Note 2 - Long-term Debt

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

N

OTE

2

–

LONG-TERM

DEBT

The carrying value of the Company’s Senior Secured Debt approximates fair value. The fair value of the Company’s Senior Secured Debt (Level

2

) is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company by its lenders for similar debt instruments of comparable maturities by its lenders.

On

March 5, 2020,

the Company entered into Conversion and Exchange Agreements (the “Exchange Agreements”) with certain holders (the “Holders”) of the Company’s

7%

Convertible Senior Notes due

2020

(the “Convertible Notes”) having an aggregate original principal amount of

$27.4

million.  Pursuant to the terms of the Exchange Agreements, the Holders exchanged an aggregate amount payable of

$27.3

million under the Convertible Notes for an aggregate of

10,000

shares of Series

1

Preferred Stock and the Holders converted the remaining aggregate amount payable of

$17.5

million of Convertible Notes into

2.6

million shares of common stock in accordance with the terms of the existing Indenture.  Each preferred share is convertible at any time at the option of the Holder into

405.05

shares of Common Stock.  Following the transactions, all of the Convertible Notes held by the Holders, as well as all the remaining Convertible Notes held by others that were converted in accordance with the existing Indenture at maturity have been satisfied in full and cancelled.  Pursuant to applicable guidance, the Series

1

Preferred Stock was recorded in Stockholders’ Equity at fair value, which was determined using an option pricing model.  A loss of

$12.4

million was recorded in the Condensed Consolidated Statement of Operations and Comprehensive Income, representing the excess of the fair value of the Series

1

Preferred Stock over the historical book value of the related Convertible Notes. 

On

March 5, 2020,

the Company entered into an agreement with its senior lender, Apollo Global Management LLC (“Apollo”), in which the Company acquired the option to extend the current

May 2021

maturity date of its loan to

May 2022 (

“Extension Option”).  The fee to acquire the Extension Option included the repricing of

362,500

warrants held by Apollo to

$6.75

and the extension of their expiration date by

36

months (“Warrant Modification”), together with an increase in the applicable prepayment premium of up to

7%

of the accreted value of the loan.  Additionally, if the Company exercises the Extension Option, the exercise price of the warrants automatically decreases to

$0.01

per share and the expiration date of the warrants will automatically be extended by an additional

12

months. 

At the time of the Warrant Modification, the Company recorded a warrant liability in the amount of

$2.0

million, which was the carrying value of the warrant prior to modification in the amount of

$0.9

million combined with the increase in fair value of the warrant in the amount of

$1.1

million.  This increase in fair value of the warrant at the time of the Warrant Modification was recorded to debt issuance costs and will be amortized over the remaining life of the Senior Secured Debt.  The fair value of the warrant liability is remeasured each reporting period using an option pricing model, and the change in fair value is recorded as an adjustment to the warrant liability with the unrealized gains or losses reflect in interest expense. 

Total unrealized losses of

$561

thousand for warrant liabilities accounted for as derivatives have been recorded in interest expense in the

three

months ended

March 31, 2020.