|12 Months Ended|
Dec. 31, 2021
|Debt Disclosure [Abstract]|
Note 8 – Debt
The Company and its subsidiaries are party to a number of loans with third parties and affiliates. At December 31, 2021 and 2020, notes payable consisted of the following:
Schedule of Notes Payable
Notes Payable – Third Parties
The Company did not make the required monthly principal and interest payments due under the TCA Debenture for the period from October 2016 through March 2017. On September 19, 2017, the Company entered into a new agreement with TCA, which extended the repayment schedule through December 31, 2017. In May 2020, the SEC appointed a Receiver to close down the TCA Global Credit Master Fund, L.P. The amount recorded by the Company as being owed to TCA as of December 31, 2020 was based on TCA’s application of prior payments made by the Company. The Company and the Receiver entered into a settlement agreement dated effective as of September 30, 2021, under which the Company agreed to pay $500,000 as full and final settlement of principal and accrued interest, of which $250,000 was paid during 2021 and the remaining $250,000 is due in five consecutive monthly installments of $50,000 payable on or before the fifth day of each month. As a result of the settlement, in the year ended December 31, 2021, the Company recorded a gain from legal settlement, resulting from the adjustments of principal and accrued interest, of $2.2 million.
The Company did not make the second annual principal payment under the Tegal Notes that was due on July 12, 2016. On November 3, 2016, the Company received a default notice from the holders of the Tegal Notes demanding immediate repayment of the outstanding principal at that time of $341,612 and accrued interest of $43,000. On December 7, 2016, the Company received a breach of contract complaint with a request for the entry of a default judgment (see Note 14). On April 23, 2018, the holders of the Tegal Notes received a judgment against the Company. As of December 31, 2021, the Company has paid $50,055 of the principal amount of these notes.
On September 27, 2019, the Company issued a promissory note payable to Anthony O’Killough in the principal amount of $1.9 million and received proceeds of $1.5 million, which was net of a $0.3 million original issue discount and $0.1 million of financing fees. The first principal payment of $1.0 million was due on November 8, 2019 and the remaining $0.9 million was due on December 26, 2019. These payments were not made. In February 2020, Mr. O’Killough sued the Company and Mr. Diamantis, as guarantor, in New York State Supreme Court for the County of New York, for approximately $2.2 million for non-payment of the promissory note. In May 2020, the Company, Mr. Diamantis, as guarantor, and Mr. O’Killough entered into a Stipulation providing for a payment of a total of $2.2 million (which included accrued “penalty” interest as of that date) in installments through November 1, 2020. As of December 31, 2021, $450,000 had been paid in cash and $2.3 million ($1.5 million of principal and $0.8 million of accrued penalty interest), remained past due. On January 18, 2022, Mr. Diamantis paid $750,000 and the remaining balance is due 120 days thereafter. Mr. O’Killough agreed to forebear from any further enforcement action until then. The Company is obligated to repay Mr. Diamantis the $750,000 payment as well as any further payments that may be made by him. See below under the heading Note Payable – Related Party and Notes 14 and 18 for additional discussions of the Stipulation and the forbearance agreement.
As of April 20, 2020 and through May 1, 2020, the Company and its subsidiaries received PPP loan proceeds in the form of promissory notes (the “PPP Notes”) in the aggregate amount of approximately $2.4 million. The PPP Notes and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. No collateral or guarantees were provided in connection with the PPP Notes. The unforgiven portion of the PPP Notes is payable over two years at an interest rate of 1.0% per annum, with a deferral of payments for the first sixteen months. Beginning sixteen months from the dates of issuance, the Company is required (if not forgiven) to make monthly payments of principal and interest to the lenders. As of December 31, 2021, $2.0 million of the principal balance of the PPP Notes was forgiven. In January 2022, an additional $0.3 million of principal balance was forgiven.
On January 29, 2020, the Company entered into the Ponte Note in the principal amount of $1.2 million, the proceeds of which were used to satisfy in full the amounts due under accounts receivable sales agreements entered into during 2019. Pursuant to the Ponte Note, weekly installment payments ranging from $22,500 to $34,000 were due on or before February 5, 2020 through on or before October 21, 2020, the maturity date. The Ponte Note, which was issued with an original issue discount in the amount of approximately $0.1 million, was non-interest bearing and subject to a late-payment fee of 10%. The Company did not make certain installment payments due under the note and accordingly it recorded a $9,850 late payment penalty and incurred certain legal fees in connection with the payment default. On May 5, 2021, the Company entered into a settlement agreement with the holder under which the Company agreed to pay $125,000 in full satisfaction of the note, which has been paid in full.
On August 10, 2021, the Company entered into two notes payable with Western Healthcare, LLC in the aggregate principal amount of $2.4 million. The notes were issued under the terms of a settlement agreement related to a professional medical staffing services agreement that the Company had previously entered into for medical staffing services. The notes bear interest at a rate of 18% per annum and are due no later than August 30, 2022. The Company paid $0.2 million to the note holders upon issuance of the notes. Monthly installments aggregating $0.2 million are due beginning August 31, 2021. As of December 31, 2021, $0.2 million of principal and $0.1 million of interest has been paid. The Company has not made all of the monthly installments due under the notes.
On each of February 25, 2021, April 9, 2021, April 16, 2021 and April 22, 2021, the Company entered into agreements with certain institutional investors for warrant prepayment promissory notes with an aggregate principal amount of $1.1 million. The Company received proceeds of $1.0 million from the investors and, accordingly, it recorded a total of $0.1 million in original issue discount of which was fully amortized during 2021. The investors could at their option apply all or any portion of the principal amount outstanding to the exercise of any common stock warrants of the Company. The notes were unsecured and they matured 12 months from the date of issuance. The notes did not bear interest but an interest rate of 18% was to be applied to the outstanding principal commencing five days after any event of default that resulted in their acceleration. On November 7, 2021, the principal balance of $1.1 million was exchanged for shares of the Company’s Series P Preferred Stock as more fully discussed in Note 12.
Note Payable – Related Party
At December 31, 2021 and December 31, 2020, note payable - related party consisted of the following:
Schedule of Notes Payable Related Parties
Mr. Diamantis was a member of the Company’s Board of Directors until his resignation on February 26, 2020. During the year ended December 31, 2021, Mr. Diamantis advanced the Company $0.9 million, the majority of which was used for working capital purposes, and we repaid Mr. Diamantis $0.9 million. During the year ended December 31, 2020, Mr. Diamantis advanced the Company $7.6 million that was used primarily for working capital purposes and we repaid Mr. Diamantis $4.2 million. On June 30, 2020, the Company exchanged the total amount owed to Mr. Diamantis on that date for outstanding loans and accrued interest, net of repayments, which was approximately $18.8 million, for shares of the Company’s Series M Preferred Stock as more fully discussed in Notes 11 and 12.
During the years ended December 31, 2021 and 2020, the Company accrued interest of $0.1 million and $2.1 million, respectively, on the loans from Mr. Diamantis. As of December 31, 2021 and 2020, accrued interest on the loans from Mr. Diamantis totaled $0.3 million and $0.2 million, respectively. Interest accrues on loans from Mr. Diamantis at a rate of 10% on the majority of the amounts loaned. In addition, the Company incurs interest expense related to the amounts Mr. Diamantis borrows from third-parties to loan to the Company. In November 2021, Mr. Diamantis requested the Company repay the outstanding loan payable and facilitate repayment of the note payable to Mr. O’Killough for which he is a guarantor. At December 31, 2021, the Company owed Mr. Diamantis approximately $2.4 million, including accrued interest.
On January 18, 2022, notes payable due to Mr. Diamantis increased by $750,000 due to his payment of a like amount to Mr. Anthony O’Killough in connection with a forbearance agreement related to amounts owed to Mr. O’Killough by the Company and personally guaranteed by Mr. Diamantis (see Note 18).
The carrying amount of all outstanding debentures with institutional investors as of December 31, 2021 and 2020 was as follows:
Schedule of Debentures
Payment of all outstanding debentures with institutional investors totaling $8.2 million and $12.7 million at December 31, 2021 and 2020, respectively, was past due by the debentures’ original terms. A 30% late payment penalty was added to the principal amount of each debenture. Included in the amounts owed as of December 31, 2021 and 2020, were late payment penalties of $1.9 million and $2.9 million, respectively. The debentures bear default interest at the rate of 18% per annum and are secured by a first priority lien on all of the Company’s assets. On August 31, 2020, all of the then outstanding debentures issued in September 2017 (the “September 2017 Debentures”) and a portion of the then outstanding debentures issued in 2018 (the “2018 Debentures”) were exchanged for shares of the Company’s Series N Preferred Stock under the terms of Exchange, Redemption and Forbearance Agreements (the “August 2020 Exchange and Redemption Agreements”). On November 7, 2021, all of the then outstanding debentures issued in 2019 (the “2019 Debentures”) were exchanged for shares of the Company’s Series P Preferred Stock under the terms of Exchange and Amendment Agreements (the “November 2021 Exchange Agreements”). Each of these agreements is more fully discussed in Notes 11 and 12.
March 2017 Debenture
In March 2017, the Company issued a debenture due in March 2019 (the “March 2017 Debenture) with a principal balance of $2.6 million at both December 31, 2021 and 2020, including a late-payment penalty. The March 2017 Debenture is convertible into shares of the Company’s common stock, at a conversion price, which has been adjusted pursuant to the terms of the March 2017 Debenture to $0.90 per share on December 31, 2021, or 2.9 million shares of common stock. The conversion price is subject to reset in the event of offerings or other issuances of common stock, or rights to purchase common stock, at a price below the then conversion price, as well as other customary anti-dilution protections.
September 2017 Debentures
In September 2017, the Company issued the September 2017 Debentures with principal balances aggregating $10.8 million, including late-payment penalties, due in September 2019. As of December 31, 2019, a total of $3.1 million of the September 2017 Debentures were converted into shares of the Company’s Series I-2 Convertible Preferred Stock (the “Series I-2 Preferred Stock”). On August 31, 2020, the Company and the debenture holders exchanged the remaining principal balance of the September 2017 Debentures on that date, which was $7.7 million, including late-payment penalties, for shares of the Company’s Series N Preferred Stock under the terms of the August 2020 Exchange and Redemption Agreements (sees Notes 11 and 12).
During 2018, the Company closed various offerings of the 2018 Debentures with principal balances aggregating $14.5 million, including late-payment penalties, due in September 2019. The conversion terms of the 2018 Debentures are the same as those of the March 2017 Debenture, as more fully described above, with the exception of the conversion price, which was $520 per share at December 31, 2021 and is subject to a floor of $0.052 per share. On August 31, 2020, the Company and the debenture holders exchanged $8.9 million of principal balance, including late-payment penalties, of the 2018 Debentures for shares of the Company’s Series N Preferred Stock under the terms of the August 2020 Exchange and Redemption Agreements (see Notes 11 and 12). At December 31, 2021, the outstanding principal balance of the 2018 Debentures, including late-payment penalties, was $5.6 million and the debentures were convertible into shares of the Company’s common stock.
During 2019, the Company closed various offerings of the 2019 Debentures with principal balances, including late-payment penalties, aggregating $4.5 million. The 2019 Debentures, which were due, as amended, on December 31, 2019, were non-convertible. The 2019 Debentures bore interest on the outstanding principal amount at a rate of 2.5% per month (increasing to 5% per month on October 12, 2019). All overdue accrued and unpaid interest entailed a late fee equal to the lesser of 24% per annum or the maximum rate permitted by applicable law. The 2019 Debentures were not paid on the maturity date. The Company incurred $1.2 million of late-payment penalties as a result of the non-payments. As a result of the August 2020 Exchange and Redemption Agreements discussed above and in Notes 11 and 12, the interest rate on the 2019 Debentures was reduced retroactively to a rate of 18% per annum. On November 7, 2021, the Company and the debenture holders exchanged the full $4.5 million principal balance, including late-payment penalties, of the 2019 Debentures and $1.5 million of associated accrued interest for shares of the Company’s Series P Preferred Stock under the terms of the November 2021 Exchange Agreements, Mr. Diamantis, is also a party to the November 2021 Exchange Agreements as he was a guarantor of one of the promissory notes that was included in the exchange. The November 2021 Exchange Agreements are also discussed in Note 12.
During the years ended December 31, 2021 and 2020, the Company incurred default interest expense on debentures of $2.2 million and $6.0 million, respectively. At December 31, 2021 and 2020, accrued interest on debentures was $3.6 million and $3.0 million, respectively, with $1.6 million of accrued interest being exchanged for Series P Preferred Stock under the terms of the November 2021 Exchange Agreements.
The March 2017 Debentures and the September 2017 Debentures were issued with warrants to purchase shares of the Company’s common stock. In connection with the November 7, 2021 Exchange and Redemption Agreements, the expiration date of the warrants issued with the March 2017 Debentures was extended from March 21, 2022 to March 21, 2024. The Company recorded a deemed dividend during 2021 as a result of the extension of the expiration date of these warrants as more fully discussed in Note 11. Outstanding warrants are more fully discussed in Notes 11 and 12.
See Notes 3, 8, 12 and 18 for a discussion of the dilutive effect of the outstanding convertible debentures, warrants and convertible preferred stock as of December 31, 2021 and April 8, 2022. During the years ended December 31, 2021 and 2020, the Company recorded $490.2 million and $256.4 million of deemed dividends as a result of the down round provisions of debentures and warrants. See Notes 2 and 11.
The entire disclosure for short-term debt.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef