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Debt
9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Debt
7.
Debt

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Convertible Note

 

$

50,000

 

 

$

50,000

 

2022 Note *

 

 

23,449

 

 

 

23,449

 

Total carrying amount

 

 

73,449

 

 

 

73,449

 

Unamortized debt discount and issuance costs

 

 

(14,639

)

 

 

(18,043

)

Total - carrying amount, net

 

$

58,810

 

 

$

55,406

 

 

*2022 Note includes exit fees of $0.45 million – included in principal and unamortized debt discount and issuance costs

 

Convertible and 2022 Note

 

On October 12, 2022, the Company, entered into the “Restated Agreement” that amends and restates the Existing Agreement with Deerfield. In connection with the Restated Agreement, the Company and Deerfield entered into an

Exchange Agreement pursuant to which Deerfield exchanged $10.0 million of principal under the Original Note for securities of the Company, reducing the outstanding principal amount of the original convertible note to $50.0 million. Additionally, on the date of the Restated Agreement and pursuant to the terms thereof, the Company issued and sold an additional senior secured convertible note in a principal amount of $23.0 million (the “2022 Note” and, together with the Original Note, the “Convertible Notes”).

 

Pursuant to the Convertible Notes, Deerfield has the option to demand repayment of all outstanding principal, and any unpaid interest accrued thereon and any other amounts payable under the Restated Agreement (including the Exit Fee (in the case of the 2022 Note) and any make whole amounts), in connection with a Major Transaction (as defined in the Convertible Notes), which shall include, among others, any acquisition or other change of control of the Company; the sale or transfer of assets of the Company equal to more than 50% of the Enterprise Value (as defined in the Convertible Notes) of the Company; a liquidation, bankruptcy or other dissolution of the Company; or if at any time shares of the Company’s common stock are not listed on an Eligible Market (as defined in the Convertible Notes). The Convertible Notes are subject to specified events of default, the occurrence of which would entitle Deerfield to immediately demand repayment of all outstanding principal and accrued interest on the Convertible Note. Such events of default include, among others, failure to make any payment under the Convertible Note when due, failure to observe or perform any covenant under the Restated Agreement or the other transaction documents related thereto (subject to a standard cure period), the failure of the Company to be able to pay debts as they come due, the commencement of bankruptcy or insolvency proceedings against the Company, a material judgment levied against the Company and a material default by the Company under the Convertible Note.

On the payment, repayment, dischargement, redemption or prepayment of the 2022 Note or upon a Successor Major Transaction Conversion (as defined in the 2022 Note), the Company will pay a non-refundable exit fee equal to 1.95% of the 2022 Note so paid, repaid, discharged, redeemed or prepaid, as the case may be.

The Company used the proceeds from the new 2022 Note to repay in full the outstanding amounts under its Second Amended and Restated Credit and Security Agreement (Term Loan), dated December 31, 2021, by and among the Company, certain of its wholly owned subsidiaries, the lenders party thereto and MidCap Financial Trust, as administrative agent and collateral agent (as amended, amended and restated, supplemented or otherwise modified prior to the date hereof, the “MidCap Term Credit Agreement”) and repay in full the outstanding amounts, and terminate the outstanding commitments, under that certain Amended and Restated Credit and Security Agreement (Revolving Loan), dated as of July 1, 2019, by and among the Company, certain of its wholly owned subsidiaries, the lenders party thereto and MidCap Funding IV Trust, as administrative and collateral agent (as amended, amended and restated, supplemented or otherwise modified prior to the date hereof, the “MidCap Revolving Credit Agreement”).

The Restated Agreement also provides for the issuance of warrants to purchase Common Stock (the “Warrants”) to the extent that the obligations under Restated Agreement and the Convertible Notes are prepaid. If issued, the Warrants will be exercisable on a cash or cashless (net exercise) basis with an initial exercise price equal to the conversion price of the Original Note and 2022 Note, respectively, for the number of Conversion Shares (as defined in the Convertible Notes) which the repaid amount would have been convertible into and will be subject to the Beneficial Ownership Cap, as well as certain other customary anti-dilution adjustments upon the occurrence of certain events such as stock splits, subdivisions, reclassifications or combinations of Common Stock consistent with those included in the Convertible Notes. The Warrants will also provide, at the election of each holder thereof, for the payment of the exercise price therefor by reduction of the principal amount of any outstanding Convertible Notes held by such holder. Upon the consummation of a “Major Transaction” (as defined in the Warrants and consistent with the term as used in the Convertible Notes), holders of the Warrants may elect to (i) have their Warrants redeemed by the Company for an amount equal to the Black-Scholes value of such Warrant, in cash or, if applicable, in the form of the consideration paid to the Company’s stockholders in a Major Transaction, or (ii) have such Warrants be assumed by the successor to the Company in a Major Transaction, if applicable. Holders of the Warrants are also entitled to participate in any dividends or distributions to holders of Common Stock at the time such dividends or distributions are paid to such stockholders. All Warrants under the Exchange Agreement with Deerfield, in connection with the Restated Agreement were exercised as of March 31, 2023. See Note 8 for additional details.

The Company may redeem all or any portion of the principal amount of the Convertible Notes for cash. Upon redemption of any Convertible Notes, the Company will issue Warrants covering the same number of shares of Common Stock underlying, and at an exercise price equal to the conversion price of, the redeemed Convertible Notes.

The Convertible Notes provide for the optional redemption of the Convertible Notes without issuance of any Warrants or payment of any additional make whole amount (unless such Convertible Note is converted following receipt of an optional redemption notice but prior to payment of the redemption amount) provided that each of the following is greater than 130% of the conversion price then in effect: (1) the volume weighted average price of the Common Stock on each of any twenty (20) trading days during the period of thirty (30) consecutive trading days ending on the date on which the Company delivers an optional redemption notice, (2) the volume weighted average price of the Common Stock on the last trading day of such period and (3) the closing price of the Common Stock on the last trading day of such period. The Company may not effect any optional redemption during a delisting event or unless all conversion shares and warrant shares are freely tradable.

 

As of September 30, 2023, there was $73.5 million of outstanding principal, reduced by unamortized debt discount and issuance costs of $14.6 million related to the convertible note included in “Current portion of long-term debt” on the condensed consolidated balance sheets. The Company amortizes the debt discount and debt issuance costs under the effective interest method over the term of the Note, at a resulting effective interest rate of approximately 12%. For the nine months ended September 30, 2023 and 2022, the amortization of the convertible debt discount and issuance costs were $3.6 million and $2.5 million, respectively. Both were included in interest expense in the condensed consolidated statements of operations.

The Company is subject to a number of affirmative and restrictive covenants, including covenants regarding compliance with applicable laws and regulations, maintenance of property, payment of taxes, maintenance of insurance, business combinations, incurrence of additional indebtedness, prepayments of other unsecured indebtedness and transactions with affiliates, among other covenants.

As of September 30, 2023, the Company was not in compliance with the minimum revenue financial covenant. In the event of default under the Restated Agreement, one of the remedies that Deerfield has available is the ability to accelerate repayment of the debt, which the Company would not be able to immediately repay. Additionally, Deerfield may elect that Default Interest of 2.0% shall be payable in cash on demand in addition to the applicable interest rate then in effect.

On October 30, 2023, the Company entered into the Temporary Waiver and Exchange Agreement with Deerfield, which provides for a temporary waiver of the event of default through January 15, 2024. Under the Temporary Waiver, the Company continues to be deemed in default and the uncertainty of the final resolution is unknown. For further details, see Note 12 Subsequent Events.

As a result of the above, the Company reclassified the Convertible Notes, net of unamortized debt discount and issuance costs, from a long-term liability to a current liability as of September 30, 2023.

Any additional amendments or waiver under the Restated Agreement may result in increased interest rates or premiums and more restrictive covenants and other terms less advantageous to the Company and may require the payment of a fee for such amendments, or waiver.

Term Loan and Revolving Loan

 

As noted above, the Company used the proceeds from the new 2022 Note to repay in full the outstanding amounts under its Term Loan and Revolving loan.

 

Accordingly, for the current year there was no amount outstanding under the Term Loan and the Revolving Loan and no unamortized debt issuance costs related to the Term Loan and the Revolving Loan.

 

The amortization of debt issuance costs on the term loan and the revolving loan was $0.2 million for both three months and nine months ended September 30, 2022, and was included in interest expense in the condensed consolidated statements of operations.

 

Future Principal Payments of Debt

 

The future principal payments for all outstanding debt as of September 30, 2023 are as follows (in thousands):

 

Fiscal Year

 

 

 

2023

 

$

73,449

 

2024

 

 

 

2025

 

 

 

2026

 

 

 

2027 and thereafter

 

 

 

Total

 

$

73,449