Related Party Transactions

9 Months Ended

Sep. 30, 2020

Note 14. Related Party Transactions

In the ordinary course of business, the Company entered into transactions with PDL.

Corporate Allocations

The Company’s condensed financial statements include expenses of $637 and $917 for the three months ended September 30, 2020 and 2019, respectively and $3,387 and $3,178 for the nine months ended September 30, 2020 and 2019, respectively, allocated to the Company by PDL for corporate support functions that are provided by PDL such as administration and organizational oversight; including employee benefits, finance and accounting, treasury and risk management, professional and legal services, among others. Allocated costs are included within selling, general and administrative expenses in the accompanying condensed statements of operations. A portion of these allocated costs related to certain cross charges that have historically been cash settled and included in the condensed statements of cash flows as operating activities. As of September 30, 2020 and December 31, 2019, $1,098 and $142, respectively, related to the allocation of corporate costs are included in other current liabilities as those amounts are to be cash settled.

No costs related to the separation of LENSAR incurred by PDL have been allocated to the Company for the three and nine months ended September 30, 2020.

Note Payable to Related Party

In May 2017, the Company entered into a loan agreement with PDL. Under the loan agreement, the maximum aggregate principal amount that LENSAR can draw from the loan agreement is $25,600. On April 15, 2020, the Company and PDL, upon mutual agreement, increased the credit limit that LENSAR can draw from PDL under the loan agreement by $7,000 to a total of $32,600. LENSAR drew an additional $12,400 under the loan agreement during the nine months ended September 30, 2020. Immediately before the Note Payable Recapitalization, the Company had drawn the full amount under the amended loan agreement. The interest expense incurred during the three months ended September 30, 2020 and 2019 was $33 and $112, respectively, and is included in interest expense. The interest expense incurred during the nine months ended September 30, 2020 and 2019 was $511 and $302, respectively, and is included in interest expense.

Upon completion of the Note Payable Recapitalization, as of September 30, 2020 the Company does not have a Note payable due to related party. See Note 1, Overview and Basis of Presentation, for more information on the Note Payable Recapitalization.

Series A Preferred Stock

Refer to Note 8, Series A Preferred Stock.

Agreements with PDL

In connection with the completion of the Spin-Off, the Company entered into several agreements with PDL, each dated September 30, 2020, that, among other things, provide a framework for the Company’s relationship with PDL after the Distribution, including the following (collectively, the “Spin Agreements”):

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Separation and Distribution Agreement: The Separation and Distribution Agreement set forth the agreements between PDL and the Company regarding the principal transactions necessary to separate the Company from PDL. It also set forth other agreements that govern certain aspects of the relationship with PDL after the completion of the Spin-Off. In general, neither the Company nor PDL will make any representations or warranties regarding the transactions contemplated by the Separation and Distribution Agreement or the respective businesses, assets, liabilities, condition or prospects of PDL or the Company.

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Transition Services Agreement: The Transition Services Agreement provides that for a limited time, PDL is to provide services (through various separate work streams) to LENSAR on an interim basis, ranging in duration from two to nine months, with the majority of such services being provided for a duration of six months. The support functions include accounting and other financial functions. The agreed upon charges for such services are either (i) generally intended to allow PDL to recover all out-of-pocket costs and expenses, along with a pre-determined mark-up of such out-of-pocket costs and expenses or (ii) where available, a benchmark market based rate for the service.

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Tax Matters Agreement: The Tax Matters Agreement generally governs the respective rights, responsibilities and obligations of LENSAR and PDL with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes.