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3 Months Ended
Mar. 31, 2023
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Convertible Notes

November 2021 and December 2021 Convertible Notes and Private Placement

On November 23, 2021, the Company entered into a Securities Purchase Agreement (the “2021 Lind Securities Purchase Agreement”) with Lind Global Asset Management V, LLC (“Lind V”) pursuant to which, among other things, on November 23, 2021 (the “Closing Date”), the Company issued and sold to Lind V, in a private placement transaction (the “Private Placement”), in exchange for the payment by Lind V of $20.0 million, (i) a convertible promissory note (the “2021 Note”) in an aggregate principal amount of $22.0 million (the “Principal Amount”), which will bear no interest until the first anniversary of the issuance of the 2021 Note and will thereafter bear interest at a rate of 5% per annum, and mature on November 23, 2024 (the “Maturity Date”), and (ii) 534,759 shares of Company common stock.

Commencing August 23, 2022, and from time to time and before the Maturity Date, Lind V has the option to convert any portion of the then-outstanding Principal Amount of the 2021 Note into shares of Common Stock at a price per share of $6.00, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions (the “Conversion Price”). Commencing August 23, 2022, the Company has the right to prepay, in whole or in part (exercisable by the Company at any time or from time to time prior to the Maturity Date), up to the full remaining Principal Amount of the 2021 Note with no penalty; however, if the Company exercises such prepayment right, Lind V will have the option to convert up to thirty-three and one-third percent (33 1/3%) of the amount that the Company elects to prepay at the Conversion Price. However, pursuant to the 2023 Securities Purchase Agreement, the Company agreed that, until the Trigger Date, all payments under the 2021 Note will be made in cash.

Subject to certain exceptions, the Company will be required to direct proceeds from any subsequent debt financings (including subordinated debt, convertible debt or mandatorily redeemable preferred stock but other than purchase money debt or capital lease obligations or other indebtedness incurred in the ordinary course of business) to repay the 2021 Notes, unless waived by Lind V in advance.

Beginning on November 23, 2022, the 2021 Note amortizes in twenty-four monthly installments equal to the quotient of (i) the then-outstanding Principal Amount of the 2021 Note, divided by (ii) the number of months remaining until the Maturity Date. All amortization payments shall be payable, at the Company’s sole option, in cash, shares of Common Stock or a combination of both. In addition, commencing on the last business day of the first month following November 23, 2022, the Company will pay, on a monthly basis, all interest that has accrued and remains unpaid on the then-outstanding Principal Amount of the 2021 Note. Any portion of an amortization payment or interest payment that is paid in shares of Common Stock shall be priced at 90% of the average of the five lowest daily volume weighted average prices of the Common Stock during the 20 trading days prior to the date of issuance of the shares. If, after the first amortization payment, the Company elects to make any amortization payments in cash, the Company shall pay a 5% premium on each cash payment. However, pursuant to the 2023 Securities Purchase Agreement, the Company agreed that, until the Trigger Date, all payments under the 2021 Note will be made in cash. In conjunction with the 2021 Lind Securities Purchase Agreement and the 2021 Note, on the Closing Date, the Company and Lind V entered into a security agreement, which provides Lind V with a first priority lien on the Company’s assets and properties. During the three months ended March 31, 2023, the Company issued 3,166,130 shares to Lind V to satisfy interest and principal payments due under the 2021 Note.

On December 2, 2021, the Company entered into two separate securities purchase agreements with certain accredited investors on substantially the same terms as the 2021 Lind Securities Purchase Agreement, pursuant to which the Company sold, in private placement transactions, in exchange for the payment by the accredited investors of an aggregate of $201,534, (i) convertible promissory notes in an aggregate principal amount of $221,688, which did not bear interest and mature on December 2, 2024 (the “December 2021 Notes”), and (ii) an aggregate of 5,388 shares of its common stock. These notes had substantially the same terms as the 2021 Note. On February 22, 2023, the December 2021 Notes were repaid in full and the Company recognized a loss on extinguishment of debt of $13,000 during the three months ended March 31, 2023.

During the year ended December 31, 2021, the Company received aggregate gross proceeds of $20.2 million from the convertible note offerings. The Company elected to account for these notes under the fair value option. At time of issuance, the Company recorded a liability of $19.2 million, which was determined to be the fair value at time of issuance. As of December 31, 2022 and 2021, the Company recognized a total convertible note liability of $20.0 million and $18.9 million, respectively. During the year ended December 31, 2022 and 2021, the Company recognized $3.0 million loss and $0.2 million gain on change in fair value of convertible notes, respectively. During the three months ended March 31, 2023 and 2022, the Company recognized a $66,000 gain and a $0.2 million loss, respectively, on change in fair value of convertible notes.

During the three months ended March 31, 2023 and the year ended December 31, 2022, the Company made principal and interest payments of $3.1 million (consisting of $1.8 million of common stock and $1.3 million of cash) and $1.9 million of cash, respectively, on the convertible notes. As of March 31, 2023, the principal and interest payment of the 2021 Note totaled $18.2 million.