Quarterly report pursuant to Section 13 or 15(d)

Convertible Notes

Convertible Notes
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Convertible Notes
Convertible Notes
During the second quarter of 2019, the Company’s board of directors authorized the issuance of $20 million of convertible promissory notes (the “Notes”), which may be paid by investors in the form of cash or, in the Company’s sole discretion, cryptocurrency, such as Bitcoin or Ethereum. The Notes will be sold and issued only to accredited investors, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D promulgated thereunder.
The Notes bear ordinary interest at a rate of 7% per annum. Interest under the Notes is payable quarterly beginning on September 30, 2019, and interest and principal under the Notes is payable monthly beginning on June 30, 2021. However, at the holder’s election, interest payments may be deferred until the earlier of (i) repayment in full of all remaining unpaid principal, and (ii) conversion. The notes mature on June 3, 2024.
The Notes are convertible into shares of the Company’s common stock at a price of $11.50 per share. Each Note will convert voluntarily upon a holder’s election, or automatically upon the occurrence of the following events: (a) the closing sale price of the Company’s common stock equals or exceeds $17.25 per share for 20 out of 30 consecutive trading days, and (b) a registration statement is then in effect covering the disposition of the converted shares.
On June 3, 2019, the Company entered into a Note Purchase Agreement with an investor for the sale of a Note. The sale of this Note constituted an initial closing on June 3, 2019, and the Company issued a Note in the principal amount of $250. The Company may hold subsequent closings until June 2, 2020. The Company may not issue Notes under the Purchase Agreement in excess of $20 million, in the aggregate, unless otherwise agreed by the holders of a majority in interest of the principal outstanding under the Notes.
The balance of outstanding Notes is $250 as of June 30, 2019. Interest expense related to the Note for the three and six months ended June 30, 2019, and interest payable under the Note as of June 30, 2019 is immaterial.