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Leap Tide Financing Transaction | 12 Months Ended
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Dec. 31, 2015
Leap Tide Financing Transaction |
Leap Tide Financing Transaction | NOTE 3—LEAP TIDE FINANCING TRANSACTION On August 13, 2015, the Company executed a Loan and Security Agreement with Leap Tide Capital Partners III, LLC (“Leap Tide”), pursuant to which the Company borrowed $2,000 from Leap Tide (the “LT Loan”). Principal and accrued interest is due and payable on August 13, 2016. Interest accrues and is payable quarterly at a rate of 10% per annum. At the closing, $100 of the proceeds were deposited into an escrow account which will be used to fund the payment of interest; the escrow account shall be maintained at not less than $50 until the last three months before maturity. In addition to the interest payable in cash described above, Leap Tide received 850,000 shares of the Company’s common stock (the “Initial Shares”) at the closing and became entitled to vested rights to receive 179,167 additional shares of the Company’s common stock (each vested right to receive one share, a “Vested Share Right”) per month for each full month that the full principal amount of the LT Loan remains outstanding, subject to immediate vesting upon acceleration of the LT Loan for the Company’s failure to timely increase its authorized shares of common stock as described below. The number of Vested Share Rights that accrue in a given month are prorated to the extent less than the full principal amount is outstanding and/or for any partial month in which no principal amount is outstanding. Leap Tide is entitled to receive the Company’s common stock underlying its Vested Share Rights after the expiration of the Cash Settlement Period (defined below). The Company may pre-pay all principal and interest accrued on the LT Loan at any time. Unpaid and accrued interest on the LT Loan was $50 at December 31, 2015 and in included Accrued expenses in Other current liabilities (see Note 12). In addition, the Company may on or prior to 30 days after the maturity or earlier acceleration or repayment of the LT Loan (such 30-day period being referred to herein as the “Cash Settlement Period”) repurchase any or all Initial Shares and settle any or all Vested Share Rights accrued under the LT Loan for cash in lieu of stock. The cash repurchase/settlement price shall be an amount equal to $0.30 for each Initial Share so repurchased and each Vested Share Right so settled. The Company’s right to repurchase Initial Shares and settle Vested Share Rights for cash in lieu of stock shall be subject to Lender’s right to put the same to the Company at a higher price as described below. At the time the LT Loan was made, the Company did not have sufficient authorized common stock to cover the full amount of Vested Share Rights that will accrue through maturity of the LT Loan. Failure by the Company to effectuate a charter amendment to authorize sufficient additional common stock by March 30, 2016 would be deemed an event of default, triggering Leap Tide’s right to accelerate the LT Loan and entitling Leap Tide to put to the Company, at a price equal to $0.40 per Initial Share and Vested Share Right, any Initial Shares and any Vested Share Rights (see below for the liability recorded and subsequently reversed with respect to the Leap Tide transaction following the results of the Special Meeting of the stockholders of the Company held to amend the Company’s restated certificate of incorporation to increase the number of authorized shares of common stock of the Company (see Note 22 - Subsequent Events). Subject to customary permitted liens, the LT Loan is secured by a first priority lien on the assets of the Company, except that the lien on the Company’s shares of DSIT is pari passu with a preexisting lien held by DSIT to secure its loans to the Company in the principal amount of up to $5,000. DSIT and Leap Tide have entered into an intercreditor and collateral agency agreement reflecting the pari passu nature of their respective liens. Each of the Company’s domestic subsidiaries (GridSense, OMX Holdings, Inc. and OmniMetrix) has guaranteed the repayment of the LT Loan, and GridSense and OmniMetrix have pledged their respective IP as security. Concurrent with the LT Loan, Jan H. Loeb, Manager of Leap Tide, joined the Board of Directors of the Company. See Note 22 (Subsequent Events) with respect to Mr. Loeb becoming CEO of the Company. Certain members of the management of the Company's DSIT Solutions subsidiary (including its CEO and its CFO - who also serves as CFO of the Company) have invested in Leap Tide (which is a special entity formed to make the loan) on the same terms as the other investors in Leap Tide. None of these persons has any role in the management of Leap Tide. The value of the Initial Shares ($162) at closing is treated as a discount to the loan and is being amortized to interest expense over the one-year period of the LT Loan. Through December 31, 2015, $62 of the discount associated with the Initial Shares was amortized and the remaining discount is $100. Through December 31, 2015, Leap Tide is entitled to 820,708 Vested Share Rights. Prior to the Special Meeting of the stockholders of the Company to amend the Company’s restated certificate of incorporation to increase the number of authorized shares of common stock of the Company (see Note 22 – Subsequent Events), the Company had recorded derivative liabilities and non-cash interest expense associated with the Vested Share Rights, the put on the Initial Shares and the put on the Vested Share Rights. As a result of the increase in the number of authorized shares, those liabilities have been eliminated at December 31, 2015. At December 31, 2015, the Company has recorded a liability (and interest expense) of $86 with respect to the market value of the common stock to be granted upon vesting of the Vested Share Rights.

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