Quarterly report pursuant to Section 13 or 15(d)

Related Parties

v3.7.0.1
Related Parties
3 Months Ended
Mar. 31, 2017
Related Parties [Abstract]  
RELATED PARTIES

13. RELATED PARTIES

 

At March 31, 2017 and December 31, 2016, the Company had outstanding the following loans due to related parties:

 

    March 31,     December 31,  
    2017     2016  
             
Promissory note issued to CamaPlan FBO Mark Munro IRA, 3% interest, maturing on January 1, 2018, unsecured, net of debt discount of $28 and $38, respectively   $ 668     $ 658  
Promissory note issued to 1112 Third Avenue Corp, 3% interest, maturing on January 1, 2018, unsecured, net of debt discount of $28 and $36, respectively     347       339  
Promissory note issued to Mark Munro, 3% interest, maturing on January 1, 2018, unsecured, net of debt discount of $47 and $62, respectively     590       575  
Promissory note issued to Pascack Road, LLC, 3% interest, maturing on January 1, 2018, unsecured, net of debt discount of $116 and $152, respectively     2,434       2,398  
Promissory notes issued to Forward Investments, LLC, between 2% and 10% interest, matured on July 1, 2016, unsecured     1,421       4,235  
Promissory notes issued to Forward Investments, LLC, 3% interest, maturing on January 1, 2018, unsecured, net of debt discount of $665 and $860, respectively     3,708       3,513  
Promissory notes issued to Forward Investments, LLC, 6.5% interest, matured on July 1, 2016, unsecured     390       390  
Former owner of IPC, unsecured, 8% interest, matured on May 30, 2016, due on demand     5,755       5,755  
Former owner of IPC, unsecured, 15% interest, due on demand     75       75  
Former owner of Nottingham, unsecured, 8% interest, matured on May 30, 2016     225       225  
      15,613       18,163  
Less: current portion of debt     (15,613 )     (9,531 )
Long-term portion of notes payable, related parties   $ -     $ 8,632  

 

The interest expense, including amortization of debt discounts, associated with the related-party notes payable in the three months ended March 31, 2017 and 2016 was $656 and $902, respectively. 

 

All notes payable to related parties are subordinate to the JGB (Cayman) Waltham Ltd. and JGB (Cayman) Concord Ltd. term loan notes. 

 

As noted in Note 11, Stockholders’ Deficit, related party lenders converted principal into shares of the Company’s common stock during the three months ended March 31, 2017.

 

Restructuring of Forward Investments, LLC Promissory Notes and Working Capital Loan

 

On March 4, 2015, the Company restructured the terms of certain promissory notes issued by it to a related party investor, Forward Investments, LLC, in order to extend the maturity dates thereof, reduce the seniority and reduce the interest rate accruing thereon. The following notes were restructured as follows:

 

  notes issued to Forward Investments, LLC in the aggregate principal amount of $3,650 that bear interest at the rate of 10% per annum, had the maturity date extended from June 30, 2015 to July 1, 2016. These notes matured on July 1, 2016;

 

  notes issued to Forward Investments, LLC in the principal amount of $2,825 that bear interest at the rate of 2% per annum, had the maturity date extended from June 30, 2015 to July 1, 2016. These notes matured on July 1, 2016; and
     
  notes issued to Forward Investments, LLC in the aggregate principal amount of $2,645 were converted from senior notes to junior notes, had the interest rate reduced from 18% to 3% per annum, had the maturity date extended by approximately three years to January 1, 2018, and originally were convertible at a conversion price of $6.36 per share until the Convertible Debentures were repaid in full and thereafter $2.35 per share, subject to further adjustment as set forth therein.

 

In connection with such restructuring, Forward Investments, LLC agreed to lend to the Company an amount substantially similar to the accrued interest the Company owed to Forward Investments, LLC on the restructured notes. In consideration for such restructuring and additional payments made by Forward Investments, LLC to the Company, the Company issued to Forward Investments, LLC an additional convertible note in the original principal amount of $1,730 with an interest rate of 3% per annum, a maturity date of January 1, 2018, and an initial conversion price of $6.36 per share until the Convertible Debentures were repaid in full and thereafter $2.35 per share, subject to further adjustment as set forth therein, and provided Forward Investments, LLC the option to lend the Company an additional $8,000 in the form of convertible notes similar to the existing convertible notes of the Company issued to Forward Investments, LLC. The convertible note was issued to Forward Investments, LLC as an incentive to restructure the above-mentioned notes and resulted in the Company recording a loss on modification of debt of $1,508 on the unaudited condensed consolidated statement of operations as of March 31, 2015.

 

As part of the restructuring, Forward Investments, LLC agreed to convert $390 of accrued interest on the above-mentioned loans to a new note bearing interest at the rate of 6.5% per annum that matured on July 1, 2016.

 

In conjunction with the extension of the 2% and 10% convertible notes issued to Forward Investments, LLC, the Company recorded an additional $1,916 of debt discount at the date of the restructuring.

 

The Company has entered into an agreement with Forward Investments, LLC permitting Forward Investments, LLC to convert its debt into the Company’s common stock at a 5% discount to the daily market price. During the three months ended March 31, 2017, Forward Investments, LLC converted $2,814 aggregate principal amount of promissory notes into an aggregate of 161,960,689 shares of the Company’s common stock. Refer to Note 11, Stockholders’ Deficit, for further information.

 

Convertible Promissory Note to Frank Jadevaia, Former Owner of IPC

 

On January 1, 2014, the Company acquired all of the outstanding capital stock of IPC. As part of the purchase price for the acquisition, the Company issued a convertible promissory note to Frank Jadevaia, then President of the Company, in the original principal amount of $6,255. The convertible promissory note accrues interest at the rate of 8% per annum, and all principal and interest accruing thereunder was originally due and payable on December 31, 2014. At the election of Mr. Jadevaia, the convertible promissory note is convertible into shares of the Company's common stock at a conversion price of $16.99 per share (subject to equitable adjustments for stock dividends, stock splits, recapitalizations and other similar events). The Company can elect to force the conversion of the convertible promissory note if the Company’s common stock is trading at a price greater than or equal to $16.99 for ten consecutive trading days. This note is subordinated until the Senior Secured Convertible Notes issued to the JGB entities are paid in full.

 

On December 31, 2014, the Company and Mr. Jadevaia agreed to a modification of the convertible promissory note. The term of the convertible promissory note was extended to May 30, 2016 and, in consideration for this modification, the Company issued to Mr. Jadevaia 100,000 shares of common stock.

 

On May 19, 2015, Mr. Jadevaia assigned $500 of principal related to the convertible promissory note and the assignees converted all $500 principal amount of such note into 232,182 shares of the Company’s common stock with a fair value of $3.38 per common share.

 

On May 30, 2016, the note matured and is now due on demand.

 

On November 4, 2016, Mr. Jadevaia resigned from his role as the Company’s President.

 

Convertible Promissory Note to Scott Davis, Former Owner of Nottingham

 

On July 1, 2014, the Company issued an unsecured $250 convertible promissory note to Scott Davis, who is a related party. The note bears interest at the rate of 8% per annum, matures on January 1, 2015 and is convertible into shares of the Company’s common stock at an initial conversion price of $6.59. The note is currently outstanding and payable on demand. The Company evaluated the convertible feature and determined that the value was de minimis and as such, the Company did not bifurcate the convertible feature.

 

On March 25, 2015, the Company and Mr. Davis agreed to a modification of the convertible promissory note. The term of the note was extended to May 30, 2016, the initial conversion price was amended to $2.22 per share of the Company’s common stock and, in consideration for this modification, the Company issued to Mr. Davis 22,222 shares of common stock with a fair value of $2.16 per share.

 

On May 31, 2015, Mr. Davis converted $25 of principal amount due into 11,261 shares of common stock, with a fair value of $3.53 per share and recorded a loss on debt conversion of $13 on the consolidated statement of operations.

 

On May 30, 2016, the note matured and was due on demand.

 

On April 3, 2017, Scott Davis assigned the full outstanding amount of the note to a third party (refer to Note 16, Subsequent Events, for further detail).

 

Loans to Employees

 

During the year ended December 31, 2016, the Company issued loans to four employees totaling $928. As of March 31, 2017 and December 31, 2016, the Company had outstanding loans to these employees with total principal of $928. These loans are collateralized by shares of the Company’s common stock held by the employees. As of March 31, 2017 and December 31, 2016, the value of the collateral was below the principal value. As a result, the Company recorded a reserve for the balance of $891 on the unaudited condensed consolidated balance sheet as of March 31, 2017 and December 31, 2016 (refer to Note 4, Loans Receivable, for further detail).