RumbleON, Inc. filed 10-Q on Wed, May 15

RumbleON, Inc. files 10-Q in a filing on Wednesday, May 15.

In July 2016, Berrard Holdings Limited Partnership (“Berrard Holdings”) acquired 99.5% of the common stock of the Company from the principal stockholder. Shortly after the Berrard Holdings common stock purchase, the Company began exploring the development of a capital light e-commerce platform facilitating the ability of both consumers and dealers to Buy-Sell-Trade-Finance pre-owned vehicles in one online location and in April 2017, the Company launched its platform. The Company’s goal is to transform the way pre-owned vehicles are bought and sold by providing users with the most efficient, timely and transparent transaction experience. The Company’s initial emphasis has been motorcycles and other powersports, however, the Company’s platform is able to accommodate any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks.

In connection with the execution of the Inventory Financing and Security Agreement (the “Credit Facility”) by and among the Company’s subsidiary, RMBL Missouri, LLC (“RMBL MO”), Ally Bank (“Ally”) and Ally Financial, Inc., dated February 16, 2018 the parties entered into a Credit Balance Agreement, and so long as the Company owes any debt to Ally or until the bank otherwise consents, the Company agrees to maintain a Credit Balance at Ally of 1) at least 10% of the amount of the Company’s approved and available credit line under the Credit Facility and 2) no greater than 25% of the total principal amount owed to Ally for inventory financed under the Credit Facility.

On June 30, 2017 the Company’s shareholders approved a Stock Incentive Plan (the “Plan”) under which restricted stock units (“RSUs”) and other equity awards may be granted to employees and non-employee members of the Board of Directors. Twelve percent (12%) of the Company’s issued and outstanding shares of Class B Common Stock from time to time are reserved for issuance under the Plan. The Company estimates the fair value of awards granted under the Plan on the date of grant. The fair value of an RSU is based on the average of the high and low market prices of the Company’s Class B Common Stock on the date of grant and is recognized as an expense on a straight-line basis over its vesting period; to date, substantially all the RSUs issued vest over a three-year period utilizing the following vesting schedule: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date.

Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is February 8, 2020.

Notes payable-private placement dated March 31, 2017. Interest is payable semi-annually at 6.5% through March 31, 2019 and 8.5% through maturity which is March 31, 2020. Unamortized debt discount of $275,650 and $334,998 as of March 31, 2019 and December 31, 2018, respectively.

Line of credit-floor plan dated February 16, 2018. Facility provides up to $25,000,000 of available credit secured by vehicle inventory and other assets. Interest rate at March 31, 2019 was 7.8%. Principal and interest are payable on demand.

Loan Agreement with Hercules Capital Inc. dated April 30, 2018 and as amended for tranche II on October 30, 2018. Tranche I- Interest only at 10.5% and is payable monthly through December 1, 2018. Principal and interest payments commence on June 1, 2019 through maturity which is May 1, 2021. Trance II-Interest payable monthly at 11.0%. Principal payable at maturity on October 1, 2021. Unamortized debt issuance costs of $1,415,415 and $1,547,412 and as of March 31, 2019 and December 31, 2018, respectively.

Line of credit-floor plan dated February 16, 2018. Facility initially provides available credit of up to $63,000,000 with a decrease to $55,000,000 after February 28, 2019. Secured by vehicle inventory and other assets. Interest rate at March 31, 2019 of 7.5%. Principal and interest are payable on demand.

Convertible Note dated February 3, 2019. Interest rate at March 31, 2019 was 6.5%. Interest is payable monthly for the first twelve months and thereafter payments of amortized principal and interest will be due. The Promissory Note has a term of three years. Unamortized debt discount of $399,382 as of March 31, 2019.

The Promissory Note has a term of fifteen months and will accrue interest at a simple rate of 5% per annum. Interest under the Promissory Note is payable upon maturity. Any interest and principal due under the Promissory Note is convertible, at the Buyer’s option into shares of the Company’s Class B Common Stock at a conversion price equal to the weighted average trading price of the Company’s Class B Common Stock on the Nasdaq Stock Exchange for the twenty (20) consecutive trading days preceding the conversion date. The number of shares of the Company’s Class B Common Stock issuable pursuant to the Promissory Note is indeterminate at this time.

The Convertible Note has a term of three years and will accrue interest at a rate of 6.5% per annum. Interest under the Convertible Note is payable monthly for the first 12 months, and thereafter monthly payments of amortized principal and interest will be due. Any interest and principal due under the Convertible Note is convertible into shares of the Company’s Class B Common Stock at a conversion price of $5.75 per share, (i) at the Seller’s option, or (ii) at the Buyer’s option, on any day that (a) any portion of the principal of the Convertible Note remains unpaid and (b) the weighted average trading price of the Company’s Class B Common Stock on Nasdaq for the twenty (20) consecutive trading days preceding such day has exceeded $7.00 per share. The maximum number of shares issuable pursuant to the Convertible Note is 319,221 shares of the Company’s Class B Common Stock.

The Second Convertible Note has a term of one year and will accrue interest at a simple rate of 5% per annum. Monthly payments of amortized principal and interest will be due under the Second Convertible Note. Any interest and principal due under the Second Convertible Note is convertible into shares of the Company’s Class B Common Stock at a conversion price of $5.75 per share, (i) at the Seller’s option, or (ii) at the Buyer’s option, on any day that (a) any portion of the principal of the Second Convertible Note remains unpaid and (b) the weighted average trading price of the Company’s Class B Common Stock on Nasdaq for the twenty (20) consecutive trading days preceding such day has exceeded $7.00 per share. The maximum number of shares issuable pursuant to the Second Convertible Note is 47,101 shares of the Company’s Class B Common Stock.

On October 30, 2018, Wholesale, as borrower, entered into a floorplan vehicle financing credit line (the “NextGear Credit Line”) with NextGear. The available credit under the NextGear Credit Line is initially $63,000,000, will decrease to $55,000,000 after February 28, 2019 and will decrease to zero dollars after October 31, 2019. Advances under the NextGear Credit Line will bear interest at an initial per annum rate of 5.25%, based upon a 360-day year, and compounded daily, and the per annum interest rate will vary based on a base rate, plus the contract rate, which is currently negative 2.0%, until the outstanding liabilities to NextGear are paid in full. Interest expense on the line of credit-floor plan for the three-months ended March 31, 2019 was $645,172.

On February 16, 2018, the Company, through its wholly-owned subsidiary RMBL MO entered into an Inventory Financing and Security Agreement (the “Credit Facility”) with Ally and Ally Financial, Inc., a Delaware corporation (“Ally” together with Ally Bank, the “Lender”), pursuant to which the Lender may provide up to $25 million in financing, or such lesser sum which may be advanced to or on behalf of RMBL MO from time to time, as part of its floorplan vehicle financing program. Advances under the Credit Facility require that the Company maintain 10.0% of the advance amount as restricted cash. Advances under the Credit Facility will bear interest at a per annum rate designated from time to time by the Lender and will be determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. Advances under the Credit Facility, if not demanded earlier, are due and payable for each vehicle financed under the Credit Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed of. Interest under the Credit Facility is due and payable upon demand, but, in general, in no event later than 60 days from the date of request for payment. Upon any event of default (including, without limitation, RMBL MO’s obligation to pay upon demand any outstanding liabilities of the Credit Facility), the Lender may, at its option and without notice to the RMBL MO, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Lender and its affiliates by RMBL MO and its affiliates. The Credit Facility is secured by a grant of a security interest in the vehicle inventory and other assets of RMBL MO and payment is guaranteed by the Company pursuant to a guaranty in favor of the Lender and secured by the Company pursuant to a General Security Agreement. Interest expense on the Credit Facility for the three-months ended March 31, 2019 was $157,687.

On January 9, 2017, the Company’s Board of Directors approved, subject to stockholder approval, the adoption of the RumbleOn, Inc. 2017 Stock Incentive Plan (the “Plan”). On June 30, 2017, the Plan was approved by the Company’s stockholders at the 2017 Annual Meeting of Stockholders. The purposes of the Plan are to attract, retain, reward and motivate talented, motivated and loyal employees and other service providers (“Eligible Individuals”) by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such persons and the stockholders of the Company. The Plan allows the Company to grant a variety of stock-based and cash-based awards to Eligible Individuals. Twelve percent (12%) of the Company’s issued and outstanding shares of Class B Common Stock from time to time are reserved for issuance under the Plan. As of March 31, 2019, there were 2,000,000 shares available for issuance under the Plan. As of March 31, 2019, the Company has granted 1,846,011 restricted stock units (“RSUs”) under the Plan to certain officers and employees of the Company. The aggregate fair value of the RSUs, net of expected forfeitures was $8,819,338. The RSUs generally vest over a three-year period as follows: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. The fair value of the grant is amortized over the period from the grant date through the vesting dates. Forfeitures are based on the historic employee behavior under similar stock-based compensation plans. Compensation expense recognized for these grants for the three-months ended March 31, 2019 is $689,121. As of March 31, 2019, the Company has approximately $5,969,513 in unrecognized stock-based compensation, with an average remaining vesting period of 2.0 years. Compensation expense recognized for the three-months ended March 31, 2018 was $326,707.

On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act, or the Act, was signed in to law. The Tax Act, among other changes, reduces the U.S. federal corporate tax rate from 35% to 21%, requires taxpayers to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. On March 31, 2019, the Company did not have any foreign subsidiaries and the international aspects of the Tax Act are not applicable.

On May 9, 2019, the Company entered into a purchase agreement (the “Purchase Agreement”) with JMP Securities LLC (“JMP Securities”) to issue and sell $30.0 million in aggregate principal amount of its 6.75% Convertible Senior Notes due 2024 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Note Offering”).  The Company paid JMP Securities a fee of 7% of the gross proceeds in the Note Offering. The net proceeds for the Note Offering were approximately $27.3 million.

The Notes were issued on May 14, 2019 pursuant to an Indenture (the “Indenture”), by and between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”). The Purchase Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. Under the terms of the Purchase Agreement, the Company has agreed to indemnify JMP Securities against certain liabilities. The Notes will bear interest at 6.75% per annum, payable semiannually on May 1 and November 1 of each year, beginning on November 1, 2019. The Notes may bear additional interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the Indenture or if the Notes are not freely tradeable as required by the Indenture. The Notes will mature on May 1, 2024, unless earlier converted, redeemed or repurchased pursuant to their terms.

The Notes are not redeemable by the Company prior to the May 6, 2022. The Company may redeem for cash all or any portion of the Notes, at its option, on or after May 6, 2022 if the last reported sale price of our Class B Common Stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the notes.

On May 9, 2019, the Company also entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Investors”) pursuant to which the Company agreed to sell in a private placement (the “Private Placement”) an aggregate of 1,900,000 shares of its Class B Common Stock (the “Private Placement Shares”), at a purchase price of $5.00 per share. JMP Securities served as the placement agent for the Private Placement. The Company paid JMP Securities a fee of 7% of the gross proceeds in the Private Placement. Upon closing, the net proceeds for the Private Placement are expected to be approximately $8.8 million.

For the three-months ended March 31, 2019, our vehicle distribution segment accounted for approximately 97.6% of our total revenue and approximately 88.5% of our total gross profit, and our vehicle logistics and transportation service segment accounted for approximately 2.4% of our total revenue and approximately 11.5% of our total gross profit.

Total powersports vehicle revenue increased by $18,864,327 to $26,929,159 for the three-months ended March 31, 2019 compared to $8,064,832 for the same period of 2018. The growth in powersports revenue was primarily due to an increase in the number of pre-owned vehicles sold to 3,298 for the three-months ended March 31, 2019 as compared to 878 for the same period of 2018. The increase in vehicles sold was driven by the continued expansion of our business which was highlighted by the growth in visits to the RumbleOn website, continued growth in requests for cash offers by consumers and dealers, expanded levels of availability and selection of inventory for sale, enhanced marketing efforts, increased brand awareness and customer referrals, increased utilization of our Dealer Direct online acquisition platform which allows dealers to use our web or mobile application to view, bid and buy inventory when and where they want. The average selling price of pre-owned powersport vehicles for the three-months ended March 31, 2019 was $8,165 as compared to $9,185 for the same period of 2018. The decline in average selling price was primarily due to a shift in inventory mix from acquiring and selling higher priced Harley-Davidson motorcycles to acquiring a mix of both Harley-Davidson and lower priced other makes of powersports vehicles which better represented the overall powersport market. For the three-months ended March 31, 2019, 62.9% of the pre-owned vehicles sold to consumers and dealers were Harley-Davidson at an average selling price of $10,131 as compared to 69.4% of the pre-owned vehicles sold to consumers and dealers for the three-months ended March 31, 2018 were Harley-Davidson sold at an average selling price of $10,759. We anticipate that pre-owned vehicle sales will continue to grow as we further increase selection and availability of our online pre-owned vehicle inventory and enhance our website with additional functionality while continuing to efficiently source and scale our addressable markets of consumers and dealers through brand building, direct response marketing and event marketing and expand usage of both our dealer direct and consumer classified listing site.

Powersport vehicle gross profit increased $2,466,682 to $3,165,796 for the three-months ended March 31, 2019 compared to $699,359 for the same period in 2018. The increase was primarily due to an increase in the number of pre-owned vehicles sold at an average higher per unit gross profit for the three-months ended March 31, 2019 as compared to the same period of 2018. The increase in powersport unit gross profit was driven primarily by an increase in gross profit per unit to $960 or an 11.8 % gross margin for the three-months ended March 31, 2019 as compared to $797 or 8.7 % gross margin for the same period of 2018. The net increase was primarily a result of: (i) a shift in sales mix volume from Harley-Davidson to lower priced higher gross margin non-Harley Davison brands and (ii) lower unit reconditioning and freight costs resulting from cost efficiencies.

Total gross profit for the three-months ended March 31, 2019 was $9,435,365, which included $2,232,856 from the sales to consumers and $7,202,509 from sales to dealers. Gross profit per vehicle sold to consumers and dealers was $1,072 or a 4.9% gross margin.

Total gross profit per vehicle sold to consumers for three-months ended March 31, 2019 was $2,587 or a 10.4% gross margin. Total gross profit per vehicle sold to dealers for the three-months ended March 31, 2019 was $907 or a 4.3% gross margin. The gross profit of pre-owned vehicles sold will fluctuate from period to period as a result of changes in the sales mix to consumers and dealers in any given period.

On February 16, 2018, the Company, through RMBL Missouri, entered into an Inventory Financing and Security Agreement (the “Credit Facility”) with Ally Bank, a Utah chartered state bank (“Ally Bank”) and Ally Financial, Inc., a Delaware corporation (together with Ally Bank “Ally”), pursuant to which Ally may provide up to $25 million in financing, or such lesser sum which may be advanced to or on behalf of RMBL Missouri from time to time, as part of its floorplan vehicle financing program. Advances under the Credit Facility require RMBL Missouri to maintain 10.0% of the advanced amount as restricted cash. Advances under the Credit Facility will bear interest at a per annum rate designated from time to time by Ally and will be determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. Advances under the Credit Facility, if not demanded earlier, are due and payable for each vehicle financed under the Credit Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed of. Interest under the Credit Facility is due and payable upon demand, but, in general, in no event later than 60 days from the date of request for payment. Upon any event of default (including, without limitation, the Borrower’s obligation to pay upon demand any outstanding liabilities of the Credit Facility), Ally may, at its option and without notice to RMBL Missouri, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Ally and its affiliates by RMBL Missouri and its affiliates. The Credit Facility is secured by a grant of a security interest in the vehicle inventory and other assets of RMBL Missouri and payment is guaranteed by the Company pursuant to a guaranty in favor of Ally and secured by the Company pursuant to a General Security Agreement.

On April 30, 2018 (the “Closing Date”), the Company, and it wholly owned subsidiaries, (collectively the “Borrowers”), entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. a Maryland Corporation (“Hercules”) pursuant to which Hercules may provide one or more term loans in an aggregate principal amount of up to $15.0 million (the “Hercules Loan”). Under the terms of the Loan Agreement, $5.0 million was funded at closing with the balance available in two additional tranches over the term of the Loan Agreement, subject to certain operating targets and otherwise as set forth in the Loan Agreement. The Hercules Loan has an initial 36-month maturity and initial 10.5% interest rate. The Hercules Loan is subject to various covenants, including gross profit and EBITDA. As of March 31, 2019, the Company was in compliance with such covenants.

Advances under the Hercules Loan (“Advances”) will bear interest at a per annum rate equal to the greater of either (i) the prime rate plus 5.75%, or (ii) 10.25%, based on a year consisting of 360 days. Advances under the Loan Agreement are due and payable on May 1, 2021, unless Borrowers achieve certain performance milestones, in which case Advances will be due and payable on November 1, 2021.

On October 30, 2018, the Company, NextGen Pro, LLC, (“NextGen Pro”), RMBL Missouri, LLC, (“RMBL Missouri”), RMBL Texas, LLC (“RMBL Texas”, and together with the Company, NextGen Pro, and RMBL Missouri, each, an “Existing Borrower”, and collectively, the “Existing Borrowers”), Merger Sub, Wholesale, Wholesale Express, RMBL Express, LLC, (“RMBL Express”, and together with Merger Sub, Wholesale and Wholesale Express, the “New Borrowers”; together with the Existing Borrowers, the “Borrowers”), Hercules Capital, Inc., (“Hercules”), in its capacity as lender (in such capacity, “Lender”), and Hercules, in its capacity as administrative agent and collateral agent for Lender (in such capacities, “Agent”), entered into the First Amendment and Waiver to Loan and Security Agreement (the “Amendment”), amending that certain Loan and Security Agreement, dated as of April 30, 2018 (the “Loan Agreement”; as amended by the Amendment, the “Amended Loan Agreement”), by and among the Existing Borrowers, Lender and Agent. Under the terms of the Amendment, $5,000,000 (less certain fees and expenses) was funded by Lender to the Borrowers in connection with the Wholesale Closing Date (the “Tranche II Advance”). The Tranche II Advance has a maturity date of October 1, 2021 and an initial interest rate of 11.00%. Pursuant to the Amendment, we issued to Hercules a warrant to purchase 20,950 shares of Class B Common Stock at an exercise price of $7.16 per share. In connection with the Company’s public offering in February 2019, the exercise price of the warrant was adjusted to $5.55 and the number of shares of Class B Common Stock underlying the warrant was adjusted to 27,026. The warrant is immediately exercisable and expires on October 30, 2023.

Also, on October 30, 2018, Wholesale, as borrower, entered into a floorplan vehicle financing credit line (the “NextGear Credit Line”) with NextGear Capital, Inc. (“NextGear”). The available credit under the NextGear Credit Line is initially $63,000,000, it decreased to $55,000,000 after February 28, 2019 and will decrease to zero dollars after October 31, 2019. Advances under the NextGear Credit Line will bear interest at an initial per annum rate of 5.25%, based upon a 360-day year, and compounded daily, and the per annum interest rate will vary based on a base rate, plus the contract rate, which is currently negative 2.00%, until the outstanding liabilities to NextGear are paid in full.

On October 30, 2018, we completed the private placement of an aggregate of 3,030,000 shares of our Class B Common Stock (the “2018 Private Placement”), at a price of $7.10 per share for non-affiliates of the Company, and, with respect to directors participating in the 2018 Private Placement, at a price of $8.10 per share. The gross proceeds for the 2018 Private Placement were approximately $21.6 million. National Securities Corporation, a wholly owned subsidiary of National Holdings Corporation, and Craig-Hallum Capital Group (together the “Placement Agents”) served as the placement agents for the 2018 Private Placement. We paid the Placement Agents a fee of 6.5% of the gross proceeds in the 2018 Private Placement. Net proceeds from the 2018 Private Placement and $5,000,000 funded under the Tranche II Advance were used to partially fund the cash consideration of the Wholesale Merger and the Express Acquisition and the balance will be used for working capital purposes.

On May 9, 2019, the Company entered into a purchase agreement (the “Purchase Agreement”) with JMP Securities LLC (“JMP Securities”) to issue and sell $30.0 million in aggregate principal amount of its 6.75% Convertible Senior Notes due 2024 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Note Offering”).  The Company paid JMP Securities a fee of 7% of the gross proceeds in the Note Offering. The net proceeds for the Note Offering were approximately $27.3 million.   On May 9, 2019, the Company also entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Investors”) pursuant to which the Company agreed to sell in a private placement (the “Private Placement”) an aggregate of 1,900,000 shares of its Class B Common Stock (the “Private Placement Shares”), at a purchase price of $5.00 per share. JMP Securities served as the placement agent for the Private Placement. The Company paid JMP Securities a fee of 7% of the gross proceeds in the Private Placement. Upon closing, the net proceeds for the Private Placement are expected to be approximately $8.8 million.   On May 14, 2019, the Company made a payment to Hercules of $11,134,696, representing the principal, accrued and unpaid interest, fees, costs and expenses outstanding under its Loan and Security Agreement (the “Loan Agreement”) with Hercules dated April 30, 2018 (the “Hercules Indebtedness”). Upon the payment, all outstanding indebtedness and obligations of the Company owed to Hercules under the Loan Agreement were paid in full, and the Loan Agreement has been terminated. The Company used a portion of the net proceeds from the Note Offering to pay the Hercules Indebtedness.

On May 9, 2019, the Company entered into a purchase agreement (the “Purchase Agreement”) with JMP Securities LLC (“JMP Securities”) to issue and sell $30.0 million in aggregate principal amount of its 6.75% Convertible Senior Notes due 2024 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Note Offering”).  The Company paid JMP Securities a fee of 7% of the gross proceeds in the Note Offering. The net proceeds for the Note Offering were approximately $27.3 million.

On May 9, 2019, the Company also entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Investors”) pursuant to which the Company agreed to sell in a private placement (the “Private Placement”) an aggregate of 1,900,000 shares of its Class B Common Stock (the “Private Placement Shares”), at a purchase price of $5.00 per share. JMP Securities served as the placement agent for the Private Placement. The Company paid JMP Securities a fee of 7% of the gross proceeds in the Private Placement. Upon closing, the net proceeds for the Private Placement are expected to be approximately $8.8 million.   On May 14, 2019, the Company made a payment to Hercules of $11,134,696, representing the principal, accrued and unpaid interest, fees, costs and expenses outstanding under its Loan and Security Agreement (the “Loan Agreement”) with Hercules dated April 30, 2018 (the “Hercules Indebtedness”). Upon the payment, all outstanding indebtedness and obligations of the Company owed to Hercules under the Loan Agreement were paid in full, and the Loan Agreement has been terminated. The Company used a portion of the net proceeds from the Note Offering to pay the Hercules Indebtedness.

On May 9, 2019, the Company also entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Investors”) pursuant to which the Company agreed to sell in a private placement (the “Private Placement”) an aggregate of 1,900,000 shares of its Class B Common Stock (the “Private Placement Shares”), at a purchase price of $5.00 per share. JMP Securities served as the placement agent for the Private Placement. The Company paid JMP Securities a fee of 7% of the gross proceeds in the Private Placement. Upon closing, the net proceeds for the Private Placement are expected to be approximately $8.8 million.

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