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Debt
 9 Months Ended
Sep. 30, 2022
Debt [Abstract]  
Debt

Note 9 – Debt

 

The Company’s debt consisted of:

 

(In thousands)  September 30,
2022		   December 31,
2021		 
Note payable – Exchange Note  $35,000   $— 
PPP Loan   726    804 
Navitas Loan   27    — 
Other notes payable (1)   218    297 
Total debt   35,971    1,101 
Less: unamortized debt discount   (5,099)   — 
Total debt, net of debt discount   30,872    1,101 
Less: current portion, net of current unamortized debt discount   (492)   (1,089)
Long-term debt  $30,380   $12 

 

(1) Other notes payable relates to a one-year insurance premium that was financed over nine months.

 

Note Payable

 

Securities Purchase Agreement

 

On March 14, 2022, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with the Investor, pursuant to which the Company agreed to issue and sell to the Investor, in a private placement transaction, in exchange for the payment by the Investor of $65 million, less applicable expenses, as set forth in the Securities Purchase Agreement, a senior secured promissory note in an aggregate principal amount of $65 million (the “SPA Note”), and a SPA Warrant to purchase up to an aggregate of 688,111 shares of Common Stock.

 

Securities Exchange Agreement

 

On August 18, 2022, the Company reached an agreement with its Investor to amend its existing senior SPA Note and entered into the Exchange Agreement. Pursuant to the Exchange Agreement, the Company partially paid $35.2 million under the SPA Note and exchanged the remaining balance of the SPA Note for an Exchange Note with an aggregate original principal amount of $35.0 million and a new Note Exchange Warrant to purchase 1,422,764 shares of Common Stock and modified an existing SPA Warrants to purchase up to an aggregate of 688,111 shares of Common Stock. The Company exchanged the SPA Warrant for a new warrant for the same number of underlying shares but with a reduced exercise price (the “Modified Warrants” and, collectively with the Note Exchange Warrant, the “Warrant Liabilities”). As of September 30, 2022, the Company had outstanding liability-classified Warrant Liabilities that allows the Investor to purchase 2,110,875 shares of the Company’s Common Stock. Additional information regarding the Company’s Warrant Liabilities may be found in Note 1 – Overview, Basis of Presentation and Significant Accounting Policies and Note 4 – Fair Value Measures, included elsewhere in the notes to the condensed consolidated financial statements.

 

The Exchange Note is a senior secured obligation of the Company and ranks senior to all indebtedness of the Company. The Exchange Note will mature on the three-year anniversary of its issuance (the “Maturity Date”) and contains a 9.0% annualized interest rate, with interest to be paid monthly, in cash, beginning September 1, 2022. The principal amount of the Exchange Note will be payable on the Maturity Date, provided that the Investor will be entitled to a cash sweep of 20% of the proceeds received by the Company in connection with any equity financing, which will reduce the outstanding principal amount under the Exchange Note.

 

At any time, the Company may prepay all of the Exchange Note by redemption at a price equal to 102.5% of the then-outstanding principal amount under the Note plus accrued but unpaid interest. The Investor will also have the option of requiring the Company to redeem the Exchange Note on the one-year or two-year anniversaries of issuance at a price equal to the then-outstanding principal amount under the Exchange Note plus accrued but unpaid interest, or if the Company undergoes a fundamental change at a price equal to 102.5% of the then-outstanding principal amount under the Exchange Note plus accrued but unpaid interest.

 

The Exchange Note imposes certain customary affirmative and negative covenants upon the Company, as well as covenants that restrict the Company and its subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions, restrict the ability of the Company and its subsidiaries from making certain investments, subject to specified exceptions, restrict the declaration of any dividends or other distributions, subject to specified exceptions, require the Company not to exceed maximum levels of allowable cash spend while the Exchange Note is outstanding, and require the Company to maintain minimum amounts of cash on hand. If an event of default under the Exchange Note occurs, the Investor can elect to redeem the Exchange Note for cash equal to 115% of the then-outstanding principal amount of the Note (or such lesser principal amount accelerated by the Investor), plus accrued and unpaid interest, including default interest, which accrues at a rate per year equal to 15% from the date of a default or event of default. As of September 30, 2022, the Company is in compliance with the financial debt covenants associated with its Exchange Note.

 

Until the date the Exchange Note is fully repaid, the Investor has, subject to certain exceptions, the right to participate for up to 30% of any offering of debt, equity (other than an offering of solely Common Stock), or equity-linked securities, including without limitation any debt, preferred stock or other instrument or security, of the Company or its subsidiaries.

 

The Modified Warrant have an exercise price of $21.50 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, will be exercisable on and after the six-month anniversary of issuance, have a term of five and one-half years from the date of issuance and will be exercisable on a cash basis, unless there is not an effective registration statement covering the resale of the shares issuable upon exercise of the Modified Warrant (the “Modified Warrant Shares”) or if shareholder approval for the full exercise of the Modified Warrant is not received, in which case the Modified Warrant will also be exercisable on a cashless exercise basis at the Investor’s election.

 

The Note Exchange Warrant have an exercise price of $12.30 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, were exercisable upon issuance, and have a term of five and one-half years from the date of issuance and will be exercisable on a cash basis, unless there is not an effective registration statement covering the resale of the shares issuable upon exercise of the Warrant (the “Note Exchange Warrant Shares” and, together with the Modified Warrant Shares, the “Exchange Warrant Shares”) or if shareholder approval for the full exercise of the Note Exchange Warrant is not received, in which case the Note Exchange Warrant will also be exercisable on a cashless exercise basis at the Investor’s election. Until the Company completes a qualified equity financing of at least $15.0 million, which requirement was satisfied with sales under the ATM Program, the Note Exchange Warrant’s exercise price would have been reduced to the extent the Company issues securities, subject to certain exceptions, for a lower purchase price. The Note Exchange Warrant also prohibited the Company, until following the completion of such qualified equity financing, from issuing warrants with more favorable or preferential terms and/or provisions.

 

The Warrant Liabilities will each provide that in no event will the number of shares of Common Stock issued upon exercise of such warrant result in the Investor’s beneficial ownership exceeding 4.99% of the Company’s shares of Common Stock outstanding at the time of exercise (which percentage may be decreased or increased by the Investor, but to no greater than 9.99%, and provided that any increase above 4.99% will not be effective until the sixty-first day after notice of such request by the Investor to increase its beneficial ownership limit has been delivered to the Company). Additionally, the Warrant Liabilities could be exercised for more than an aggregate of 530,858 shares of Common Stock unless and until shareholder approval is obtained, which approval was obtained on October 14, 2022.

 

The following table summarizes the short-term and long-term portions of the Exchange Note as of September 30, 2022:

 

(In thousands)  Short-Term   Long-Term   Notes
Payable,
Net		 
Direct issuance costs  $191   $454   $645 
                
Principal  $—   $35,000   $35,000 
Unamortized discount   —    (5,099)   (5,099)
Net carrying amount  $         —   $29,901   $29,901 

 

As of September 30, 2022, future minimum principal payments were as follows:

 

Years ending December 31 (In thousands),    
     
Remaining 2022  $269 
2023   303 
2024   282 
2025   35,117 
2026 and thereafter   — 
Total future payments  $35,971 

 

Paycheck Protection Program Loan

 

Paycheck Protection Program Loans under the Coronavirus Aid, Relief, and Economic Security Act

 

In May 2020, the Company entered into a PPP Loan with Bank of America pursuant to the PPP under the CARES Act administered by the SBA.

 

The Company received total proceeds of approximately $779 thousand from the unsecured PPP Loan, which was originally scheduled to mature on May 7, 2022. The SBA denied the Company’s submission to have the remaining $779 thousand PPP Loan forgiven. On June 23, 2022, the Company received a letter from Bank of America agreeing to extend the maturity date to May 7, 2025 and bears interest at a rate of 1.00% per year. The PPP loan is payable in 34 equal combined monthly principal and interest payments of approximately $24 thousand that commenced on August 7, 2022.

 

The breakdown of PPP Loan balances by current and non-current as of September 30, 2022 and December 31, 2021 were as follows:

 

(In thousands)  Balance Sheet
Location		  September 30,
2022		   December 31,
2021		 
PPP Loan, current  Long-term debt,
current		  $256   $792 
PPP Loan, non-current  Long-term debt   470    12 
Total PPP Loan outstanding     $      726   $804 

 

PurePressure SBA Debt

 

As part of the acquisition of PurePressure, $159 thousand of debt remained outstanding from a standard SBA loan as of December 31, 2021. This debt has subsequently been paid as a part of the PurePressure acquisition.