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Debt | 9 Months Ended
--- | ---
Sep. 30, 2022
Debt Disclosure [Abstract] |
Debt |
8. | Debt
Our debt consisted of the following (in thousands):
|  | September 30, 2022 |  |  | December 31, 2021 |
Financing Agreement |  | $ | 94,432 |  |  | $ | 200,000 |
Less: deferred financing fees |  |  | 830 |  |  |  | 11,731 |
Debt, net |  | $ | 93,602 |  |  | $ | 188,269 |
Financing agreement As of September 30, 2022, the stated interest rate under the Financing Agreement was 10.45%. In March 2022, we entered into Amendment No. 9 to the Financing Agreement (“Amendment No. 9”) pursuant to which, among other amendments, (i) the lenders waived various Company breaches of the Financing Agreement, including breaches of the $60.0 million minimum cash covenant and the minimum net revenue covenants for the fourth quarter of 2021; (ii) the Company and the lenders agreed to a reduced minimum cash covenant and to the removal of the minimum net revenue covenant for the first quarter of 2022; (iii) the lenders waived the existing $60.0 million prepayment penalty under the Financing Agreement and the Company agreed to pay a paid in kind (“PIK”) amendment financing fee of $30.0 million, which fee was added to the principal amount of the loans under the Financing Agreement, $16.0 million of which fee wa s waivable in certain conditions; (iv) the maturity date of the Financing Agreement was amended to June 1, 2022; and (v) the Company agreed to pay to the Lenders as a prepayment of the loans under the Financing Agreement the first $120.0 million of net proceeds from the vitaCare Divestiture and all net proceeds of the vitaCare Divestiture in excess of $135.0 million. Amendment No. 9 was accounted for as an extinguishment of debt modification in accordance with U.S. GAAP. Accordingly, in March 2022, we recorded a n $8.4 million loss on extinguishment of debt, which represented the unamortized deferred financing fees, net of previously accrued prepayment fees. Additionally, the Amendment No. 9 PIK financing fee was recorded as deferred financing fees and wa s amortized over the remaining term of the Financing Agreement. I n April 2022, we utilized $120.0 million of net proceeds from the vitaCare Divestiture to make a prepayment of the loans under the Financing Agreement under the terms of Amendment No. 9. Additionally, with the prepayment on the debt, $16.0 million of the PIK financing fee was waived i n accordance with Amendment No. 9. In May 2022, we entered into Amendment No. 10 to the Financing Agreement (“Amendment No. 10”) pursuant to which, among other amendments, (i) interest payments under the Financing Agreement were paused, such that interest on each term loan shall be payable in cash and in arrears (a) upon any prepayment of that term loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid and (b) on the maturity date, (ii) the minimum cash covenant was set at $10.0 million, (iii) the maturity date of the Financing Agreement was amended to July 13, 2022, (iv) the termination of the Company’s merger agreement with an affiliate of EW Healthcare Partners was added as an event of default, and (v) we agreed to a PIK financing fee of $1.8 million, which fee was added to the principal amount of the loans under the Financing Agreement. Amendment No. 10 was accounted for as a debt amendment in accordance with U.S. GAAP. Accordingly, in May 2022, the Amendment No. 10 PIK financing fee was recorded as deferred financing fees and was amortized over the remaining term of the Financing Agreement. Also in May 2022, we entered into Amendment No. 11 (“Amendment No. 11”) to the Financing Agreement. Amendment No. 11 contains amendments to the Financing Agreement that would have gone into effect upon the satisfaction of certain conditions on or before July 13, 2022 (the “Amendment Effective Date”), including (i) the consummation of the merger with an affiliate of EW Healthcare Partners (the “Merger”), (ii) the payment in cash of (a) all accrued and unpaid interest under the Financing Agreement through and including the Amendment Effective Date and (b) all fees, costs, expenses and taxes then payable pursuant to Section 2.7 or 10.2 of the Financing Agreement, and (iii) the delivery to the administrative agent of certain customary documents with respect to the pledge of 100% of the capital stock of the Company. Since the consummation of the Merger did not occur, Amendment No. 11 never became effective. On July 13, 2022, we entered into Amendment No. 12 to the Financing Agreement pursuant to which the maturity date of the Financing Agreement was extended to July 24, 2022, and we agreed to pay the Lenders a PIK amendment fee in the amount of $1.2 million. On July 24, 2022, we entered into Amendment No. 13 to the Financing Agreement pursuant to which the maturity date of the Financing Agreement was extended to July 27, 2022, we agreed to pay the Lenders a payment of accrued and unpaid interest of $2.9 million, and we agreed to retain Jeffrey Varsalone from G2 Capital Advisors as our chief restructuring officer. On July 27, 2022, we entered into Amendment No. 14 to the Financing Agreement pursuant to which the maturity date of the Financing Agreement was extended to July 28, 2022. On July 28, 2022, we entered into Amendment No. 15 to the Financing Agreement pursuant to which the maturity date of the Financing Agreement was extended to July 29, 2022. On July 29, 2022, we entered into Amendment No. 16 to the Financing Agreement pursuant to which the maturity date of the Financing Agreement was extended to September 30, 2022, with the option for us to further extend the maturity date to October 31, 2022, and November 30, 2022, in each case if we receive not less than $7.0 million in cash proceeds from an equity issuance, which, if preferred equity, is on substantially the same terms as the Preferred Stock. In lieu of a cash amendment fee, to induce the Lenders to enter into Amendment No. 16, on July 29, 2022, we issued Lender Warrants to purchase an aggregate of 185,000 shares of Common Stock, pursuant to a subscription agreement by and among the Company and the Lenders (the “July Lender Subscription Agreement”). The Lender Warrants to purchase 185,000 shares of our Common Stock issued pursuant to the July Lender Subscription Agreement have an exercise price of $0.01 per warrant, subject to certain adjustment as provided therein, and an expiration date of July 29, 2032, and may be exercised via cashless exercise pursuant to the terms thereof. These Lender Warrants were initially valued at $1.2 million based on the market price of our Common Stock on July 29, 2022 and entirely expensed as financing costs during three and nine months ended September 30, 2022. In connection with the closing of a private placement offering with the Preferred Stock Investor on September 30, 2022, and in accordance with Amendment No. 16 to the Financing Agreement, on September 30, 2022, we issued Lender Warrants to purchase an aggregate of 125,000 shares of Common Stock, pursuant to a subscription agreement by and among the Company and the Lenders (the “September Lender Subscription Agreement”), and the maturity date of the Financing Agreement was extended to October 31, 2022. Subsequent to September 30, 2022, the maturity date was extended to November 30, 2022 in connection with an additional private placement, See Note 16, Subsequent Events. The Lender Warrants to purchase 125,000 shares of our Common Stock issued pursuant to the September Lender Subscriptions Agreement have an exercise price of $0.01 per warrant, subject to certain adjustment as provided therein, and an expiration date of September 30, 2032, and may be exercised via cashless exercise pursuant to the terms thereof. See Note 10, Mandatory R edeemable Preferred Stock and Stockholders’ Deficit for additional information regarding the equity financing with the Preferred Stock Investor. The se Lender Warrants were initially valued at $0.8 million based on the market price of our Common Stock on September 30, 2022 and recorded as deferred financing fees, which will be amortized until the maturity of the Financing Agreement. Based on the structure of the Lender Warrants, they are recorded as Lender Warrants derivative liability in the consolidated balance sheets and their carrying amounts are marked to market based on our Common Stock’s closing price at measurement date, which is considered Level 1 under the fair value hierarchy. As of September 30, 2022, the fair value of our Lender Warrants derivative liability was $2.1 million, and we recorded fair value loss on the Lender Warrants derivative liability of $0.1 million for three and nine months ended September 30, 2022. Additionally, in September 2022, we and the Lenders agreed to PIK interest of $2.5 million related to the outstanding debt balance, which was entirely expensed as interest expense during three and nine months ended September 30, 2022. Debt covenants The Financing Agreement contains customary restrictions and covenants applicable to us that are customary for financings of this type. Among other requirements, we are required to maintain a minimum unrestricted cash balance. A s defined in Amendment No. 10, the minimum unrestricted cash balance was set at $10.0 million. Our unrestricted cash balance was above the minimum unrestricted cash balance covenant at all times through November 14, 2022, the filing date of this 10-Q Report. Interest and financing costs Interest expense and other financing costs consisted of the following (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Interest expense |  | $ | 2,251 |  |  | $ | 5,391 |  |  | $ | 10,888 |  |  | $ | 17,175 |
Interest prepayment fees |  |  | — |  |  |  | 650 |  |  |  | — |  |  |  | 4,008 |
Financing fees amortization |  |  | 2,582 |  |  |  | 1,477 |  |  |  | 20,053 |  |  |  | 4,158 |
Interest expense and other financing costs |  | $ | 4,833 |  |  | $ | 7,518 |  |  | $ | 30,941 |  |  | $ | 25,341 |

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