B3D Senior Secured Loan
On January 9, 2020, as compensation for the consent of B3D to the CC Agreement, we entered into the Fifth Credit Agreement Amendment with B3D in order to (i) increase the principal amount owed to B3D from $7,000 to $7,150, which additional $150 in principal and any interest accrued thereon will become convertible, at B3D’s option, into shares of our common stock upon receipt of the approval of our stockholders, which was obtained on May 28, 2020 and (ii) provide for the advance payment of 97,223 shares of common stock in satisfaction of the interest payable pursuant to the B3D Note for the months of October, November and December 2020. The common stock was issued to B3D on January 14, 2020. We capitalized a $150 fee charged by the lender to consent to the CC Agreement.
The total of fees paid to the lender as consideration for entering into the Fourth and Fifth Credit Agreement Amendments of $650 was capitalized and was being amortized over the remaining term of the B3D Note. We recorded amortization expense of $62 related to these capitalized costs, which is included in Interest expense in our consolidated statements of operations and comprehensive loss.
On March 6, 2020, XpresSpa Holdings entered into the Sixth Credit Agreement Amendment with B3D in order to, among other provisions, (i) increase the principal amount owed to B3D from $7,150 to $7,900, which additional $750 in principal, comprised of $500 in new funding and $250 in debt issuance costs, and any interest accrued thereon will be convertible, at B3D’s option, into shares of our common stock subject to receipt of the approval of our stockholders which was obtained on May 28, 2020 and (ii) decrease the conversion rate under the B3D Note from $6.00 per share to $1.68 per share. On March 19, 2020, the conversion rate was further reduced to $0.525 per share after giving effect to certain anti-dilution adjustments.
The Sixth Credit Agreement Amendment was accounted for as an extinguishment of debt in our consolidated financial statements. In March 2020, we extinguished debt with a carrying value of $4,829, net of unamortized debt discount of $1,845 and unamortized debt issuance costs of $476. In addition, we extinguished $2,048 of derivative liability, which represented the estimated fair value of the conversion option based upon provisions included in the Fifth Credit Agreement Amendment. We determined that the conversion option in the Sixth Credit Agreement Amendment should be bifurcated from the host instrument and engaged a third party to assess the fair value of the conversion option. As a result, we recorded debt with a carrying value of $3,994, net of a debt discount of $3,656 and debt issuance costs of $250, and a derivative liability of $3,656. We recognized a loss on the extinguishment of debt of $273 during the year ended December 31, 2020, which represents the difference between the carrying amount of the debt recorded under the Fourth and Fifth Credit Agreement Amendments and the debt recorded under the Sixth Credit Agreement Amendment and is included in Other non-operating income (expense), net in the consolidated statements of operations and comprehensive loss.
Subsequent to the Sixth Credit Agreement Amendment and during the year ended December 31, 2020, B3D elected to convert a total of $7,900 of principal into shares of common stock at conversion prices of $1.68 and $0.525. As a result, approximately $15,395 of derivative liability was settled and reclassified to equity, we wrote off $3,156 of unamortized debt discount and debt issuance costs, and 13,934,525 shares of common stock were issued. We recognized a revaluation loss related to the derivative liability of $11,990 during the year ended December 31, 2020, which is included in “Loss on revaluation of warrants and conversion options” in the consolidated statements of operations and comprehensive loss.
A total of $884 of accretion expense on the debt discount was recorded in the years ended December 31, 2020, which is included in “Interest expense” in the consolidated statements of operations and comprehensive loss and increased the carrying value of the B3D Note. Total amortization expense related to the B3D Note debt issuance costs was $98 for the year ended December 31, 2020, which is included in “Interest expense” in the consolidated statements of operations and comprehensive loss.
The B3D Note was guaranteed on a full, unconditional, joint, and several basis, by the parent Company, XpresSpa Group, Inc., and all wholly owned subsidiaries of Holdings (the “Guarantor Subsidiaries”). Under the terms of a security and guarantee agreement dated July 8, 2019, XpresSpa Group, Inc. (the parent company) and the Guarantor Subsidiaries each