Long-Term Debt | Issuance of Unsecured Subordinated Promissory Notes In connection with the Convertible Note Financing, on June 25, 2019, the Company entered into a $2,500 Unsecured Subordinated Promissory Note, which funded on July 5, 2019, with Venus Concept USA Inc., a wholly owned subsidiary of Venus. On August 14, 2019, the Company entered into another $2,500 Unsecured Subordinated Promissory Note funded in three tranches A and B of $1,000 each and tranche C of $500 with Venus Concept USA Inc., a wholly owned subsidiary of Venus, collectively (the Subordinated Notes). Tranches A and B were funded on August 27, 2019 and September 25, 2019, respectively for a total of $2,000. The maturity date of the Subordinated Notes is November 30, 2019. The Subordinated Notes bear interest on the unpaid principal amount at a rate of eight percent (8%) per annum from the date of issuance, provided that upon any event of default pursuant to the Subordinated Notes, the Subordinated Notes shall bear interest payable on demand at a rate that is 4% per annum in excess of the rate of interest otherwise payable under thereunder. The Subordinated Notes are unsecured and subordinate in priority to the Company’s existing obligations to Solar Capital, Ltd. under its amended loan and security agreement. Issuance of Related Party Convertible Promissory Notes On February 28, 2019, the Company entered into a Note Purchase Agreement pursuant to which the Company raised $5,000 through the issuance of two unsecured subordinated convertible promissory notes (the Notes) to Frederic Moll, M.D., one of the Company’s directors, and Interwest Partners IX, LP, one of the Company’s stockholders affiliated with Gil Kliman, M.D., one of the Company’s directors (together, the Investors). The Note Purchase Agreement was amended on August 20, 2019 to adjust the post-merger conversion price for per share from $0.825 to $0.4664 and to convert the Notes upon consummation of the Merger. In addition, on August 20, 2019, the Company entered into a Note Purchase Agreement pursuant to which the Company raised $2,000 through the issuance of one unsecured subordinated convertible promissory note to Frederic Moll, M.D. The maturity date of the Notes is August 28, 2020 (the Maturity Date). The Notes bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. The Notes are unsecured and subordinate in priority to the Company’s existing obligations under the Solar Agreement. All of the outstanding principal and unpaid accrued interest on the Notes will automatically be converted into shares of the same class and series of capital stock of the Company issued to other investors upon consummation of the Merger, into the number of fully paid and non-assessable shares of the Company’s common stock, par value $0.0001 per share, of Restoration Robotics (the “Common Stock”), calculated by dividing the outstanding principal amount of this Note (and any accrued and unpaid interest under this Note) by the Post-Merger Conversion Price then in effect. The initial Post-Merger Conversion Price is $0.4664 per share, subject to adjustment for any stock split. Upon the occurrence of certain events of default or the Maturity Date, the Notes require the Company to repay the principal amount of the Notes and any unpaid accrued interest. Issuance costs associated with the Notes were not significant and accrued interest of $259 through September 30, 2019 is reported in “Other Accrued Liabilities” on the condensed consolidated balance sheets. Loan and Security Agreement In May 2018, the Company entered into a Loan and Security Agreement and as subsequently amended (the Solar Agreement) with Solar Capital Ltd. (Solar) and certain other lenders thereunder (together with Solar, the Lenders), and Solar, as the Collateral Agent. The Solar Agreement consists of a four-year term loan for an aggregate principal amount of $20,000 (the Borrowings), for working capital, to fund the Company’s general business requirements and to repay indebtedness of the Company to Oxford Finance LLC (the Oxford Agreement). The Company used $10,085 of the loan proceeds to repay the outstanding principal of $8,667, a final payment fee of $1,300 plus accrued interest and prepayment fees of $118 under the Oxford Agreement. The Borrowings under the Solar Agreement bear interest through maturity at a rate equal to the U.S. Dollar LIBOR rate plus 7.95% per annum (the Interest Rate). The outstanding balance on the loan was $20,000 and accrued interest totaled $167 as of September 30, 2019. The Interest Rate was 10.1% at September 30, 2019. Pursuant to the terms of the Solar Agreement, the Company shall make interest only payments until December 1, 2019 (the Interest Only Period). The Interest Only Period may be extended up to three additional months, if the Company achieves certain revenue and capital fundraising thresholds. Following cessation of the Interest Only Period, the Company shall make equal monthly payments on the outstanding principal balance of the Borrowings and any unpaid and accrued interest such that the Borrowings shall be fully repaid on May 1, 2022. In addition, pursuant to the Solar Agreement, the Company issued the Lenders warrants (the Warrants) to purchase an aggregate of 161,725 shares of the Company’s common stock, $0.0001 par value per share, at an exercise price of $3.71 per share. The Warrants were immediately exercisable upon issuance, and excluding certain mergers or acquisitions, will expire on the ten-year anniversary of the date of issuance. The fair value of the Warrants issued was determined to be $404 using a Black-Scholes valuation model with the following assumptions: common stock price at issuance of $3.71 per share; exercise price of $3.71; risk-free interest rate of 2.97% based upon observed risk-free interest rates; expected volatility of 55.50% based on the Company’s implied volatility; expected term of ten years, which is the contractual life of the Warrants; and a dividend yield of 0%. The fair value of the Warrants was recorded as a debt discount within notes payable and an increase to additional paid-in capital on the Company’s condensed consolidated balance sheets. The debt discount is being amortized as interest expense over the term of the Solar Agreement, using the effective interest method. The third-party transaction costs (not paid directly to the lenders) related to the debt of $404 are accounted for as a debt discount and classified within notes payable on the Company’s condensed consolidated balance sheets and amortized as interest expense over the term of the loan using the effective interest method. The obligations under the Solar Agreement are secured by a lien on substantially all the Company’s property. The Solar Agreement contains certain affirmative covenants, negative covenants and events of default, including, covenants and restrictions that among other things, require the Company and its subsidiary to satisfy certain financial covenants including covenants requiring the Company to satisfy certain revenue and liquidity thresholds, and restricts the ability of the Company and its subsidiary’s ability to, incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales or sale and leaseback transactions, and declare dividends or redeem or repurchase capital stock. A failure to comply with these covenants could permit the Lenders under the Solar Agreement to declare the Borrowings, together with accrued but unpaid interest and certain Prepayment Fees, to be immediately due and payable. On November 2, 2018, the Solar Agreement was amended to modify the compliance requirement for certain revenue and liquidity thresholds. As part of this amendment, the Company paid a fee of $50 to the Lenders and cancelled 161,725 Warrants (originally issued in May 2018, as mentioned above) and issued 161,725 new warrants of the Company’s common stock, $0.0001 par value per share, at an exercise price of $1.76 per share. All other terms of the Warrants were unchanged. On February 13, 2019, the Company entered into a Third Amendment to the Loan and Security Agreement (the Third Amendment), which amended the Solar Agreement with the Lenders. Pursuant to the terms of the Third Amendment, the Solar Agreement was amended to modify the compliance requirement for certain liquidity thresholds to provide the Company with additional flexibility. As part of the Third Amendment, the Final Fee (as defined in the Solar Agreement) that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $130 to $960. In addition, the Solar Agreement was amended to include certain additional changes to covenants covering certain operational milestones. On June 14, 2019, the Company entered into a Fourth Amendment to the Solar Agreement, which modified the compliance requirement for certain liquidity thresholds. As part of the Fourth Amendment, the Final Fee that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $150 to $1,110, and the Solar Agreement was also amended to include a new covenant covering certain equity financing milestones. In August 2019, the Company entered into a Fifth Amendment to the Solar Agreement, which modified the compliance requirement for certain revenue thresholds and included a new covenant covering certain equity financing milestones. As part of the Fifth Amendment, the Final Fee that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $200 to $1,310. In October 2019, the Company entered into a Sixth Amendment to the Solar Agreement, which modified the drop dead date for the Merger from October 31, 2019 to November 15, 2019. As of September 30, 2019, the Company was in compliance with all covenants under the Solar Agreement, as amended. The Company is also required to make mandatory prepayments of the Borrowings, subject to specified exceptions, upon defaulting on any payments of principal or interest on the Borrowings, the occurrence of certain specified defaults of the covenants in the Solar Agreement, the occurrence of a material adverse change in the business, operations or conditions of the Company and specified other events (each, an Event of Default). Upon the occurrence and continuation of an Event of Default, the Borrowings shall accrue at the Interest Rate plus 4.0%. If all or any of the Borrowings are prepaid or required to be prepaid under the Solar Agreement, then the Company shall pay, in addition to such prepayment, a prepayment premium (the Prepayment Premium) equal to (i) with respect to any such prepayment paid on or prior to May 1, 2019, 3.0% of the principal amount of the Borrowings being prepaid, (ii) with respect to any prepayments paid after May 1, 2019 but on or prior to May 1, 2020, 2.0% of the principal amount of the Borrowings being prepaid and (iii) with respect to any prepayments paid after May 1, 2020 but on or prior to May 1, 2021, 1.0% of the principal amount of the Borrowings being prepaid. Notwithstanding the foregoing, if the Lenders each participate in a refinancing of the Borrowings, then the Prepayment Premium shall be 0%. The scheduled principal payments on the outstanding borrowings as of September 30, 2019 are as follows: As of September 30, 2019 Solar Debt Related Party Convertible Promissory Notes Unsecured Subordinated Promissory Notes Total 2019 (remaining 3 months) $ 667 $ — $ 4,500 $ 5,167 2020 8,000 7,000 — 15,000 2021 8,000 — — 8,000 2022 4,643 — — 4,643 2023 — — — — Total 21,310 7,000 4,500 32,810 Less: debt discount (1,274 ) — — (1,274 ) Less: current portion (5,878 ) (7,000 ) (4,500 ) (17,378 ) Non-current portion $ 14,158 $ — $ — $ 14,158 |