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LONG-TERM DEBT | 12 Months Ended
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Dec. 31, 2017
Debt Disclosure [Abstract] |
LONG-TERM DEBT | 6. LONG-TERM DEBT ﻿ Long-term debt consists of the following: ﻿
﻿ |  |  |  |  |  |  |  |
﻿ |  | Dollars in Thousands
﻿ |  | December 31, 2017 |  | December 31, 2016
﻿Senior Notes |  | $ | — |  |  | $ | 3,270 |
﻿Senior Note debt issuance costs |  | — |  |  | (9 | )
﻿Junior Notes |  | — |  |  | 584 |
﻿Connecticut Innovations - line of credit |  | — |  |  | 162 |
﻿Department of Economic and Community Development (DECD) |  | — |  |  | 243 |
﻿DECD debt issuance costs |  | — |  |  | (30 | )
﻿Webster Bank |  | — |  |  | 328 |
﻿Webster Bank debt discounts and issuance costs |  | — |  |  | (26 | )
﻿Secured debt obligations |  | 3,233 |  |  | — |
﻿Financed insurance loan |  | 183 |  |  | — |
﻿Total long-term debt |  | 3,416 |  |  | 4,522 |
﻿Current portion of long-term debt |  | (587 | ) |  | (395 | )
﻿Long-term debt, net of current maturities |  | $ | 2,829 |  |  | $ | 4,127 |
﻿ ﻿ Senior and Junior Notes ﻿ During 2016, the Company raised $525,000 from members through the issuance of senior notes which accrue interest at a rate of 12% and were payable at the sooner of the closing of a qualified public offering, as outlined in the note agreement, or five years from date of issuance. ﻿ Also during 2016, the Company restructured equity through a redemption and exchange agreement by exchanging Member Equity comprised of Series A and Series B Convertible Preferred Units in the amount of $2,147,716 (members’ initial investment of $1,715,000, plus declared dividends on these preferred units of $432,716), and Convertible Bridge Notes of $1,120,000, plus accrued interest of $61,073 for new senior notes of $2,744,968 (“Senior Notes”) and new junior notes of $583,821 (“Junior Notes”). The Senior and Junior Notes accrue d interest at a rate of 12% and 15%, respectively, and ha d maturity dates ranging from March 2021 to September 2021, or earlier based on certain qualifying events as outlined in the note agreements. ﻿ During the year ended December 31, 2017, prior to the Merger, the Company raised $315,000 from members through the issuance of Senior Notes at a rate of 12% interest that were payable at the sooner of the closin g of a qualified public offering, as outlined in the note agreement, or five years from date of issuance. ﻿ On the Closing Date of the Merger, the outstanding balance of $3,584,968 in Senior Notes and $583,821 in Junior Notes, plus accrued interest of $602,373, were converted into 802,920 shares of Precipio preferred stock and 1,414,700 shares of Precipio common stock. There were no Senior or Junior Notes outstanding a t December 31, 2017. ﻿ As of December 31, 2016, the outstanding balance of Senior and Junior Notes was $3,269,968 and $583,821, respectively, with accrued interest included within the accrued expenses on the accompanying consolidated balance sheet of $279,740 and $71,258, respectively. ﻿ Connecticut Innovations, Incorporated ﻿ The Company entered into a line of credit on April 1, 2012 with Connecticut Innovations, Incorporated (Connecticut Innovations), an entity affiliated with a director of the Company, for up to $500,000 with interest paid monthly at 8%, due on September 1, 2018. Principal and interest payments began February 1, 2013 and ranged from $7,436 to $12,206 until September 2016, when the Company entered into a forbearance agreement to 1) defer monthly principal payments until October 2017 and 2) make interest-only payments totaling $1,041 per month through October 2017. Pursuant to the forbearance agreement, the Company was also restricted from any additional borrowings under the line of credit. The line was secured by substantially all of the Company’s assets. ﻿ In connection with the Merger, the Company paid in full its loan obligations with Connecticut Innovations. The outstanding balance was zero and $162,066 as of December 31, 2017 and 2016, respectively. ﻿ Department of Economic and Community Development. ﻿ The Company entered into a 10-year term loan with the Department of Economic and Community Development (“DECD”) on May 1, 2013 for $300,000, with interest paid monthly at 3%, due on April 23, 2023. The loan was secured by substantially all of the Company’s assets but was subordinate to the term loan with Webster Bank and the Connecticut Innovations line of credit. In connection with the Merger, the Company paid in full its loan obligations with DECD. The outstanding balance was zero and $243,287 as of December 31, 2017 and 2016, respectively. The outstanding principal and accrued interest balance paid in full in July 2017 was $225,714. ﻿ Webster Bank. ﻿ The Company entered into a 3.5-year term loan with Webster Bank on December 1, 2014 for $500,000, with interest paid monthly at the one month LIBOR rate (1.16% at June 30, 2017) plus 500 basis points, due on May 31, 2018. The line was secured by substantially all of the Company’s assets and had first priority over all other outstanding debt. ﻿ The term loan with Webster Bank was subject to financial covenants relating to maintaining adequate cash runway, as defined in the term loan agreement. As of December 31, 2016 the Company was not in compliance with these covenants and, as such, the Webster Bank debt has all been presented as current in the accompanying consolidated financial statements. ﻿ On June 29, 2017, the closing date of the Merger, the Company paid in full its loan obligations (including principal and interest) with Webster Bank. The outstanding balance was zero and $328,000 as of December 31, 2017 and 2016, respectively. ﻿ During the year ended December 31, 2017, the Company incurred a loss on extinguishment of debt in the approximate amount of $53,000, related to the extinguishment of the Connecticut Innovations, DECD and Webster Bank loans. ﻿ Secured Debt Obligations ﻿ In the fourth quarter of 2017, the Company entered into Debt Settlement Agreements (the “Settlement Agreements”) with certain of its accounts payable and accrued liability vendors (the “Creditors”) pursuant to which the Creditors, who were owed $6.3 million (the “Debt Obligations”) by the Company, agreed to reduce and exchange the Debt Obligations for a secured obligation in the amount of $3.2 million, $1.9 million in shares of the Company’s common stock and warrants, with a fair value of approximately $0.2 million, to purchase shares of the Company’s common stock. As a result of the Settlement Agreements, the Company recorded a gain on troubled debt restructuring of $1.2 million and a loss on extinguishment of liability of $0.2 million. ﻿ The Debt Obligations were restructured as follows:
| · |  | The Company entered into a scheduled long-term debt repayment agreement of approximately $3.2 million, which includes interest of approximately $0.6 million, to be paid in forty-eight equal monthly installments beginning in July 2018 (the “Secured Debt Obligations”).
| · |  | Debt Obligations of $1.9 million were canceled in exchange for 1,814,754 shares of the Company’s common stock with a weighted average price per share of $1.04 (the “Settlement Common Shares”). The stock was issued in February 2018.
| · |  | Warrants to purchase 108,112 shares of the Company’s common stock at an exercise price of $7.50 per share (the “Creditor Warrants”) were issued to certain Creditors. The Creditor Warrants were issued in February 2018 and had a fair value of approximately $0.2 million at the date of the Settlement Agreements.
﻿ The Company also entered into a Security Agreement (the “Security Agreement”), dated October 31, 2017, with a collateral agent for the Creditors, pursuant to which the Company granted to the collateral agent, for the benefit of the Creditors, a security interest in certain property of the Company to secure its obligations under the Settlement Agreements. ﻿ Accounting for Settlement Agreements – Troubled debt ﻿ The Settlement Agreements for certain of the Creditors were accounted for as troubled debt restructurings as the Creditors had granted concessions to the Company. Of the $6.3 million in Debt Obligations, the accounts payable and accrued liability balances related to the troubled debt restructurings totaled $5.2 million at the time of the Settlement Agreements. During the year ended December 31, 2017, the Company recorded a gain on settlement of troubled debt restructuring of approximately $1.2 million which is included in gain on troubled debt restructuring in the consolidated statements of operations. The $1.2 million gain represents the carrying amount of the liability due to the Creditors in excess of the undiscounted future cash flows. In connection with the accounting for these troubled debt restructurings the Company recorded a liability of $3.2 million which represents the undiscounted future cash flows. As such, the Company will not record interest in the amount of $0.6 million on the Secured Debt Obligations in the future. ﻿ The full amount of the undiscounted future cash flow of the Secured Debt Obligations of approximately $3.2 million includes interest of 10% accrued up to the first payment, plus interest over the forty-eight months, resulting in an estimated monthly payment by the Company to the Creditors of approximately $65,000 per month beginning in July 2018. At December 31, 2017, the $3.2 million of Secured Debt Obligations is included in long-term debt in the Company’s consolidated balance sheet. ﻿ In connection with the Settlement Agreements, the Company agreed to issue, to certain of the Creditors whose settlements were treated as troubled debt restructurings, Creditor Warrants to purchase 108,112 shares of the Company’s common stock at an exercise price of $7.50 per share. The Creditor Warrants were issued on February 9, 2018 and are exercisable on the date of issuance and will expire five years from the date of issuance. See Note 11 – Stockholders’ Equity (Deficit). The Company concluded that the Creditor Warrants will be classified as equity. At December 31, 2017, the Company reviewed its obligation to issue Creditor Warrants in the future and concluded that the Creditor Warrants will be treated as issued for accounting purposes on the date of the Settlement Agreements. The fair value of the Creditor Warrants, as determined by a Black-Scholes calculation, was approximately $158,000 on the date of the Settlement Agreements and was recorded as additional paid-in capital. Subsequent changes in the fair value will not be recognized as long as the warrants continue to be equity classified. ﻿ On February 12, 2018, the Company issued 1,814,754 Settlement Common Shares with a fair value of approximately $1.9 million. As the Settlement Common Shares were not yet issued as of December 31, 2017, the Company considered the appropriate treatment of its obligation to issue common shares and concluded that the Settlement Common Shares will be measured at fair value on the date of the Settlement Agreements. Accordingly, the Company recorded a liability of $1.9 million as of the date of the Settlement Agreements. The Company has a $1.9 million liability included in other current liabilities in the accompanying consolidate d balance sheet as of December 31, 2017. ﻿ The transaction for the Secured Debt Obligations exchanged for Settlement Common Shares was treated as an obligation to issue shares and represented a fixed dollar liability, in the amount of $1.9 million, being settled with a variable number of shares that equal the fixed dollar amount. Accordingly, the Company recorded a liability on the Settlement Agreement date equal to the fair value of the shares issued in February 2018. See Note 11 – Stockholders’ Equity (Deficit). Of the $1.9 million of debt canceled in exchange for common shares, $0.6 million was related to Creditors accounted for as troubled debt restructurings and $1.3 million was related Creditors treated as extinguishments as discussed below. Accounting for Settlement Agreements – Extinguishment of liability ﻿ For Creditors where the settlement was not treated as a troubled debt restructuring, the accounting was treated as an extinguishment. The accounts payable and accrued liability balances related to the extinguishments totaled $1.1 million at the time of the Settlement Agreements. For these settlements, the Company recorded a net loss during the year ended December 31, 2017 of approximately $0.2 million equal to the difference between the carrying amount of the liability due to the Creditors and the fair value of the consideration transferred to the Creditors. The loss of $0.2 million is included in net gain on settlement of liability in the consolidated statements of operations. ﻿ Convertible Promissory Notes. ﻿ The Company, as part of the merger, assumed an Unsecured Convertible Promissory Note (the “Note”) with an accredited investor (the “Investor”) in the aggregate principal amount of $125,000 and interest accrues at a rate of 6% per year. The Note provided that two-thirds of the outstanding principal amount of the Note was due upon the earlier to occur of the close of the Merger or June 17, 2017 (such applicable date, the “Maturity Date”). The remaining one-third of the principal amount outstanding on the Note was to be paid on the six month anniversary of the Maturity Date. ﻿ On the Maturity Date, the then outstanding aggregate amount owed on the Note of $143,041 ($125,000 in principal amount and $18,041 of accrued interest) became due. Pursuant to the terms of the Note, the Company’s failure to pay any principal or interest within 10 days of the date such payment is due will constitute an event of default (the “Prospective Event of Default”). On June 21, 2017, the Investor agreed to waive the Prospective Event of Default and agreed to further extend the Maturity Date of the Note pursuant to a side letter to the Note (the “Side Letter”). The Side Letter provides that two-thirds of the outstanding principal amount of the Note must be paid upon the earlier to occur of (1) the closing of a public offering by the Company of either common stock, convertible preferred stock or convertible preferred notes or (2) August 16, 2017 (such applicable date, the “Deferred Maturity Date”). On August 31, 2017, the Company made payment of $83,333, two-thirds of the then outstanding principal amount, which was more than 10 days after the Deferred Maturity Date and constituted an event of default under the terms of the Note (the “Deferred Maturity Date Event of Default”). The Investor agreed to waive the Deferred Maturity Date Event of Default. In consideration of this waiver, the Company issued the Investor one warrant to purchase 10,000 shares of the Company’s common stock, par value $0.01 per share (the “Convertible Promissory Note Warrants”). See Note 11 – Stockholders’ Equity (Deficit). The issuance date of the Convertible Promissory Note Warrants was October 3, 2017. ﻿ The remaining one-third of the principal amount outstanding on the Note must be paid on the six month anniversary of the Deferred Maturity Date (the “Extended Maturity Date”). All accrued and unpaid interest on the outstanding principal amount of the Note will be due and immediately payable on the Extended Maturity Date, unless the Note is converted in which case such interest will be payable in shares of the Company’s common stock as part of the conversion. As of October 31, 2017, the outstanding principal amount due was $41,666 and accrued interest was approximately $20,000. The Investor entered into a Settlement Agreement, as described above, through which the amount due to the Investor would be settled with Settlement Common Shares. As of December 31, 2017, the $41,666 due to the Investor is included in the Settlement Common Shares liability discussed above. ﻿ Financed Insurance Loan. ﻿ During the year ended December 31, 2017, t he Company financed certain of its insurance premiums (the “Financed Insurance Loan”). The original amount financed in July 2017 was $0.4 million with a 4.99 % interest rate. The Company will make monthly payments through May 2018. As of December 31, 2017, the Financed Insurance Loan outstanding balance of $0.2 million is included in current maturities of long-term debt in the Company’s consolidated balance sheet and a corresponding prepaid asset of $0.2 million is included in other current assets. The aggregate future maturities required on long-term debt at December 31, 2017 are as follows:
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ | 2018 |  | 2019 |  | 2020 |  | 2021 |  | 2022 |  | Total
﻿Secured Debt Obligations | $ | 404 |  |  | $ | 809 |  |  | $ | 808 |  |  | $ | 808 |  |  | $ | 404 |  |  | $ | 3,233 |
﻿Financed Insurance Loan | 183 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 183 |
﻿ | $ | 587 |  |  | $ | 809 |  |  | $ | 808 |  |  | $ | 808 |  |  | $ | 404 |  |  | $ | 3,416 |
﻿ ﻿

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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