Borrowings

CRG

September

22,

2015,

the Company entered into a Term Loan Agreement, as amended (the “Loan Agreement”) with CRG under which, subject to certain conditions, the Company had the right to borrow up to

$50

million in principal amount from CRG on or before

March

29,

2017.

The Company borrowed

$30

million on

September

22,

2015.

The Company borrowed an additional

$10

million on

June

15,

2016

under the Loan Agreement.

February

14,

2018,

the Company and CRG further amended the Loan Agreement concurrent with the conversion of

$38

million of the principal amount of the senior secured term loan (plus

$3.8

million in back-end fees and prepayment premium applicable thereto) into a newly authorized Series A convertible preferred stock (see below). On

March 2, 2020,

the Loan Agreement was again amended as set forth below.

Under the Loan Agreement, as amended,

cash payments for either principal or interest are due until the

third

quarter of

2021.

The accrued interest will be accrued and included in the debt balance based (to the extent

not

paid) on principal amounts outstanding at the beginning of the quarter at an interest rate of

12.5%.

Beginning in the

third

quarter of

2021,

the Company will be required to make quarterly principal payments (in addition to the interest) of

$1.4

million with total principal payments of

$2.7

million in

2021,

$5.5

million in

2022

and

$2.7

million in

2023.

The Company

may

voluntarily prepay the borrowings in full, with a prepayment premium beginning at

5.0%

and declining by

1.0%

annually thereafter, with

premium being payable if prepayment occurs after

seven

and half years of the loan. Each tranche of borrowing required the payment, on the borrowing date, of a financing fee equal to

1.5%

of the borrowed loan principal, which is recorded as a discount to the debt. In addition, a facility fee equal to

15.0%

of the amounts borrowed plus any payment-in-kind (“PIK”) is to be payable at the end of the term or when the borrowings are repaid in full. A long-term liability is being accreted using the effective interest method for the facility fee over the term of the Loan Agreement with a corresponding discount to the debt. The borrowings are collateralized by a security interest in substantially all of the Company’s assets.

The Loan Agreement requires that the Company adheres to certain affirmative and negative covenants, including financial reporting requirements, certain minimum financial covenants for pre-specified liquidity and revenue requirements and a prohibition against the incurrence of indebtedness, or creation of additional liens, other than as specifically permitted by the terms of the Loan Agreement. In particular, the covenants of the original Loan Agreement included a covenant that the Company maintain a minimum of

million of cash and certain cash equivalents, and the Company had to achieve certain minimum revenues. If the Company fails to meet the applicable minimum revenue target in any calendar year, the Loan Agreement provides the Company with a cure right if it prepays a portion of the outstanding principal equal to

2.0

times the revenue shortfall. In addition, the Loan Agreement prohibits the payment of cash dividends on the Company’s capital stock and also places restrictions on mergers, sales of assets, investments, incurrence of liens, incurrence of indebtedness and transactions with affiliates. CRG

may

accelerate the payment terms of the Loan Agreement upon the occurrence of certain events of default set forth therein, which include the failure of the Company to make timely payments of amounts due under the Loan Agreement, the failure of the Company to adhere to the covenants set forth in the Loan Agreement, the insolvency of the Company or upon the occurrence of a material adverse change.

February

14,

2018,

the Company entered into Amendment

No.

to the Loan Agreement to, among other things:

	●	extend the interest only payment period and the period during which the Company may elect to pay a portion of the interest in PIK interest payments through June 30, 2021;
	●	provide for a 15% facility fee to be paid on the maturity date;
	●	permit the Company to make the entire interest payment for payment dates in 2018 and 2019 in PIK interest payments, provided no default has occurred and is continuing;
	●	extend the maturity date to June 30, 2023;
	●	modify certain of the covenants, including the indebtedness covenant, lien covenant and restricted payments covenant, to eliminate or modify permitted exceptions to the restrictions in those covenants;
	●	modify the financial covenants to reduce the minimum liquidity requirement to $3.5 million at all times, to eliminate the minimum revenue requirements for 2018 and 2019, and to reduce the minimum revenue requirements to $15 million for 2020, $20 million for 2021 and $25 million for 2022; and
	●	provide CRG with board observer rights.

March 2, 2020,

the Company entered into Amendment

No.

to the Loan Agreement to, among other things:

	●	Extend the period that the Company can make interest payments in payment in kind (PIK) to June 30, 2020;
	●	Lower the Minimum Revenue Covenants to $10 million for 2020, $12 million for 2021, and $15 million for 2022;
	●	Insert certain terms to clarify that all fees, including the prepayment premium, are due if the obligations are accelerated; and
	●	Insert a new provision to make clear that to the extent the Company divides its assets/liabilities into divisions, such assets/liabilities will be treated as transferred to a third party.

As of

December

31,

2019,

the Company was in compliance with all applicable covenants under the Loan Agreement.

As of

December 31, 2019,

principal, final facility fee and PIK payments under the Loan Agreement, which incorporates all aforementioned amendments including those occurring after our fiscal year end, were as follows (in thousands):

Year Ending December 31,
2020	$	—
2021		3,400
2022		6,266
2023		4,518
		14,184
Less: Amount of PIK additions and facility fee to be accreted subsequent to December 31, 2019		(4,629	)
Less: Amount representing debt financing costs		(588	)
Borrowings, as of December 31, 2019	$	8,967

In connection with drawdowns under the Loan Agreement, the Company recorded aggregate debt discounts of

$1.3

million as contra-debt. The debt discounts are being amortized as non-cash interest expense using the effective interest method over the term of the Loan Agreement. As of

December 31, 2019

and

2018,

the balance of the aggregate debt discount was approximately

$588,000

and

$757,000,

respectively. The Company’s interest expense associated with the amortization of debt discount amounted to

$169,000

and

$117,000

during the years ended

December 31, 2019

and

2018,

respectively. The Company incurred total interest expense of approximately

$1.5

million and

$5.4

million during the years ended

December 31, 2019

and

2018,

respectively.

Due to the substantial doubt about the Company’s ability to continue operating as a going concern and the material adverse change clause in the Loan Agreement with CRG, the entire amount of borrowings at

December 31, 2019

and

2018

is classified as current in these financial statements. CRG has

not

invoked the material adverse change clause.