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Debt | 12 Months Ended
--- | ---
Dec. 31, 2016
Transfers And Servicing [Abstract] |
Debt | 10. DEBT Debt consisted of the following (in thousands):
|  | December 31, |
|  | 2016 |  |  | 2015 |
East West Bank Loan |  | $ | 12,614 |  |  | $ | 2,866 |
Danske Bank Credit Facility |  |  | 7,376 |  |  |  | — |
FastPartner Subordinated Promissory Notes |  |  | 1,692 |  |  |  | — |
Al Amoudi Subordinated Promissory Notes |  |  | 1,164 |  |  |  | — |
Current portion of long-term debt |  | $ | 22,846 |  |  | $ | 2,866 |
East West Bank Loan |  | $ | — |  |  | $ | 12,887 |
SSP Primers Loan |  |  | 1,098 |  |  |  | — |
Long-term debt, net of current portion |  | $ | 1,098 |  |  | $ | 12,887 |
Loan Agreement with East West Bank On January 30, 2015, the Company entered into the Loan Agreement with East West Bank as the lender (“the Lender”), which provided the Company with a secured term loan facility in an aggregate principal amount of up to $20.0 million. The Company borrowed the first and only advance of $16.0 million (“Draw A”) on January 30, 2015. Draw A was used to pay-off the Company’s existing term debt of $11.3 million. A loss on extinguishment of debt of $0.6 million related to costs from the pay-off of the previously existing term loan was recognized as interest expense during the three months ended March 31, 2015. Draw A bore interest at a daily floating rate equal to 2.00%, plus the greater of (i) 3.25% or (ii) the prime rate published by the Lender. The maturity date of the loan is December 1, 2018. The principal pay-down of the loan began on July 1, 2016 with the loan being payable in 30 equal monthly installments and the balance at December 31, 2016 was $12.6 million. A fully non-refundable commitment fee of $160,000 was paid on January 30, 2015 when Draw A was received. The loan had no prepayment penalty. Commitment fees are included in debt issuance costs which are netted against the debt outstanding and are amortized to interest expense using the effective interest method over the term of the loan. Debt discount and issuance costs, current, were $0.2 million and $0.2 million as of December 31, 2016 and 2015, respectively. Debt discount and issuance costs, non-current, were nil and $0.1 million as of December 31, 2016 and 2015, respectively. In connection with the Loan Agreement, the Company agreed to issue to the Lender warrants to purchase shares of the Company’s common stock upon the drawdown of each advance in an amount equal to 1.5% of the amount drawn, divided by the exercise price per share for that tranche. The fair value of the warrant is reflected as a discount to the debt. As a result of Draw A, the Company issued to the Lender a warrant to purchase an aggregate of 34,483 shares of the Company’s common stock, at an exercise price of $6.96 per share. The fair value of the warrant was estimated to be $90,000 on January 30, 2015, using the Black-Scholes Model with the following assumptions: expected volatility of 39.83%, a contractual term of 5 years, risk-free interest rate of 1.18%, underlying common stock price of $7.06, and dividend yield of 0%. The warrant is included in stockholders’ equity with the offset to debt discount that is amortized over the term of the loan using the effective interest method. The warrant is not subject to remeasurement. The Loan Agreement required collateral by a security interest in all of the Company’s assets and contains customary affirmative and negative covenants including financial maintenance covenants, and also includes standard events of default, including payment defaults. Upon the occurrence of an event of default, a default interest rate of an additional 5.00% may be applied to the outstanding loan balances, and the Lender may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement. As of February 29, 2016, the Company was in violation of one of its financial covenants under the Loan Agreement. This violation was waived in principle by the Lender by virtue of a contemporaneous verbal amendment to the Loan Agreement received from the Lender, which was subsequently memorialized in a written amendment to the Loan Agreement dated May 12, 2016. As of December 31, 2016, the Company was in compliance with its debt covenants under the Loan Agreement. In April 2016, the Lender consented to the acquisition of Allenex by the Company (the “Consent”). The Consent was contingent upon the closing of a private placement financing for aggregate cash proceeds of at least $12.0 million and separately depositing into an escrow account cash of $8.0 million relating to a commitment by the Majority Shareholders to purchase the Company’s equity securities in the Subsequent Financing, all of which occurred on April 14, 2016. Pursuant to the Consent, the Company is also required to raise another $20.0 million through one or more equity financings by March 31, 2017, of which $9.0 million was raised on September 26, 2016 in the Public Offering, prior to paying the $6.2 million of deferred purchase price consideration to the Majority Shareholders, which had a carrying amount of $5.4 million as of December 31, 2016. On May 12, 2016, the Company entered into a First Amendment to Loan and Security Agreement (the “First Amendment”), which amended the Loan Agreement. The First Amendment, among other things, amended the Loan Agreement by modifying certain financial covenants, adding an equity financing covenant, and restricting certain transactions between the Company and its subsidiaries. On June 27, 2016, the Company entered into a Second Amendment to Loan and Security Agreement (the “Second Amendment”). The Second Amendment, among other things, amended the Loan Agreement to permit certain transactions between the Company and its subsidiaries and to add intellectual property as collateral security. As discussed in Note 1, due to the substantial doubt about the Company’s ability to continue operating as a going concern and the material adverse change clause in the Loan Agreement, the entire amount of borrowings at December 31, 2016 has been classified as current in these financial statements. East West Bank did not invoke the material adverse change clause. As discussed in Note 18, in March 2017, the Company repaid all amounts then outstanding under the Loan Agreement with East West Bank. Danske Bank Credit Facility On June 25, 2013, Allenex entered into the Term Loan Facility with Danske in an aggregate principal amount of up to SEK 71,000,000 (approximately $7.8 million in U.S. dollars). The Term Loan Facility is available for utilization in advances of a minimum of SEK 5,000,000 (approximately $0.5 million in U.S. dollars) and if more, integral multiples of SEK 1,000,000 (approximately $0.1 million in U.S. dollars). The interest rate applicable to each advance shall be the percentage rate per annum calculated as the aggregate of (i) Stockholm Interbank Offered Rate (“STIBOR”) (as defined in the Term Loan Facility) and (ii) the Margin (as described in the Term Loan Facility) at 3% conditional on the fulfillment of certain criteria. In March 2015, Allenex entered into a first amendment to the Term Loan Facility, pursuant to which additional loans were granted. In August 2015, Allenex entered into a second amendment to the Term Loan Facility, pursuant to which the term of the Term Loan Facility was extended. In December 2015, Allenex entered into a waiver and amendment agreement relating to the Term Loan Facility, pursuant to which the change of control provision was waived and amended. In March 2016, Allenex entered into another amendment to the Term Loan Facility, which modified the repayment schedule for advances under the Term Loan Facility. Under this Term Loan Facility, SEK 62,000,000, or approximately $6.8 million in U.S. dollars, was outstanding as of December 31, 2016, and this will be paid through quarterly payments of SEK 3,000,000, or $0.3 million in U.S. dollars in September and December of 2017 and March and June of 2018. The remaining balance of SEK 50,000,000, or approximately $5.5 million in U.S. dollars, is due in June 2018. On June 18, 2015, Allenex also entered into a short term credit facility with Danske with total available credit of SEK 8,000,000 (approximately $0.9 million in U.S. dollars). As of August 4, 2016, the available credit under the short term credit facility with Danske was increased to SEK 10,000,000 (approximately $1.1 million in U.S. dollars). As of December 31, 2016, the total outstanding balance due to Danske under the short term credit facility was approximately SEK 5,100,000 (approximately $0.6 million in U.S. dollars), and pursuant to a quarterly roll-over provision is due on March 31, 2017. Due to insufficient working capital in Allenex, a debt covenant in the Term Loan Facility relating to maintaining an adequate leverage ratio was violated at each of June 30, 2016, September 30, 2016 and December 31, 2016. The Company obtained waivers from Danske for each of these violations of the debt covenant. However, the waiver we received from Danske for the covenant violation as of December 31, 2016 is conditional. This waiver is conditional because it is based on preliminary consolidated financial statements for Allenex as of and for the three months and year ended December 31, 2016 prepared under International Financial Reporting Standards as adopted in Sweden and for regulatory reporting in Sweden, which financial statements are currently subject to further review and audit in Sweden, and the final consolidated financial statements for Allenex may change materially. Any change to the preliminary Allenex financials that served as a basis for the conditional waiver could result in a withdrawal of the conditional waiver and could result in Allenex being in default under the Term Loan Facility, at which point Danske could demand repayment of the debt. Additionally, while Allenex received waivers from Danske for each of these violations, due to continuing liquidity matters, we determined that it is not probable that Allenex was in compliance with this covenant as of March 31, 2017 or will be in compliance with this covenant in the near future, and Danske has the ability to demand repayment of the debt if the violation is not resolved. For these reasons, the long-term debt due to Danske was classified as a current liability in the consolidated balance sheet as of December 31, 2016. Additionally, if the loan was no longer available or Danske demanded repayment of the debt, the Company may not have sufficient capital to operate. FastPartner Subordinated Promissory Notes On June 28, 2013, Allenex issued a SEK 9,400,000 (approximately $1.0 million in U.S. dollars) subordinated promissory note to FastPartner, which provides for an annual interest rate of 10.00%. Principal payments of SEK 1,000,000 (approximately $0.1 million in U.S. dollars) and accrued interest are payable quarterly at September 30, December 31, March 31 and June 30 and subject to working capital requirements that had not been met in fiscal years 2016 and 2015. The full amount of the promissory note was outstanding as of December 31, 2016, and is due July 1, 2017. However, pursuant to an intercreditor agreement among Allenex, Danske, FastPartner, Mohammed Al Amoudi and Olerup SSP AB, dated June 25, 2013 (the “Intercreditor Agreement”), until the Term Loan Facility with Danske is repaid, FastPartner may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. Allenex’s obligations under the promissory note is secured by a pledge of Allenex shares to FastPartner. On December 29, 2015, Allenex issued a SEK 2,000,000 (approximately $0.2 million in U.S. dollars) subordinated promissory note to FastPartner, a related party, which matured on December 31, 2016 and has an annual interest rate of 10.00%. Principal and accrued interest are payable on the maturity date and subject to working capital requirements that had not been met in fiscal years 2016 and 2015. However, pursuant to the Intercreditor Agreement, until the Term Loan Facility with Danske is repaid, FastPartner may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. Allenex’s obligations under the promissory note is secured by a pledge of Allenex shares to FastPartner. The full amount of subordinated promissory note was outstanding as of December 31, 2016 and is due July 1, 2017. On March 7, 2016, Allenex issued a SEK 4,000,000 (approximately $0.4 million in U.S. dollars) subordinated promissory note to FastPartner, a related party, which matured on December 31, 2016 and has an annual interest rate of 10.00%. Principal and accrued interest are payable on the maturity date and subject to working capital requirements that had not been met during the year ended December 31, 2016. However, pursuant to the Intercreditor Agreement, until the Term Loan Facility with Danske is repaid, FastPartner may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. Allenex’s obligations under the promissory note is secured by a pledge of Allenex shares to FastPartner. The full amount of the subordinated promissory note was outstanding as of December 31, 2016 and is due July 1, 2017. FastPartner is also a shareholder of the Company and is considered a related party (See Note 17). Mohammed Al Amoudi Subordinated Promissory Note On June 28, 2013, Allenex issued a SEK 10,600,000 (approximately $1.2 million in U.S. dollars) subordinated promissory note to Mohammed Al Amoudi, which provides for an annual interest rate of 10.00%. Principal payments of SEK 1,000,000 (approximately $0.1 million in U.S. dollars) and accrued interest are payable quarterly at September 30, December 31, March 31 and June 30, subject to meeting certain requirements for working capital. The promissory note had an initial maturity date of June 28, 2016. On December 31, 2016, the maturity date was extended until July 1, 2017. However, pursuant to the Intercreditor Agreement, until the Term Loan Facility with Danske is repaid, Mohammed Al Amoudi may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. The full amount of the promissory note was outstanding as of December 31, 2016. Allenex’s obligations under the promissory note is secured by a pledge of Allenex shares to Mohammed Al Amoudi. Mohammed Al Amoudi is also a shareholder of the Company and is considered a related party (See Note 17). Loan Agreement with SSP Primers Aktieboulag On February 25, 2015, Allenex entered into a SEK 14,000,000 (approximately $1.5 million in U.S. dollars) loan agreement with SSP Primers Aktieboulag, pursuant to which SEK 4,000,000 (approximately $0.4 million in U.S. dollars) was paid on March 7, 2016 and SEK 10,000,000 (approximately $1.1 million in U.S. dollars) is payable on February 28, 2018. The loan amount outstanding as of December 31, 2016 is SEK 10,000,000 (approximately $1.1 million in U.S. dollars) and has an annual interest rate of 3% payable in conjunction with each principal payment. Total interest accrual on debt as of December 31, 2016 was $0.8 million. As of December 31, 2016, future debt maturities were as follows (in thousands):
Years Ending December 31, |  | Amount |
2017 |  | $ | 23,032 |
2018 |  |  | 1,098 |
Total debt maturities |  |  | 24,130 |
Less: debt discount and issuance costs |  |  | (186 | )
Total debt maturities, net of debt discount and issuance costs |  |  | 23,944 |
Less: current portion, of long-term debt |  |  | (22,846 | )
Long-term debt, net carrying value |  | $ | 1,098 |

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- Definition The entire disclosure for certain contractual rights to receive money on demand or on fixed or determinable dates with evidence of deterioration of credit quality since origination that were acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6379141&loc=d3e15032-111544 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=66008989&loc=d3e5212-111524 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6379141&loc=d3e15029-111544 + Details
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