Debt |
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Transfers And Servicing [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Debt | 11. DEBT On January 30, 2015, the Company entered into the Loan Agreement with East West Bank as the lender (“the Lender”), which provides the Company with a secured term loan facility in an aggregate principal amount of up to $20.0 million. The Company borrowed the first and only advance of $16.0 million (“Draw A”) on January 30, 2015. Draw A was used to pay-off the Company’s existing term debt of $11.3 million. A loss on extinguishment of debt of $0.6 million related to costs from the pay-off of the previously existing term loan was recognized as interest expense during the three months ended March 31, 2015. Draw A bears interest at a daily floating rate equal to 2.00%, plus the greater of (i) 3.25% or (ii) the prime rate published by the Lender. The maturity date of the loan is December 1, 2018. The principal pay-down of the loan began on July 1, 2016 with the loan being payable in 30 equal monthly installments. A fully non-refundable commitment fee of $160,000 was paid on January 30, 2015 when Draw A was received. The loan has no prepayment penalty. Commitment fees are included in debt issuance costs which are netted against the debt outstanding and are amortized to interest expense using the effective interest method over the term of the loan. Debt discount and issuance costs, current, as of both September 30, 2016 and December 31, 2015 were $0.2 million. Debt discount and issuance costs, non-current, as of both September 30, 2016 and December 31, 2015 were $0.1 million.
In connection with the Loan Agreement, the Company agreed to issue to the Lender warrants to purchase shares of the Company’s common stock upon the drawdown of each advance in an amount equal to 1.5% of the amount drawn, divided by the exercise price per share for that tranche. The fair value of the warrant is reflected as a discount to the debt. As a result of Draw A, the Company issued to the Lender a warrant to purchase an aggregate of 34,483 shares of the Company’s common stock, at an exercise price of $6.96 per share. The fair value of the warrant was estimated to be $90,000 on January 30, 2015, using the Black-Scholes Model with the following assumptions: expected volatility of 39.83%, a contractual term of 5 years, risk-free interest rate of 1.18%, underlying common stock price of $7.06, and dividend yield of 0%. The warrant is included in stockholders’ equity with the offset to debt discount that is amortized over the term of the loan using the effective interest method. The warrant is not subject to remeasurement.
The Loan Agreement requires collateral by a security interest in all of the Company’s assets except intellectual property and contains customary affirmative and negative covenants including financial maintenance covenants, and also includes standard events of default, including payment defaults. Upon the occurrence of an event of default, a default interest rate of an additional 5.00% may be applied to the outstanding loan balances, and the Lender may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement. As of February 29, 2016, the Company was in violation of one of its financial covenants under the Loan Agreement. This violation was waived in principle by the Lender by virtue of a contemporaneous verbal amendment to the Loan Agreement received from the Lender, which was subsequently memorialized in a written amendment to the Loan Agreement dated May 12, 2016. As of September 30, 2016, the Company was in compliance with its debt covenants under the Loan Agreement. In April 2016, the Lender consented to the acquisition of Allenex by the Company (the “Consent”). The Consent was contingent upon the closing of a private placement financing for aggregate cash proceeds of at least $12.0 million and separately depositing into an escrow account cash of $8.0 million relating to a commitment by the Majority Shareholders to purchase the Company’s equity securities in the Subsequent Financing, all of which occurred on April 14, 2016. Pursuant to the Consent, the Company is also required to raise another $20.0 million through one or more equity financings by March 31, 2017, of which $9.0 million was raised on September 26, 2016 in the Public Offering, prior to paying the $6.2 million of deferred purchase price consideration to the Majority Shareholders, which had a carrying amount of $5.9 million as of September 30, 2016. As of April 11, 2016, the Company reassessed the probability of the completion of a six-month bridge loan of $18.0 million with Oberland and determined that it was not probable that the bridge loan would be consummated. The Company is currently disputing the fees associated with the bridge loan with Oberland, but in the interim a charge of $2.9 million was recorded in the nine months ended September 30, 2016 to expense financing costs associated with this bridge loan (see the Oberland Complaint in Note 9). These costs have been included as a component of other expense on the Company’s condensed consolidated statements of operations. On May 12, 2016, the Company entered into a First Amendment to Loan and Security Agreement (the “First Amendment”), which amended the Loan Agreement. The First Amendment, among other things, amended the Loan Agreement by modifying certain financial covenants, adding an equity financing covenant, and restricting certain transactions between the Company and its subsidiaries. On June 27, 2016, the Company entered into a Second Amendment to Loan and Security Agreement (the “Second Amendment”). The Second Amendment, among other things, amended the Loan Agreement to permit certain transactions between the Company and its subsidiaries and to add intellectual property as collateral security. On June 25, 2013, Allenex entered into the Term Loan Facility with Danske in an aggregate principal amount of up to SEK 71,000,000 (approximately $8.3 million in U.S. dollars). The Term Loan Facility is available for utilization in advances of a minimum of SEK 5,000,000 (approximately $0.6 million in U.S. dollars) and if more, integral multiples of SEK 1,000,000 (approximately $0.1 million in U.S. dollars). The interest rate applicable to each advance shall be the percentage rate per annum calculated as the aggregate of (i) Stockholm Interbank Offered Rate (“STIBOR”) (as defined in the Term Loan Facility) and (ii) the Margin (as described in the Term Loan Facility) at 3% conditional on the fulfillment of certain criteria. In March 2015, Allenex entered into a first amendment to the Term Loan Facility, pursuant to which additional loans were granted. In August 2015, Allenex entered into a second amendment to the Term Loan Facility, pursuant to which the term of the Term Loan Facility was extended. In December 2015, Allenex entered into a waiver and amendment agreement relating to the Term Loan Facility, pursuant to which the change of control provision was waived and amended. In March 2016, Allenex entered into another amendment to the Term Loan Facility, which modified the repayment schedule for advances under the Term Loan Facility. Under this Term Loan Facility, SEK 63,500,000 (approximately $7.4 million in U.S. dollars) was outstanding as of September 30, 2016, and a quarterly payment of SEK 1,500,000 (approximately $0.2 million in U.S. dollars) is payable in the quarter ended December 31, 2016, and six quarterly payments of SEK 3,000,000 (approximately $0.4 million in U.S. dollars) are payable in 2017 and the first half of 2018, and the remaining balance of SEK 44,000,000 (approximately $5.1 million in U.S. dollars) is due in June 2018. Notwithstanding the repayment schedule provided by the Term Loan Facility, the full outstanding balance was reclassified to current liabilities due to the insufficient working capital in Allenex. On June 18, 2015, Allenex also entered into a short term credit facility with Danske with total available credit of SEK 8,000,000 (approximately $0.9 million in U.S. dollars). As of August 4, 2016, the available credit under the short term credit facility with Danske was increased to SEK 10,000,000 (approximately $1.2 million in U.S. dollars). As of September 30, 2016, the total outstanding balance due to Danske under the short term credit facility was SEK 5,200,000 (approximately $0.6 million in U.S. dollars), and is due on December 31, 2016, unless it is rolled over. Due to insufficient working capital in Allenex, a debt covenant in the Term Loan Facility relating to maintaining an adequate leverage ratio was violated at each of June 30, 2016 and September 30, 2016. The Company obtained waivers from Danske for each of these violations of the debt covenant. While Allenex received waivers from Danske for each of these violations as of June 30, 2016 and September 30, 2016, due to continuing liquidity matters, Allenex has determined that it is not probable that it will be in compliance with this covenant in future periods. For these reasons, the long-term debt due to Danske was classified as a current liability in the condensed consolidated balance sheet as of September 30, 2016. Additionally, if the loan was no longer available or Danske demanded repayment of the debt, the Company may not have sufficient capital to operate. On June 28, 2013, Allenex issued a SEK 9,400,000 (approximately $1.1 million in U.S. dollars) subordinated promissory note to FastPartner AB (“FastPartner”), which provides for an annual interest rate of 10.00%. Principal payments of SEK 1,000,000 (approximately $0.1 million in U.S. dollars) and accrued interest are payable quarterly at September 30, December 31, March 31 and June 30 and subject to working capital requirements that had not been met in fiscal years 2014 and 2015, nor the nine months ended September 30, 2016. The full amount of the promissory note was outstanding as of September 30, 2016, and will mature on December 31, 2016. However, pursuant to an intercreditor agreement among Allenex, Danske, FastPartner, Mohammed Al Amoudi and Olerup SSP AB, dated June 25, 2013 (the “Intercreditor Agreement”), until the Term Loan Facility with Danske is repaid, FastPartner may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. Allenex’s obligations under the promissory note is secured by a pledge of Allenex shares to FastPartner. As of September 30, 2016, FastPartner had beneficial ownership of 5% or more of the outstanding shares of the Company’s common stock and was considered a related party (See Note 17). On June 28, 2013, Allenex issued a SEK 10,600,000 (approximately $1.2 million in U.S. dollars) subordinated promissory note to Mohammed Al Amoudi, which provides for an annual interest rate of 10.00%. Principal payments of SEK 1,000,000 (approximately $0.1 million in U.S. dollars) and accrued interest are payable quarterly at September 30, December 31, March 31 and June 30, subject to meeting certain requirements for working capital. The promissory note had an initial maturity date of June 28, 2016. On December 16, 2015, the maturity date was extended until December 31, 2016. However, pursuant to the Intercreditor Agreement, until the Term Loan Facility with Danske is repaid, Mohammed Al Amoudi may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. The full amount of the promissory note was outstanding as of September 30, 2016. Allenex’s obligations under the promissory note is secured by a pledge of Allenex shares to Mohammed Al Amoudi. As of September 30, 2016. Mohammed Al Amoudi had beneficial ownership of 5% or more of the outstanding shares of the Company’s common stock and was considered a related party (see Note 17). On February 25, 2015, Allenex entered into a SEK 14,000,000 (approximately $1.6 million in U.S. dollars) loan agreement with SSP Primers Aktieboulag, pursuant to which SEK 4,000,000 (approximately $0.5 million in U.S. dollars) has been paid and SEK 5,000,000 (approximately $0.6 million in U.S. dollars) is payable on February 27, 2017, and SEK 5,000,000 (approximately $0.6 million in U.S. dollars) is payable on February 26, 2018. The loan amount outstanding as of September 30, 2016 is SEK 10,000,000 (approximately $1.2 million in U.S. dollars) and has an annual interest rate of 3% payable in conjunction with each principal payment. On December 29, 2015, Allenex issued a SEK 2,000,000 (approximately $0.2 million in U.S. dollars) subordinated promissory note to FastPartner, a related party, which matures on December 31, 2016 and has an annual interest rate of 10.00%. Principal and accrued interest are payable on the maturity date and subject to working capital requirements that had not been met in fiscal year 2015, nor the nine months ended September 30, 2016. However, pursuant to the Intercreditor Agreement, until the Term Loan Facility with Danske is repaid, FastPartner may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. Allenex’s obligations under the promissory note is secured by a pledge of Allenex shares to FastPartner. The full amount of subordinated promissory note was outstanding as of September 30, 2016. On March 7, 2016, Allenex issued a SEK 4,000,000 (approximately $0.5 million in U.S. dollars) subordinated promissory note to FastPartner, a related party, which matures on December 31, 2016 and has an annual interest rate of 10.00%. Principal and accrued interest are payable on the maturity date and subject to working capital requirements that had not been met during the nine months ended September 30, 2016. However, pursuant to the Intercreditor Agreement, until the Term Loan Facility with Danske is repaid, FastPartner may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. Allenex’s obligations under the promissory note is secured by a pledge of Allenex shares to FastPartner. The full amount of the subordinated promissory note was outstanding as of September 30, 2016. Interest of $0.7 million on shareholder loans had been accrued as of September 30, 2016. As of September 30, 2016, future debt maturities were as follows (in thousands):
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