock at a price per share of $2.72, which represented the closing price of the Company’s common stock on March 9, 2018. As payment for the purchase price for the shares, The Mann Group agreed to cancel $8.2 million in principal amount under the Mann Group Loan Arrangement, with the principal payment to be reflected in the amended and restated Mann Group Loan Arrangement. The purchased shares were issued in a private placement. Interest, at a fixed rate of 5.84%, is due and payable quarterly in arrears on the first day of each calendar quarter for the preceding quarter, or at such other time as the Company and The Mann Group mutually agree. Under the agreement, accrued and unpaid interest may be paid-in-kind. The Mann Group can require the Company to prepay up to $200.0 million in advances that have been outstanding for at least 12 months, less approximately $113.2 million aggregate principal amount that has been cancelled in connection with three common stock purchase agreements. If The Mann Group exercises this right, the Company will have 90 days after The Mann Group provides written notice, or the number of days to maturity of the note if less than 90 days, to prepay such advances. However, pursuant to a letter agreement entered into in August 2010, The Mann Group has agreed to not require the Company to prepay amounts outstanding under the amended and restated promissory note if the prepayment would require the Company to use its working capital resources. In addition, The Mann Group entered into a subordination agreement with Deerfield pursuant to which The Mann Group agreed with Deerfield not to demand or accept any payment under the Mann Group Loan Arrangement until the Company’s payment obligations to Deerfield under the Facility Agreement have been satisfied in full. Subject to the foregoing, in the event of a default under The Mann Group Loan Arrangement, all unpaid principal and interest either becomes immediately due and payable or may be accelerated at The Mann Group’s option, and the interest rate will increase to the one-year LIBOR calculated on the date of the initial advance or in effect on the date of default, whichever is greater, plus 5% per annum. All borrowings under the Mann Group Loan Arrangement are unsecured. The Mann Group Loan Arrangement contains no financial covenants. As of September 30, 2018 and December 31, 2017, the Company had accrued unpaid interest related to the above note of $5.7 million and $2.3 million, respectively. As of September 30, 2018 and December 31, 2017 there were no additional amounts available for future borrowings. Interest expense (excluding the amortization of debt premium and debt issuance costs) for the three and nine months ended September 30, 2018 and 2017 are as follows (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Interest expense on note payable to related party |  | $ | 1,074 |  |  | $ | 1,173 |  |  | $ | 3,234 |  |  | $ | 2,608 |
Amortization of the premium and accretion of debt issuance costs related to the related party notes for the three and nine months ended September 30, 2018 and 2017 are as follows (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Amortization of debt premium |  | $ | 59 |  |  | $ | — |  |  | $ | 125 |  |  | $ | — |
Accretion expense - debt issuance cost |  | $ | 6 |  |  | $ | — |  |  | $ | 13 |  |  | $ | — |
In May 2015, the Company entered into a sublease agreement with the Alfred Mann Foundation for Scientific Research (the “Mann Foundation”), a California not-for-profit corporation. The lease was for approximately 12,500 square feet of office space in Valencia, California, which expired in April 2017 and was renewed on a month-to-month basis at a rate of $20,000 per month until August 31, 2017 at which time the Company moved into its new corporate headquarters in Westlake Village, California (see Note 12 — Commitments and Contingencies). Lease Payments to the Mann Foundation for the three and nine months ended September 30, 2017 were $40,000 and $161,000, respectively. The Company has entered into indemnification agreements with each of its directors and executive officers, in addition to the indemnification provided for in its amended and restated certificate of incorporation and amended and restated bylaws (see Note 12 —Commitments and Contingencies). On October 10, 2017, the Company entered into securities purchase agreements with certain institutional investors and a charitable foundation. Included in this offering were 166,600 shares at a purchase price of $6.00 per share issued to the Kresa Family Foundation, of which Kent Kresa, the Company’s Chairman of the Board, is the President.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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