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Convertible Loan, Related Party

12 Months Ended

Dec. 31, 2015

6. CONVERTIBLE LOAN, RELATED PARTY

On November 13, 2013, the Company entered into a loan agreement (the “RCF Loan”) with Resource Capital Fund V L.P. (“RCF”), whereby RCF agreed, subject to the terms and conditions set forth in the RCF Loan, to provide a secured convertible loan facility of up to $15.0 million to the Company, which was subsequently amended on April 29, 2014 to reduce the amount available thereunder from $15.0 million to $8.0 million, which has been fully drawn. Amounts drawn under the RCF Loan mature on December 31, 2016 and bear interest at 10% per annum, payable quarterly in arrears in shares of the Company’s common stock or, at RCF’s election, in cash. The number of shares to be issued as payment for interest is determined based upon the VWAP of the Company’s common stock for the 20 trading days preceding the last day of each quarter. Accordingly, the Company issued the following shares during 2015 related to interest expense:

	Amount		Shares of common stock issued		VWAP		Date of issuance
	(thousands of dollars, except share data)
Q4 2014 Interest payment	$	199		8,576	$	23.3208		January 2, 2015
Q1 2015 Interest payment		181		11,371	$	17.5872		April 1, 2015
Q2 2015 Interest payment		161		14,159	$	14.1252		July 2, 2015
Q3 2015 Interest payment		181		18,755	$	10.6632		October 1, 2015
Total	$	722		52,861

As of December 31, 2015, interest expense of $0.2 million relating to the three months ended December 31, 2015 was included in accrued liabilities on the Company’s Consolidated Balance Sheets.

The Company’s obligations under the RCF Loan are secured by pledges on the equity interests of the Company’s subsidiaries and a lien on substantially all of the assets of the Company and its subsidiaries. The Company may prepay all or any portion of the amounts drawn under the RCF Loan without penalty, subject to a minimum prepayment amount of $5.0 million or (if lower) the full amount then outstanding. Prepaid amounts may not be redrawn. The loan agreement contains customary representations, warranties, covenants and events of default and grants RCF the right to nominate two nominees to the Company’s Board of Directors so long as any obligations remain outstanding under the RCF Loan.

RCF may convert amounts drawn under the RCF Loan into shares of the Company’s common stock at any time prior to maturity on December 31, 2016. The conversion price was initially set at $31.20 per share and was subject to customary anti-dilution adjustments and further downward adjustment, subject to a floor of $12.00 per share, in the case of certain equity issuances by the Company before November 13, 2014.

Prior to the expiration of an anti-dilution clause in 2014, the conversion feature was considered to be an embedded derivative. The initial fair value measurement of the derivative liability as determined on the date of each advance was previously recognized as a debt discount and is amortized over the life of the RCF Loan.

The following table represents the key components of the RCF Loan:

	December 31, 2015			December 31, 2014
	(thousands of dollars)
Debt principal	$	8,000		$	8,000
Unamortized discount		(1,846	)		(3,655	)
Carrying value of convertible loan, end of period	$	6,154		$	4,345

For the periods ended December 31, 2015 and 2014, the Company recorded amortization of debt discount of $1.8 million and $1.6 million, which has been included in interest expense in the Company’s Consolidated Statement of Operations.

As of March 18, 2016, RCF owned approximately 0.7 million shares or 13.9% of the Company’s outstanding common stock. If RCF were to convert the entire $8.0 million outstanding under the Loan Agreement, RCF would receive 256,410 shares of the Company’s common stock, and RCF’s ownership percentage in the Company would increase to approximately 18.0%.