Notes Payable | 7. Notes Payable The following two tables summarize outstanding notes payable as of September 30, 2022, and December 31, 2021 (dollars in thousands): As of 09/30/2022 (dollars in thousands) Maturity Date Interest Rate Conversion Price Principal Remaining Debt Discount Remaining Embedded Conversion Option Carrying Value Senior secured promissory note payable In default 20.5 % n/a $ 18,000 $ (5,227 ) $ - $ 12,773 2021 Convertible promissory notes payable In default 17.0 % $ 0.0538 4,000 - - 4,000 Convertible promissory notes payable, related parties In default 14.0 % $ 0.10 1,373 - - 1,373 Convertible notes payable August 5, 2023 15.0 % $ 0.04 10,849 (2,966 ) 1,291 9,174 Convertible notes payable, related parties August 5, 2023 15.0 % $ 0.04 5,305 (1,451 ) 631 4,485 Advances on future cash receipts In default n/a n/a 296 (102 ) - 194 Total short-term debt as of September 30, 2022, including notes in default $ 39,823 $ (9,746 ) $ 1,922 $ 31,999 As of 12/31/2021 (dollars in thousands) Maturity Date Interest Rate Conversion Price Principal Remaining Debt Discount Remaining Embedded Conversion Option Carrying Value Senior secured promissory note payable In default 20.25 % n/a $ 15,000 $ (3,414 ) $ - $ 11,586 2021 Convertible promissory notes payable In default 15.40 % $ 0.1071 6,445 (1,099 ) 6,255 11,601 Convertible promissory notes payable, related parties In default 14.0 % $ 0.10 1,596 - - 1,596 SBA loan #2 February 20, 2026 1.00 % n/a 1,033 - - 1,033 Advances on future cash receipts March 11, 2022 n/a n/a 1,500 (1,054 ) - 446 Total debt outstanding, including amounts in default 25,574 (5,567 ) 6,255 26,262 Less: current maturities, including notes in default (24,699 ) 5,567 (6,255 ) (25,387 ) Total long-term debt as of December 31, 2021 $ 875 $ - $ - $ 875 Senior secured promissory note payable, in default - In August 2020, the Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”) with NH Expansion Credit Fund Holdings LP, as noteholder and agent. The Company issued a $15 million Senior Secured Promissory Note Payable and a warrant exercisable into shares of the Company’s common stock (the “NH Expansion Warrant”) in exchange for cash to support operations, repay outstanding debt and close on the acquisition of the UltraMIST® assets from Celularity, among other transactions. In February 2022, the Company entered into the Second Amendment to Note and Warrant Purchase and Security Agreement (the “Second NWPSA”) for $3.0 million, for a total of $18.0 million outstanding, at an interest rate of 20.5% and maturity dates of September 30, 2025. Because the combined fair value of the applicable warrants and common stock issued as part of this note exceeded the face value of the note, the additional amount beyond the face value is recorded as a loss on issuance of $3.4 million. In June 2022, the Company entered into the Third Amendment to the Note and Warrant Purchase and Security Agreement (the “Third NWPSA”). The Third NWPSA provides for (i) the extension of the agent’s and holder’s forbearance of exercising its remedies arising from Existing Defaults (as defined in the NWPSA) to the earlier of (x) the occurrence of an Event of Default (as defined in the NWPSA) or (y) August 30, 2022, and (ii) the extension to file a registration statement with the Securities and Exchange Commission to register the resale of the Advisor Shares (as defined in the NWPSA) no later than August 30, 2022. Convertible Notes Payable and Convertible Notes Payable, Related Parties - On August 5, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), for our sale in a private placement (the “Private Placement”) of (i) Future Advance Convertible Promissory Notes (the “Notes”) in an aggregate principal amount of $16.2 million, consisting of $12.3 million in newly raised capital and $3.8 million in refinanced accrued expenses, bridge notes payable, convertible promissory notes, related parties, and fees, (ii) Common Stock Purchase Warrants (the “First Warrants”) to purchase an additional 404.8 million shares of common stock with an exercise price of $0.067 per share and (iii)Common Stock Purchase Warrants (the “Second Warrants”) to purchase an additional 404.8 million shares of common stock with an exercise price of $0.04 per share. The Notes will be convertible and the First and Second Warrants exercisable at such time as the Company’s authorized and unissued shares of common stock are at a number sufficient to permit the exercise or conversion of all outstanding securities exercisable for, or convertible into, common stock. The Company paid issuance costs totaling approximately $1.4 million. Pursuant to the Notes, the Company promised to pay in cash and/or in shares of common stock, at a conversion price of $0.04 (the “Conversion Price”), the principal amount and interest at a rate of 15% per annum on any outstanding principal. The Conversion Price of the Notes is subject to adjustment, including if the Company issues or sells shares of common stock for a price per share less than the Conversion Price of the Notes or if the Company lists its shares of common stock on The Nasdaq Capital Market and the average volume weighted average price of such common stock for the five May 2022 Advance on Future Receipts Financing – On May 19, 2022, the Company paid off the remaining balance of $400 thousand from the December 22, 2021, advance and received $545 thousand in cash proceeds related to its entry into a non-recourse agreement for the sale of $1.0 million of future receipts to GCF Resources LLC (“GCF”). In conjunction with the 24-week agreement, the Company is obligated to remit to GCF a minimum of $59 thousand of receipts each week for the twenty-four weeks. The Company began making the required minimum weekly payments May 23, 2022, and is obligated to continue through October 31, 2022. Because the combined fair value of the applicable warrants issued as part of this note exceeded the original payoff value of the note, the additional amount beyond the face value is recorded as a loss on extinguishment of $211 thousand in the statement of operations for the nine-months ended September 30, 2022. 2021 Convertible Promissory Notes Payable – Previously, the Company entered into a Securities Purchase Agreement (the “Leviston Purchase Agreement”), with Leviston Resources, LLC, an accredited investor (“Leviston”) for the sale by the Company in a private placement (the “Leviston Private Placement”) of (i) the Company’s future advance convertible promissory note in an aggregate principal amount of up to $3.4 million, later amended to $4.2 million (the “Leviston Note”) and (ii) a warrant to purchase up to an additional 16,666,667 shares of common stock of the Company (the “Leviston Warrants”). The Leviston Warrants had an exercise price of $0.18 per share and a four-year term. Advances on the Leviston Notes totaled $1.9 million and warrants to purchase 9.3 million shares were outstanding prior to the settlement discussed below. In addition, the Company issues notes to five institutional investors totaling approximately $0.5 million (the “Five Institutions’ Notes”), which were subject to substantially the same terms and conditions as the Leviston Purchase Agreement. Warrants to purchase 2.8 million shares of common stock with an exercise price of $0.18 per share were issued and outstanding prior to the settlement discussed below. Upon the closing of the Private Placement in August 2022, the Leviston Notes and Five Institutions’ Notes were paid and settled in full using proceeds from the Private Placement. The settlement payment included cash totaling $3.9 million, which included accrued interest and penalties, and the issuance of Company shares of common stock totaling 19.4 million shares. The lenders surrendered the warrants to the Company. The Company recognized a $0.9 million loss on extinguishment of debt for the three month-period ended September 30, 2022. SBA Loan #2 – In July 2022, the Company received confirmation that the loan forgiveness application had been approved, therefore, during the three-months ended September 30, 2022, the Company recognized a gain on loan extinguishment totaling $1.0 million. Embedded Conversion Option Liability T he fair value of Conversion Option liability assumptions for the periods ended below At / / At / / Conversion Price (1) $ 0.04 $ 0.11 Interest Rate (annual) (2) 3.93 % 0.18 % Volatility (annual) (3) 393.20 % 289.65 % Time to Maturity (Years) 0.85 0.50 (1) Based on the terms provided in the debt agreement to purchase common stock of the Company as of September 30, 2022, and December 31, 2021. (2) Interest rate for U.S. Treasury Bonds, as of each presented period ending date, as published by the U.S. Federal Reserve. (3) Based on the historical daily volatility of the Company as of December 31, 2021. Based on the historical weekly volatility of the Company with an applied discount rate of 7.5% as of September 30, 2022. The fair value for the Conversion Option liability was determined using the Black Scholes method as of September 30, 2022. As of September 30, 2022, the value of the underlying shares used in the Black Scholes model was $0.005 per share stock price. A binomial pricing model was used to determine the fair value of the Conversion Option as of December 31, 2021. As of December 31, 2021, the stock price used in the binomial pricing model was $0.17 per share. This conversion liability was settled with the 2021 Convertible Promissory Notes payable in August 2022. |