G.	Debt Obligations

As of

December 31, 2019

and

2018,

the Company had convertible notes outstanding, in the aggregate principal amounts, as follows (in thousands):

	December 31,
	2019			2018
Deerfield Convertible Note	$	6,981		$	6,667
2021 Notes		3,000			76,673
December 2019 Notes		70,218			-
Total outstanding principal on debt obligations		80,199			83,340
Less: debt issuance costs and discounts		(2,856	)		(1,902	)
Convertible notes, net	$	77,343		$	81,438

Deerfield Facility Agreement

June

2014,

the Company entered into a

$60

million multi-tranche credit facility (the “Deerfield Facility Agreement”) with Deerfield Private Design Fund III, LP (“Deerfield”). At the time the Company entered into the Deerfield Facility Agreement, the Company borrowed the

first

tranche, which consisted of a term loan of

$15

million (the “Term Note”) and a senior secured loan of

$10

million (the “Deerfield Convertible Note”). Deerfield is

longer obligated to provide the Company any additional disbursements under the Deerfield Facility Agreement. Deerfield

may

convert any portion of the outstanding principal and any accrued but unpaid interest on the Deerfield Convertible Note into shares of the Company’s common stock at an initial conversion price of

$5.85

per share (the "Deerfield Note Put Option").

The Deerfield Convertible Note originally bore interest at

9.75%

per annum, but was subsequently reduced to

6.75%.

Interest accrued on the outstanding balance under the Deerfield Convertible Note was due quarterly in arrears. The Company originally had to repay

one

third

of the outstanding principal amount of the Deerfield Convertible Note on the

fourth

and

fifth

anniversaries of the Deerfield Facility Agreement (

June

2018

and

June 2019).

June 2018,

Deerfield agreed to convert the

$3,333,333

of the principal amount then due, plus

$168,288

of accrued interest, into

598,568

shares of our common stock (as discussed below in the section entitled "Facility Agreement Waiver and Fifth Amendment to Senior Secured Convertible Note"). In

September

2019,

the Company entered into an amendment with Deerfield in order to (i) reduce the interest rate applicable under the Deerfield Facility Agreement from

9.75%

6.75%,

(ii) provide for “payment in kind” of interest on the Loans (as defined in the Deerfield Facility Agreement), and (iii) defer the Loan payments due pursuant to the Deerfield Facility Agreement until

June

2020

(as discussed below in the section entitled

"2021

Note Exchange Effected in

September 2019").

December 2019,

the Company entered into another amendment with Deerfield in order to (i) defer the Loan payments due pursuant to the Deerfield Facility Agreement until

March 31, 2021

and (ii) allow for the entries of additional debt and debt holders under the Deerfield Facility Agreement (as discussed below in the section entitled

"2021

Note Exchange Effected in

December 2019").

The Company is also obligated to repay principal of the Deerfield Convertible Note in the amount of

$6,980,824

plus any capitalized interest to date on

March 31, 2021.

Prepayment of the outstanding balance is

not

allowed without written consent of Deerfield.

Pursuant to the Deerfield Facility Agreement, the Company issued to Deerfield

1,923,077

shares of Series D redeemable convertible preferred stock ("Series D Preferred") as consideration for the loans provided to the Company thereunder. Upon completion of the initial public offering, these shares of Series D Preferred automatically reclassified into

256,410

shares of the Company’s common stock.

The Company also issued to Deerfield a warrant to purchase

14,423,076

shares of Series D Preferred at an initial exercise price of

$0.78

per share, which is exercisable until

June

2024

(the “Deerfield Warrant”). Upon completion of the Company's initial public offering, the Deerfield Warrant automatically converted into a warrant to purchase

1,923,077

shares of the Company’s common stock at an exercise price of

$5.85

per share. This warrant qualifies as a participating security under ASC Topic

260,

Earnings per Share, and is treated as such in the net loss per share calculation (Note J). If a Major Transaction occurs (as defined in the Deerfield Facility Agreement) Deerfield

may

require the Company to redeem the Deerfield Warrant for a cash amount equal to the Black-Scholes value of the portion of the Deerfield Warrant to be redeemed (the “Warrant Put Option”).

The Company recorded the fair value of the shares of Series D Preferred to debt issuance costs on the date of issuance. The Company also recorded the fair value of the Deerfield Warrant and the embedded Warrant Put Option to debt discount on the date of issuance. The debt issuance costs and debt discount are amortized over the term of the related debt and the expense is recorded as interest expense related to amortization of debt issuance costs and discount in the statements of operations.

Pursuant to the Deerfield Facility Agreement, the Company

may

not

enter into specified transactions, including a debt financing in the aggregate value of

$750,000

or more, other than permitted indebtedness under the Deerfield Facility Agreement, a merger, an asset sale or any other change of control transaction or any joint venture, partnership or other profit sharing arrangement, without the prior approval of the Required Lenders (as defined in the Deerfield Facility Agreement). Additionally, if the Company were to enter into a major transaction, including a merger, consolidation, sale of substantially all of its assets or other change of control transaction, Deerfield would have the ability to demand that prior to consummation of such transaction the Company repay all outstanding principal and accrued interest of any notes issued under the Deerfield Facility Agreement. Under each warrant issued pursuant to the Deerfield Facility Agreement, Deerfield has the right to demand that the Company redeem the warrant for a cash amount equal to the Black-Scholes value of a portion of the warrant upon the occurrence of specified events, including a merger, an asset sale or any other change of control transaction.

The Deerfield Facility Agreement also includes high yield discount obligation protections that went into effect in

June 2019.

Going forward, if at any interest payment date our outstanding indebtedness under the Deerfield Facility Agreement would qualify as an "applicable high yield discount obligation" under the Internal Revenue Code of

1986

(the" Code") then the Company is obligated to prepay in cash on each such date the amount necessary to avoid such classification.

Issuance of

5.50%

Senior Convertible

Notes and Third Amendment to Senior Secured Convertible Note and Warrant

February 2016,

the Company issued

$86.3

million aggregate principal amount of its

5.50%

Senior Convertible Notes due

2021

(the

“2021

Notes”) to Cowen and RBC Capital Markets, LLC, as representatives of the several initial purchasers (the “Initial Purchasers”), who subsequently resold the

2021

Notes to qualified institutional buyers (the “Note Offering”) in reliance on the exemption from registration provided by Rule

144A

under the Securities Act.

The

2021

Notes were issued pursuant to an indenture, dated as of

February

2016

(the “Indenture”), between the Company and U.S. Bank National Association, as trustee (the "Trustee"). Interest on the

2021

Notes was payable semi-annually in cash in arrears on

February

and

August

of each year, beginning on

August

2016,

at a rate of

5.50%

per year. The

2021

Notes had an original maturity of

February

2021

unless earlier converted or repurchased.

The net proceeds from the Note Offering were approximately

$82.8

million, after deducting the Initial Purchasers’ discount and estimated offering expenses. Concurrent with the Note Offering, the Company used approximately

$18.6

million of the net proceeds from the Note Offering to repay in full the Term Note, plus all accrued but unpaid interest, a make-whole interest payment and a prepayment premium on the Term Note.

The

2021

Notes were

not

redeemable prior to the maturity date, and

sinking fund was provided for the

2021

Notes. The

2021

Notes were convertible at an initial conversion rate of

58.4454

shares of the Company’s common stock per

$1,000

principal amount of the

2021

Notes, subject to adjustment under the Indenture, which is equal to an initial conversion price of approximately

$17.11

per share of common stock.

If the Company underwent a “fundamental change” (as defined in the Indenture), holders could have required that the Company repurchase for cash all or any portion of their

2021

Notes at a fundamental change repurchase price equal to

100%

of the principal amount of the

2021

Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. As

December 31, 2019,

the Company is bifurcating the fundamental change and make-whole interest payment provisions as embedded derivatives and marking them to fair value each reporting period (Note M).

The Indenture included customary terms and covenants, including certain events of default after which the

2021

Notes

may

be due and payable immediately.

As described in more detail below, in multiple exchanges occurring in

October 2018,

December 2019

and

January 2020,

all outstanding

2021

Notes were exchanged by the holders thereof for either shares of our common stock or senior secured convertible promissory notes issued under the terms of the Deerfield Facility Agreement.

Facility Agreement Waiver and Fifth Amendment to Senior Secured Convertible Note

June 2018,

the Company entered into the Facility Agreement Waiver and Fifth Amendment (the "Fifth Amendment") to the Deerfield Convertible Note with Deerfield. The Fifth Amendment, among other things, provided that (i)

$3,333,333

of the principal amount, plus

$168,288

of accrued interest, of the Deerfield Convertible Note issued pursuant to the terms of the Deerfield Facility Agreement was converted into

598,568

shares of the Company’s common stock, with such principal conversion amount being applied against and in full satisfaction of the amortization payment due

June 2, 2018; (

ii) Deerfield waived specified rights under the Deerfield Facility Agreement with regards to such principal and interest amount; and (iii) amended specified provisions of the Deerfield Convertible Note as they relate to the delivery of shares of the Company’s common stock in connection with any conversion of the Deerfield Convertible Note.

2021

Note Exchange Effected in

October 2018

October 2018,

the Company entered into an exchange agreement (the

“October 2018

Exchange Agreement”) with Deerfield and Deerfield Special Situations Fund, L.P. (the “Deerfield Lenders”). Under the

October 2018

Exchange Agreement, the Deerfield Lenders exchanged an aggregate of

$9,577,000

principal amount of the

2021

Notes for an aggregate of

9,577

shares of Series A Convertible Preferred Stock, par value

$0.0001

("Series A Preferred Stock").

As a condition to closing of the

October 2018

Exchange Agreement, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State Delaware, setting forth the preferences, rights and limitations of the Series A Preferred Stock.

Each share of Series A Preferred Stock has an aggregate stated value of

$1,000

and is convertible into shares of common stock at a price equal to

$3.00

per share (subject to adjustment to reflect stock splits and similar events). Immediately following the exchange under the

October 2018

Exchange Agreement, there were an aggregate of

3,192,333

shares of common stock issuable upon conversion of the then outstanding Series A Preferred Stock (without giving effect to the limitation on conversion described below). As of

December 31, 2019,

all

9,577

shares of Series A Preferred Stock issued under the

October 2018

Exchange Agreement have been converted into an aggregate

3,192,333

shares of the Company's common stock.

2021

Note Exchange Effected in

September 2019

September 2019,

the Company entered into an Exchange Agreement and Amendment to Facility Agreement (the

“September 2019

Exchange Agreement”) with the Deerfield Lenders. Under the

September 2019

Exchange Agreement, the Company issued an aggregate of

1,499,894

shares of the Company’s common stock and an aggregate of

1,576

shares of the Company’s Series B-

Convertible Preferred Stock, par value

$0.0001

per share ("Series B-

Preferred Stock") (such shares of common stock and Series B-

Preferred Stock, the “Initial Exchange Shares”), in exchange for the cancellation of an aggregate of

$3,000,000

principal amount of the Company’s

2021

Notes. The

September 2019

Exchange Agreement provided the Deerfield Lenders the option to exchange up to an additional aggregate of

$27,000,000

principal amount of the

2021

Notes (the “Optional Exchange Principal Amount”) for shares of common stock or shares of the Company’s Series B-

Convertible Preferred Stock, par value

$0.0001

per share (the “Series B-

Preferred Stock” and, together with the Series B-

Preferred Stock, the “Series B Preferred Stock”), subject to the terms and conditions set forth in the

September 2019

Exchange Agreement, including limits as to the principal amount that can be exchanged prior to specified dates therein. If the Deerfield Lenders choose to exchange any portion of the Optional Exchange Principal Amount for shares of Series B-

Preferred Stock, such exchange will be effected at an exchange price of

$1,000

per share. If the Deerfield Lenders choose to exchange any portion of the Optional Exchange Principal Amount for shares of common stock, such exchange will be effected at an exchange price equal to the greater of (i)

$0.9494,

or (ii) the average of the volume-weighted average price of the common stock on the Nasdaq Capital Market on each of the

trading days immediately preceding such exchange.

As a condition to closing of the

September 2019

Exchange Agreement, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series B-

Convertible Preferred Stock (the “Series B-

Certificate of Designation”) and a Certificate of Designation of Preferences, Rights and Limitations of Series B-

Convertible Preferred Stock (the “Series B-

Certificate of Designation”) with the Secretary of State of the State Delaware, setting forth the preferences, rights and limitations of the Series B-

Preferred Stock and the Series B-

Preferred Stock, respectively.

Each share of Series B-

Preferred Stock has an aggregate stated value of

$1,000

and is convertible into shares of common stock at a per share price equal to

$0.9494

per share (subject to adjustment to reflect stock splits and similar events). Immediately following the exchange under the

September 2019

Exchange Agreement, there were an aggregate of

1,659,996

shares of common stock issuable upon conversion of the then outstanding Series B-

Preferred Stock (without giving effect to the limitation on conversion described below). Each share of Series B-

Preferred Stock has an aggregate stated value of

$1,000

and is convertible into shares of common stock at a per share price equal to the greater of (i)

$0.9494

(subject to adjustment to reflect stock splits and similar events), or (ii) the average of the volume-weighted average prices of the common stock on the Nasdaq Capital Market on each of the

trading days immediately preceding such exchange. Immediately following the exchange under the

September 2019

Exchange Agreement there was an aggregate of

28,439,015

shares of Common Stock issuable (i) in exchange of the Optional Exchange Principal Amount, or (ii) upon conversion of the Series B-

Preferred Stock issuable in exchange of the Optional Exchange Principal Amount (in each case without giving effect to the limitation on conversion described below).

The Series B Preferred Stock is convertible at any time at the option of the Deerfield Lenders; provided that the Deerfield Lenders are prohibited from converting shares of Series B Preferred Stock into shares of common stock if, as a result of such conversion, such holders (together with certain affiliates and “group” members of such holders) would beneficially own more than

4.985%

of the total number of shares of common stock then issued and outstanding. The Series B Preferred Stock is

not

redeemable. In the event of the Company’s liquidation, dissolution or winding up, the Deerfield Lenders will receive an amount equal to

$0.0001

per share, plus any declared but unpaid dividends, and thereafter will share ratably in any distribution of the Company’s assets with holders of common stock and with the holders of any shares of any other class or series of capital stock of the Company entitled to share in such remaining assets of the Company (including the Series A Preferred Stock on an as-converted basis). With respect to rights upon liquidation, the Series B Preferred Stock ranks senior to the common stock, on parity with the Series A Preferred Stock, if any is outstanding, and junior to existing and future indebtedness. Except as otherwise required by law (or with respect to approval of certain actions involving the Company’s organizational documents that materially and adversely affect the holders of Series B Preferred Stock), the Series B Preferred Stock does

not

have voting rights. The Series B Preferred Stock is

not

subject to any price-based anti-dilution protections and does

not

provide for any accruing dividends, but provides that holders of Series B Preferred Stock will participate in any dividends on the common stock on an as-converted basis (without giving effect to the limitation on conversion described above). The Series B-

Certificate of Designation and the Series B-

Certificate of Designation also provide for partial liquidated damages in the event that the Company fails to timely convert shares of Series B-

Preferred Stock or Series B-

Preferred Stock, respectively, into common stock in accordance with the applicable certificate of designation.

As of

December 31, 2019,

1,576

shares of Series B-

Preferred Stock have been converted into

1,659,966

shares of common stock, and there were

shares of Series B-

Preferred Stock outstanding.

The

September 2019

Exchange Agreement also amended the Deerfield Facility Agreement, in order to (i) reduce the interest rate applicable under the Deerfield Facility Agreement from

9.75%

6.75%,

(ii) provide for “payment in kind” of interest on the Loans (as defined in the Deerfield Facility Agreement), and (iii) defer the Loan payments pursuant to the Deerfield Facility Agreement until

June

2020.

The

September 2019

Exchange Agreement contains customary representations, warranties and covenants made by the Company and the Holders. The

September 2019

Exchange Agreement also requires the Company to reimburse the Holders for up to

$150,000

of expenses relating to the transactions contemplated by the

September 2019

Exchange Agreement.

The Company determined the changes to the Deerfield Facility Agreement met the definition of a troubled debt restructuring under ASC

470

60,

Troubled Debt Restructurings by Debtors

, as the Company was experiencing financial difficulties and Deerfield granted a concession. The amendments to the terms of the Deerfield Facility Agreement resulted in

gain on restructuring because the total cash outflows required under the amended Deerfield Facility Agreement exceeded the carrying value of the original Deerfield Facility Agreement immediately prior to amendment. Prospectively, the Deerfield Facility Agreement, and the associated Deerfield Convertible Note will continue to be carried net of the associated discount and debt issuance costs which will be amortized and recorded as interest expense using a modified effective interest rate based on the amendments.

The changes to the

2021

Notes, under the

September 2019

Exchange Agreement, were accounted for as a debt modification with the

$2.3

million change in fair value of the embedded conversion feature, associated with the Optional Exchange Principal Amount, recorded as an increase to additional paid in capital and as a debt discount to be amortized to interest expense under the effective interest method over the remaining term of the

2021

Notes.

2021

Note Exchange Effected in

December 2019

December 2019,

the Company entered into the

December 2019

Exchange Agreement and Amendment to Facility Agreement, Senior Secured Convertible Notes and Warrants (the

“December 2019

Exchange Agreement”) with the Deerfield Lenders and Delaware Street Capital Master Fund, L.P. (“DSC” and, collectively with the Deerfield Lenders, the

“December 2019

Holders”). Under the

December 2019

Exchange Agreement, the Company issued senior secured convertible promissory notes under the Deerfield Facility Agreement in the aggregate principal amount of

$71,418,011

(the

“December 2019

Notes”), in exchange for the cancellation of an aggregate of

$71,418,011

principal amount and accrued interest of the Company’s

2021

Notes. Upon entering into the

December 2019

Exchange Agreement, the Company agreed to pay the

December 2019

Holders, in the aggregate, an interest payment of

$745,011

which represents

50%

of the accrued interest, as of

December 18, 2019,

on the

2021

Notes owned by the

December 2019

Holders. The remainder of such interest was included in the principal amount of the

December 2019

Notes.

The

December 2019

Notes bear interest at

6.75%

per annum. The

December 2019

Notes are convertible into shares of the Company’s common stock at an initial conversion price of

$17.11

per share (which represents the conversion price of the

2021

Notes), subject to adjustment in accordance with the terms of the

December 2019

Notes. As of the date of issuance, the

December 2019

Notes were convertible, by their terms, into an aggregate of

4,174,051

shares of the Company’s common stock. The Company subsequently amended the

December 2019

Notes to provide that such notes shall be convertible into shares of the Company's common stock at a conversion price of

$5.85

per share (which represents the conversion price of the Deerfield Convertible Note). The conversion price of the

December 2019

Notes will be adjusted downward if the Company issues or sells any shares of common stock, convertible securities, warrants or options at a sale or exercise price per share less than the greater of the

December 2019

Notes' conversion price or the closing sale price of the Company’s common stock as reported on the Nasdaq Stock Market on the last trading date immediately prior to such issuance, or, in the case of a firm commitment underwritten offering, on the date of execution of the underwriting agreement between the Company and the underwriters for such offering. However, if the Company effects an “at the market offering” as defined in Rule

415

of the Securities Act or

1933,

as amended (the “Securities Act”), of its common stock, the conversion price of the

December 2019

Notes will be adjusted downward pursuant to this anti-dilution adjustment only if such sales are made at a price less than

$5.85

per share, provided that this anti-dilution adjustment will

not

apply to any sales made under (

) the Purchase Agreement, (y) the Second ATM Agreement, or (z) the

September 2019

Exchange Agreement (as amended). Notwithstanding anything in the contrary in the

December 2019

Notes, the anti-dilution adjustment of such notes shall

not

result in the conversion price of the

December 2019

Notes being less than

$0.583

per share. The

December 2019

Notes are convertible at any time at the option of the holders thereof, provided that a holder of a

December 2019

Note is prohibited from converting such note into shares of the Company’s common stock if, as a result of such conversion, such holder (together with certain affiliates and “group” members) would beneficially own more than

4.985%

of the total number of shares of common stock then issued and outstanding. However, the

December 2019

Note issued to DSC, due to the fact DSC was a beneficial owner of more than

4.985%

of the total number of shares of the Company’s common stock then issued and outstanding, has a beneficial ownership cap equal to

19.985%

of the total number of shares of the Company’s common stock then issued and outstanding. Pursuant to the

December 2019

Notes, the

December 2019

Holders have the option to demand repayment of all outstanding principal, and any unpaid interest accrued thereon, in connection with a Major Transaction (as defined in the

December 2019

Notes), which shall include, among others, any acquisition or other change of control of the Company; a liquidation, bankruptcy or other dissolution of the Company; or if at any time after

March

31,

2021,

shares of the Company’s common stock are

not

listed on an Eligible Market (as defined in the

December 2019

Notes). The

December 2019

Notes are subject to specified events of default, the occurrence of which would entitle the

December 2019

Holders to immediately demand repayment of all outstanding principal and accrued interest on the

December 2019

Notes. Such events of default include, among others, failure to make any payment under the

December 2019

Notes when due, failure to observe or perform any covenant under the Deerfield Facility Agreement (as defined below) or the other transaction documents related thereto (subject to a standard cure period), the failure of the Company to be able to pay debts as they come due, the commencement of bankruptcy or insolvency proceedings against the Company, a material judgement levied against the Company and a material default by the Company under the Deerfield Warrant, the

December 2019

Notes or the Deerfield Convertible Note.

The

December 2019

Exchange Agreement amends the Deerfield Facility Agreement in order to, among other things, (i) provide for the Deerfield Facility Agreement to govern the

December 2019

Notes received by the

December 2019

Holders pursuant to the

December 2019

Exchange Agreement, (ii) extend the maturity of the Deerfield Convertible Note from

February

14,

2020

and

June

2020,

as applicable, to

March

31,

2021,

(iii) defer interest payments on the Deerfield Convertible Note until

March

31,

2021

(which such interest shall accrue as “payment-in-kind” interest), (iv) designate DSC as a Lender under (and as defined in the Deerfield Facility Agreement), (v) name Deerfield as the “Collateral Agent” for all Lenders and (vi) modify the terms and conditions under which the Company

may

issue additional pari passu and subordinated indebtedness under the Deerfield Facility Agreement (subject to certain conditions specified in the Deerfield Facility Agreement).

The

December 2019

Exchange Agreement also amends and restates the Deerfield Convertible Note to conform the definitions of “Eligible Market” and “Major Transactions” to the definition in the

December 2019

Notes, to remove provisions that were only applicable prior to the Company’s initial public offering and to make certain other changes to conform to the

December 2019

Notes. The conversion price for the Deerfield Convertible Note remains

$5.85

per share, subject to adjustment on the same basis as the existing senior secured convertible notes, but subject to a floor price of

$0.583.

The

December 2019

Exchange Agreement also amends the Deerfield Warrant to conform the definitions of “Eligible Market” and “Major Transaction” in the Warrant with the definitions of such terms in the

December 2019

Notes.

The

December 2019

Exchange Agreement contains customary representations, warranties and covenants made by the Company and the

December 2019

Holders, including a covenant of the Company to, upon request, use commercially reasonable efforts to use its technology to discover a product based upon a compound that

may

be identified by the Deerfield Lenders in a manner that is reasonably acceptable to the Deerfield Lenders, or

one

of their affiliates, with the terms of such discovery plan, including the Company’s compensation thereunder, to be mutually agreed to by the parties.

In connection with entering into the

December 2019

Exchange Agreement, on

December 18, 2019,

the Company amended and restated that certain Guaranty and Security Agreement, dated

June

2014,

by and between the Company and the other parties thereto (the “GSA”) to, among other things, (i) provide that all of the notes will be secured by the liens securing the indebtedness under the Deerfield Facility Agreement, and (ii) name Deerfield as the “Collateral Agent” under the GSA.

In connection with entering into the

December 2019

Exchange Agreement, the Company also entered into an amendment (the

“September 2019

Exchange Agreement Amendment”)

to the

September 2019

Exchange Agreement to, among other things, (i) amend and restate Annex I of the

September 2019

Exchange Agreement to allow the Deerfield Lenders to effect optional exchanges of the

December 2019

Notes and the Deerfield Convertible Note under the terms of the

September 2019

Exchange Agreement; (ii) amend the common stock exchange price under the

September 2019

Exchange Agreement to be a per share price equal to the greater of (

)

$0.60,

subject to adjustment to reflect stock splits and similar events, or (y) the average of the volume-weighted average prices of the Company’s common stock on the Nasdaq Stock Market on each of the

trading days immediately preceding such exchange, (iii) provide that

more than

28,439,015

of shares of the Company’s common stock shall be issued pursuant to optional exchanges under the

September 2019

Exchange Agreement (whether by common stock exchange or upon conversion of Series B-

Shares (as defined in the

September 2019

Exchange Agreement Amendment)), subject to adjustment to reflect stock splits and similar events and (iv) eliminate limitations regarding the timing and aggregate amount of principal which

may

be exchanged under the

September 2019

Exchange Agreement. These changes in the

September 2019

Exchange Agreement Amendment significantly modified the Optional Exchange Principal Amount, as such after giving effect to the

September

Exchange Agreement Amendment the Optional Exchange Principal Amount ceases to exist the new optional exchanges are referred to as the Deerfield Optional Conversion Feature.

In connection with entering into the

September 2019

Amendment, the Company filed an amendment to the Series B-

Certificate of Designation (the “Series B-

Certificate of Designation Amendment”) with the Secretary of State of the State Delaware. The Series B-

Certificate of Designation Amendment provides that each share of the Company’s Series B-

preferred stock is convertible into shares of the Company’s common stock at a per share price equal to the common stock exchange price under the

September 2019

Exchange Agreement, which equals the greater of (i)

$0.60

(subject to adjustment to reflect stock splits and similar events), or (ii) the average of the volume-weighted average prices of the Company’s common stock on the Nasdaq Stock Market on each of the

trading days immediately preceding such exchange.

As of

December 31, 2019,

the Deerfield Lenders have converted

$1.2

million of principal under the

December 2019

Notes into

2,000,000

shares of common stock.

The Company determined the changes to the Deerfield Convertible Note met the definition of a troubled debt restructuring under ASC

470

60,

Troubled Debt Restructurings by Debtors

, as the Company was experiencing financial difficulties and Deerfield granted a concession. The amendments to the terms of the Deerfield Convertible Note resulted in

gain on restructuring because the total cash outflows required under the amended Deerfield Convertible Note exceeded the carrying value of the original Deerfield Convertible Note immediately prior to amendment. Prospectively, the Deerfield Convertible Note will continue to be carried net of the associated discount and debt issuance costs which will be amortized and recorded as interest expense using a modified effective interest rate based on the amendments.

The changes to the

2021

Notes, under the

December 2019

Exchange Agreement, referred to after as the

December 2019

Notes, were accounted for as a debt modification, prospectively, the

December 2019

Notes will be carried net of the associated discount and debt issuance costs which will be amortized and recorded as interest expense using a modified effective interest rate based on the amendments.

2021

Note Exchange Effected in

January 2020

January 2020,

we entered into the

January 2020

Exchange Agreement (the

"January 2020

Exchange Agreement") with M. Kingdon Offshore Master Fund, LP ("Kingdon"). Under the

January 2020

Exchange Agreement, the Company issued a senior secured convertible note in the aggregate principal amount of

$3,037,354

(the

"January 2020

Note") in exchange for the cancellation of an aggregate of

$3,037,354

principal amount and accrued interest of the

2021

Note then owned by Kingdon. Upon entering into the

January 2020

Exchange Agreement, the Company agreed to pay Kingdon an interest payment of

$37,354,

which represents

50%

of the accrued and unpaid interest, as of

January 13, 2020,

on Kingdon’s

2021

Note. The remainder of such interest was included in the principal amount of the

January 2020

Note.

The

January 2020

Note was issued with substantially the same terms and conditions as the

December 2019

Notes (as amended by the amendment described in more detail below).

In connection with entering into the

January 2020

Exchange Agreement, the Company entered into an Amendment to Facility Agreement and

December 2019

Notes and Consent (the

"December 2019

Note Amendment") with the

December 2019

Holders that, among other things, (i) amended the

December 2019

Notes to (a) reduce the Conversion Price (as defined in the

December 2019

Notes) from

$17.11

$5.85

per share and (b) increased the Floor Price (as defined in the

December 2019

Notes) from

$0.38

$0.583

per share, and (ii) amended the Deerfield Facility Agreement to (

) provide for Kingdon to join the Deerfield Facility Agreement as a Lender (as defined in the Deerfield Facility Agreement) and (y) provide that the

2020

Note and shall constitute a “Senior Secured Convertible Note” (as defined in the Deerfield Facility Agreement) for purposes of the Deerfield Facility Agreement and other Transaction Documents (as defined in the Deerfield Facility Agreement).

Convertible Notes

Future minimum principal payments under convertible notes as of

December 31, 2019

were as follows (in thousands):

	Convertible
Year Ending December 31,	Notes
2020	$	-
2021		80,199
Total minimum principal payments		80,199
Less: debt issuance costs and discounts		(2,856	)
Convertible notes, net	$	77,343

Line of Credit

During the

second

quarter of

2016,

the Company opened a line of credit to support several irrevocable letters of credit. In

March 2019,

the line of credit was closed. The irrevocable letters of credit and associated money market account remain and the money market account is reported as restricted cash on the balance sheets.