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Long-Term Debt

12 Months Ended

Dec. 31, 2020

15.

Long-term Debt

Term Loan

Under a loan and security agreement the Company entered into with Avidbank in September 2018, or the Original LSA, the Company borrowed $4,000,000 in the form of a 48-month term loan, all of which it used to pay-off the $4,050,000 of principal borrowed from its then-existing lender. In February 2020, the Company made a pre-payment on the term loan of approximately $150,000 following the sale in January 2020 of all its assets used to conduct live-hosted trivia events. In March 2020, the Company entered into an amendment to the Original LSA. In connection with entering into the amendment, the Company made a $433,000 payment on the term loan, which included the $83,333 monthly principal payment for March 2020 plus accrued interest and a $350,000 principal prepayment. All amounts owing under the term loan were paid on December 31, 2020, when the term loan matured, and Avidbank released its security interest in all of the Company’s existing personal property.

The Company incurred approximately $26,000 of debt issuance costs related to the Original LSA and the amendment to the LSA. The debt issuance costs were amortized to interest expense using the effective interest rate method over the life of the loan and were fully amortized as of December 31, 2020.

Paycheck Protection Program Loan

On April 18, 2020, the Company issued a note in the principal amount of approximately $1,625,000 evidencing a loan the Company received under the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration (the “CARES Act”). The PPP Loan bears interest at a rate of 1.0% per annum.

Under the terms of the Paycheck Protection Program, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. In October 2020, the Company submitted its loan forgiveness application for the PPP Loan, and in November 2020, the lender informed the Company that the U.S Small Business Administration approved the forgiveness of approximately $1,093,000 of the $1,625,000 loan, leaving a principal balance of approximately $532,000. The unforgiven principal balance, plus accrued and unpaid interest, is due at the closing of the Asset Sale, if the Asset Sale occurs, or at the closing of the Merger, if the Merger occurs. If neither the Asset Sale nor the Merger occurs, the unforgiven principal balance, plus accrued and unpaid interest, is due at maturity, April 18, 2022. The Company began making monthly interest only payments on November 18, 2020. The Company may prepay the PPP Loan at any time with no prepayment penalties. As of December 31, 2020, the outstanding principal balance of the PPP Loan was approximately $532,000. (See Note 3 for more information on the Asset Sale and the Merger.)

Bridge Loans

In connection with entering into the APA, the Company issued to Fertilemind an unsecured promissory note (the “First Note”) in the principal amount of $1,000,000, evidencing a $1,000,000 loan received from Fertilemind on behalf of eGames.com. As described below, until December 1, 2020, the principal amount of the First Note accrued interest at the rate of 8% per annum (increasing to 15% per annum upon the occurrence of an event of default), compounded annually. On November 19, 2020, eGames.com agreed to loan, or cause Fertilemind, on behalf of eGames.com, to loan an additional $500,000 to the Company on December 1, 2020. Upon receipt of such $500,000 loan, on December 1, 2020, the Company issued a second unsecured promissory note (the “Second Note”) evidencing such loan. In connection with borrowing the additional $500,000 loan, the interest rate of the First Note increased from 8% to 10% beginning on December 1, 2020. On January 12, 2021, eGames.com agreed to loan, or cause Fertilemind, on behalf of eGames.com, to loan an additional $200,000 to the Company on January 12, 2021. Upon receipt of such $200,000 loan, on January 12, 2021, the Company issued a third unsecured promissory note (the “Third Note,” and together with the First Note and the Second Note, the “Bridge Notes”) evidencing such loan. The principal amount of the Second Note and the Third Note accrues interest at the rate of 10% per annum (increasing to 15% per annum upon the occurrence of an event of default), compounded annually. The principal amount of the Bridge Notes and accrued interest thereon is due and payable upon the earlier of (i) the termination of the APA, (ii) the closing of a Business Combination (as defined in the Bridge Notes), and (iii) April 30, 2021. Upon the closing of the Asset Sale, the outstanding principal amount of the Bridge Notes and all accrued and unpaid interest thereon will be applied against the purchase price under the APA, and the Bridge Notes will be extinguished. The Company may use the proceeds under the Bridge Notes for, among other things, the payment of obligations related to the transactions contemplated by the APA and the Merger and other general working capital purposes. As of December 31, 2020, the outstanding principal balance of the First Note and Second Note was $1,500,000 in the aggregate, and combined with the Third Note in January 2021, the outstanding principal balance of the Bridge Notes is currently $1,700,000. As of December 31, 2020, the Company recorded approximately $29,000 of accrued and unpaid interest related to the First Note and Second Note.

The Bridge Notes include customary events of default, including if any portion of either of the Bridge Notes is not paid when due; if the Company defaults in the performance of any other material term, agreement, covenant or condition of either of the Bridge Notes, subject to a cure period; if any final judgment for the payment of money is rendered against the Company and it does not discharge the same or cause it to be discharged or vacated within 90 days; if the Company makes an assignment for the benefit of creditors, if the Company generally does not pay its debts as they become due; if a receiver, liquidator or trustee is appointed for the Company, or if it is adjudicated bankrupt or insolvent. In the event of an event of default, the Bridge Notes will accelerate and become immediately due and payable at the option of the holder.

Interest expense related to total long-term debt for the years ended December 31, 2020 and 2019 was $118,000 and $236,000, respectively.