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Borrowings | 3 Months Ended
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Mar. 31, 2020
Debt Disclosure [Abstract] |
Borrowings | NOTE 6 —Borrowings Senior Credit Agreement The Company has a loan and security agreement (“EWB Loan Agreement”) with East West Bank (the “Senior Lender” or “EWB”), as amended. Under the terms of the EWB Loan Agreement, as amended, the Senior Lender has provided for a $8,000 line of credit. In the future, we may borrow up to $8,000 under the line of credit available under the EWB Loan Agreement; provided that we are not then in default and we maintain amounts on deposit with EWB equal to any amounts borrowed under the EWB Loan Agreement. As of March 31, 2020, no amounts were outstanding under the EWB Loan Agreement. As of March 31, 2020, we were in default under the EWB Loan Agreement for a number of reasons including the occurrence of a material adverse change and failure to provide notice of certain events. Borrowings under the EWB Loan Agreement bear interest at 1.0% plus the prime lending rate. Borrowings under the EWB Loan Agreement are secured by a senior lien on substantially all of our assets, including inventory and receivables, subject to permitted liens. In the event of a default under the EWB Loan Agreement, entities affiliated with B. Riley Financial and Investec Investments (UK) Limited, two of our stockholders, have the right to purchase the indebtedness under the EWB Loan Agreement at par and to exercise remedies for the default, in their discretion, as the holders of the indebtedness. The EWB Loan Agreement contains certain negative and affirmative covenants as well as financial covenants, including covenants that restrict our ability to, among other things, incur or prepay indebtedness on subordinated debt, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, exceed annual capital expenditure limits, as defined, and make changes in the nature of the business. Objective events of default, include, without limitation, nonpayment of principal, interest or other obligations, violation of the covenants, insolvency, and court-ordered judgments. Audited financial statements are required to be submitted to the lenders no later than 120 days after year end. In particular, we are required to maintain a minimum availability under the line of credit under the EWB Loan Agreement of $750 and maintain a fixed charge coverage ratio, defined as the sum of Adjusted Covenant EBITDA plus capital expenditures minus taxes and dividends over fixed charges, of at least 1.05 to 1.00 as of the last of each month. In 2018, the financial covenants were amended to temporarily suspend the obligation to comply with the minimum fixed charge coverage ratio through September 30, 2018, to increase the minimum fixed charge coverage ratio as of December 31, 2018, and for the last day of each month thereafter, from 1.05 to 1.10, and to increase the minimum excess availability to $1,200. In 2018, the financial covenants were amended to permanently remove the requirement to maintain positive Adjusted Covenant EBITDA. As a result, as of the period ended March 31, 2018, we were no longer subject to this Adjusted Covenant EBITDA financial covenant. In October 2019, the financial covenants were amended to suspend the obligation to comply with the minimum fixed charge coverage ratio through the maturity date, which was amended to February 28, 2020, a cash block was placed on interest payments under our subordinated debt under the Riley Loan Agreement (as defined below) and the establishment of a blocked account was mandated, following which we may request revolving advances up to the amount on deposit in such blocked account in EWB’s discretion.. As of March 31, 2020, and December 31, 2019, no amounts were outstanding under the EWB Loan Agreement. As of March 31, 2020 and December 31, 2019, the Company had remaining borrowing capacity of up to $8,000 against the line of credit, provided that such borrowings are conditioned upon us not being in default are otherwise subject to the terms and conditions of the EWB Loan Agreement. As of September 30, 2019, the Company was not in compliance with one of the financial covenants, specifically the fixed charge coverage ratio, however, the Senior Lender waived such noncompliance in October 2019 by amending the EWB Loan Agreement through February 2020. The Senior Lender subsequently extended the waiver and maturity date to June 2020. The Company has established a blocked account as required by the Senior Lender to resume future borrowings if needed. Long-Term Debt Riley Loan— On October 26, 2017 (the “Effective Date”), the Company entered into a Subordinated Term Loan and Security agreement (the “B. Riley Loan Agreement”) with B. Riley Principal Investments, LLC (“BRPI”), an affiliate of B. Riley Financial, Inc., a shareholder of the Company. Under the original B. Riley Loan Agreement, the Company could borrow principal up to $10,000 via a subordinated secured convertible promissory note (the “Convertible Note”), with an optional conversion feature as described below. During the year ended December 31, 2018, the Company amended the B. Riley Loan Agreement to increase the available aggregate principal borrowings to $12,000. The 2018 amendments did not change the terms of the original B. Riley Loan Agreement other than to provide a waiver of the defined prepayment penalties if any repayment does not reduce the principal amount outstanding below $10,000. The B. Riley Loan Agreement, as amended, matures on September 1, 2022 (the “Maturity Date”) and carries a stated interest rate of 10% and provided that the first year of interest commencing on October 26, 2018 be compounded into the principal, with interest-only payments beginning thereafter. In October 2019, a cash block was placed on interest payments under the B. Riley Loan Agreement, which was accepted by BRPI. In March 2020, the cash block on interest payments was removed and scheduled interest payments resumed. As of March 31, 2020, and December 31, 2019, the total outstanding principal and interest under the B. Riley Loan Agreement, as amended, was $10,258 and $10,003, respectively. In July 2019, the Company repaid $3,250, or 25% of the principal amount under the B. Riley Loan Agreement and incurred a 2% fee on the amount below the $10,000 threshold as a result of the prepayment. During the first quarter of 2020, the compounded interest, which was added to the outstanding principal totaled $255. The Company has classified the debt as a current liability based on the occurrence of a material adverse change in our business, however B. Riley Principal Investments LLC has not commenced enforcement of its rights thereunder. Upon the occurrence and during the continuance of an event of default under the B. Riley Loan Agreement, BRPI has the option, among other things, to accelerate the debt and foreclose upon the assets pledged as collateral, any of which could severely affect our liquidity and significantly harm our business. In addition, we are unable to borrow under the EWB facility during the continuance of an event of default thereunder or under the B. Riley Loan Agreement, which could severely affect our liquidity and significantly harm our business. Optional Conversion—On November 2, 2018, the Company amended the optional conversion terms of its existing Convertible Note. As amended, the Convertible Note provides that at any time, on or prior to the Maturity Date, BRPI may elect to convert principal amounts outstanding, including accrued interest, as limited below, into shares of common stock at $8.87 per share. The number of shares of common stock to be issued upon conversion is limited to the sum of (A) the lesser of (i) the principal outstanding and (ii) the aggregate principal amount borrowed under the Loan Agreement to date multiplied by the Designated Percentage as described below, and (B) accrued interest. The “Designated Percentage” is one hundred percent (100%) if the conversion date is prior to the first anniversary of the Effective Date, seventy-five percent (75%) in Year 2 of the Loan Agreement, fifty percent (50%) in Year 3, twenty-five percent (25%) in Year 4, and twelve and a half of percent (12.5%) in the final year of the Loan Agreement on or prior to the Maturity Date. Promissory Notes Payable—In 2014 and 2017, the Company entered into agreements with one of its suppliers, whereby certain of its trade payables for royalties and royalty up-front payments were converted to payment plans. In December 2018, the Company amended its accounts payable financing agreements, effective January 1, 2019, which provides for the $736 outstanding balance to be paid in twenty equal quarterly installments. The amounts due under these agreements would be paid in quarterly installments over periods from two to four years, with interest ranging up to 8%. Remaining balances are $472 and $508 at March 31, 2020 and December 31, 2019, respectively. Other Financing Arrangements—In 2017, the Company entered into three financing arrangements totaling approximately $472 with remaining maturity dates of June 2020 and August 2020. During the quarter ended September 30, 2019, the Company repaid the remaining outstanding balance. Future aggregate annual principal payment on all long-term debt, excluding discount of $298, are as follows for the next 5 years as of March 31, 2020:
Year Ending, December 31st, |  |  |  |
2020 |  | $ | 107 |
2021 |  |  | 144 |
2022 |  |  | 10,408 |
2023 |  |  | 78 |
|  | $ | 10,737 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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