DEBT

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

DEBT

12. DEBT

PPP Loan

On April 12, 2020, our subsidiary PolarityTE MD, Inc. (the “Borrower”) entered into a promissory note evidencing an unsecured loan in the amount of $3,576,145 made to it under the Paycheck Protection Program (the “Loan”). The Paycheck Protection Program (or “PPP”) was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The Loan to the Borrower was made through KeyBank, N.A., a national banking association (the “Lender”). The interest rate on the Loan is 1.00%. Beginning seven months from the date of the Loan the Borrower is required to make 24 monthly payments of principal and interest in the amount of $150,563. The promissory note evidencing the Loan contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or Lender, or breaching the terms of the Loan documents. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Borrower, or filing suit and obtaining judgment against the Borrower. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of a loan granted under the PPP. On October 15, 2020, the Borrower applied to the Lender for forgiveness of the PPP loan in its entirety based on the Borrower’s use of the PPP loan for payroll costs, rent, and utilities. In June of 2021, the Company received notice of forgiveness of the PPP loan in whole, including all accrued unpaid interest. The Company recorded the forgiveness of $3.6 million of principal and accrued interest, which were included in gain on extinguishment of debt on the condensed consolidated statement of operations for both the three and six months ended June 30, 2021.

13. RESTRUCTURING AND OTHER CHARGES

As discussed in Note 5, the Company decided to file an IND in the second half of 2021, cease commercial sales of SkinTE by May 31, 2021, and wind down its SkinTE commercial operation. As a result, management approved several actions as part of a restructuring plan. Costs associated with the restructuring plan were included in restructuring and other charges on the condensed consolidated statement of operations.

The Company evaluated the future use of its commercial property and equipment and recorded an impairment charge of approximately $0.4 million for the three months ended March 31, 2021. No property and equipment impairment charges were recorded during the three months ended June 30, 2021. The Company recognized $0.1  million of expense related to employee severance and benefit arrangements for the three and six-month periods ended June 30, 2021. Severance costs will be paid by the end of the third quarter of 2021. The Company also recognized incremental expense of $0.2 million for the three and six-month periods ending June 30, 2021, related to the remeasurement of employee stock options that were modified due to restructuring. Lastly, during the second quarter of 2021 and effective June 30, 2021, the Company terminated a lease which included manufacturing, laboratory, and office space. The Company recorded a net gain on termination of $0.3 million.