Notes Payable, Net
|6 Months Ended|
Jun. 30, 2020
|Debt Disclosure [Abstract]|
|Notes Payable, Net||Notes Payable, net
In December 2016, the Company entered into a loan agreement and received $7,000 that bears interest on the outstanding daily balance at a floating per annum rate equal to the 30-day U.S. LIBOR plus 5.41%. The loan agreement created a first priority security interest with respect to substantially all assets of the Company, including proceeds of intellectual property, but expressly excluding intellectual property itself.
The Company was required to pay accrued interest on the current loan on the first day of each month through and including January 1, 2018. Commencing on February 1, 2018, the Company was required to make equal monthly payments of principal, together with accrued and unpaid interest. Prior to the Company entering into a second amendment to the December 2016 loan agreement as discussed below, the principal balance of the loan was amortized ratably over 36 months maturing on January 1, 2021, at which time all unpaid principal and accrued and unpaid interest would be due and payable in full. A final payment of $245 will be due on the maturity date, of which $240 was accreted as of June 30, 2020 and is included as a component of notes payable on the Company’s condensed consolidated balance sheets.
In December 2016, and pursuant to the loan agreement, the Company entered into a success fee agreement with the lender under which the Company agreed to pay the lender a $250 success fee upon the first to occur of any of the following events: (a) a sale or other disposition by the Company of all or substantially all of its assets; (b) a merger or consolidation of the Company into or with another person or entity; or (c) the closing price per share for the Company’s common stock being $120.00 or more for five successive business days. The fair value of the contingent success fee is re-measured each reporting period with any adjustments in fair value being recognized in the condensed consolidated statements of operations and comprehensive loss. At June 30, 2020, the fair value of the contingent success fee liability was de minimis.
On April 29, 2020 the Company entered into a second amendment to the December 2016 loan agreement to defer principal payments for three months beginning in May 2020 and be re-amortized when principal payments resume on August 1, 2020. During the three-month deferral period the Company is required to make interest only payments. The amended loan agreement modified the original liquidity covenant, which now requires that the Company maintain unrestricted cash and cash equivalents in accounts of the lender or subject to control agreements in favor of the lender in an amount equal to at least the outstanding balance of the term loan, which was $1,750 as of June 30, 2020. On June 30, 2020, with cash on hand of $13,260, the Company was compliant with this liquidity covenant and all other covenants.
The final payment fee, debt issuance costs, and the initial fair value of the success fee combined with the stated interest resulted in an effective interest rate of 8.05% for the three months ended June 30, 2020 and 8.80% for the six months ended June 30, 2020. The final payment fee, initial fair value of the success fee and debt issuance costs are accreted/amortized to interest expense using the effective interest method over the life of the loan.
The following table presents scheduled principal payments of the Company’s note payable and final payment fee as of June 30, 2020:
Paycheck Protection Program Loan
On April 20, 2020, the Company received an unsecured loan in the principal amount of $1,086 under the Paycheck Protection Program (the “PPP”) administered by the U.S. Small Business Administration, or the SBA, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), or the PPP loan. The terms of the PPP Loan were subsequently revised in accordance with the provisions of the Paycheck Protection Flexibility Act of 2020, or the PPP Flexibility Act, which was enacted on June 5, 2020. The PPP loan provides for an interest rate of 1.00% per year, and matures two years after the date of initial disbursement. Beginning on the seventh month following the date of initial disbursement, The Company is required to make 18 monthly payments of principal and interest. The PPP loan may be used for payroll costs, costs related to certain group health care benefits and insurance premiums, rent payments, utility payments, mortgage interest payments and interest payments on any other debt obligation that were incurred before February 15, 2020. Under the terms of the CARES Act and the PPP Flexibility Act, the Company may apply for and be granted forgiveness for all or a portion of loan granted under the PPP, with such forgiveness to be determined, subject to limitations (including where employees of the Company have been terminated and not re-hired by a certain date), based on the use of the loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. The terms of any forgiveness may also be subject to further requirements in regulations and guidelines adopted by the SBA. While the Company currently believes that the majority of the use of the PPP loan proceeds will meet the conditions for forgiveness under the PPP, no assurance is provided that the Company will obtain partial forgiveness of the loan.
The follow table presents the scheduled principal payments of the Company's PPP note payable as of June 30, 2020, shown if the loan is not forgiven:
The entire disclosure for long-term debt.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef