7.	Note Payable

May 22, 2017,

the Company entered into a Term Loan Agreement, as amended on

December 12, 2017

and

November 29, 2018 (

collectively, the

“2017

Loan Agreement”) with affiliates of CRG LP (“CRG”). The credit facility consists of

$20,000,000

drawn at closing and access to additional funding of up to an aggregate of

$10,000,000

for a total of

$30,000,000

available under the credit facility. On

December 29, 2017,

the Company accessed the remaining

$10,000,000

available under the credit facility.

In connection with the

2017

Loan Agreement, the Company issued

two

-year warrants to CRG to purchase a total of

223

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

$9,500.00

per share. (See Note

– Common Stock.)

Under the

2017

Loan Agreement, as in effect prior to the

November 12, 2019

amendment, the credit facility had a

six

-year term with

four

years of interest-only payments after which quarterly principal and interest payments were to be due through the maturity date. Amounts borrowed under the

2017

Loan Agreement accrued interest at an annual fixed rate of

12.5%,

4.0%

of which

may,

at the election of the Company, could be paid in-kind during the interest-only period by adding such accrued amount to the principal loan amount each quarter. During the year ended

December 31, 2019,

the Company paid interest in-kind of

$1,226,000,

which was added to the total outstanding principal loan amount. The Company was also required to pay CRG a final payment fee upon repayment of the loans in full equal to

5.0%

of the sum of the aggregate principal amount plus the deferred interest added to the principal loan amount during the interest-only period.

As security for its obligations under the

2017

Loan Agreement, the Company entered into security agreements with CRG whereby the Company granted CRG a lien on substantially all of the Company's assets, including intellectual property.

The terms of the

2017

Loan Agreement also required the Company to meet certain financial and other covenants. The

2017

Loan Agreement also contained customary affirmative and negative covenants for a credit facility of this size and type, including covenants that limit or restrict the Company's ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends or make distributions, license intellectual property rights on an exclusive basis or repurchase stock, in each case subject to customary exceptions.

November 12, 2019,

the Company and CRG amended the

2017

Loan Agreement (the “Amendment

No.

3”

). In connection with the amendment, the Company converted approximately

$28,981,000

of the outstanding principal amount under the term loan plus accrued interest, the prepayment premium and the back-end facility fee for an aggregate amount of converted debt obligations of approximately

$31,300,000.

The debt obligations converted into

31,300

shares of the newly authorized Series B convertible preferred stock and warrants to purchase up to

989,379

shares of common stock were also issued. The warrants have a term of

years and an exercise price equal to

120%

of the Series convertible B preferred stock conversion price of

$15.30

$18.36

per share. (See Note

– Common Stock.) CRG entered into a

one

year lock up agreement on all securities that it holds.

The Amendment

No.

to the

2017

Loan Agreement addressed, among other things:

●

repayment provisions were amended such that repayment is permitted only with, or after, the redemption in full of the Series B convertible preferred stock issued to CRG;

●

the interest only payment period and the period during which the Company

may

elect to pay the full interest in PIK interest payments was extended through the

23rd

date after the

first

payment date. Pursuant to the amendment, CRG shall consent to the payment of such interest in the form of PIK loans, provided that (i) as of such payment date,

default shall have occurred and be continuing, and (ii) the principal amount of each PIK loan shall accrue interest in accordance with the provisions of the

2017

Loan Agreement;

●

modified certain of the covenants, including (i) to permit issuance of the Series B convertible preferred stock and any preferred stock issued in the equity financing and the exercise and performance by the Company of its rights and obligations in connection with such CRG preferred stock and any preferred stock issued in the equity financing, (ii) eliminate the Company's ability to enter into permitted acquisitions, (iii) further restrict the incurrence of additional indebtedness and removal of the equity cure right, and (iv) eliminate the minimum revenue requirement; and

●

the back-end facility fee on the aggregate remaining principal balance on the term loan shall be increased from

25%.

Pursuant to the amendment, the Company paid interest in-kind of

$532,000

during the year ended

December 31, 2020,

which was added to the total outstanding principal loan amount.

As of

December 31,

2020,

the Company was in compliance with all covenants.

As of

December 31, 2020

and

2019,

$4,518,000

and

$3,983,000

was recorded on the consolidated balance sheets as note payable, noncurrent portion, which is net of the remaining unamortized debt discount. The term loan has a maturity date of

March 31, 2023.

The Company accounted for the changes in the

2017

Loan Agreement as a troubled debt restructuring. The Company reduced the amount of the debt obligation by the fair value of the equity interests transferred. The remaining difference was charged to the loss on debt restructuring and reported on the consolidated statements of operations and comprehensive loss. The equity interests transferred included the

31,300

shares of the newly authorized Series B convertible preferred stock and warrants to purchase up to

989,379

shares of common stock. The Company determined the fair value of the Series B convertible preferred stock on

November 26, 2019

using the option pricing method. The fair value of the Series B convertible preferred stock was determined to be

$1,023.23

for an aggregate fair value amount of approximately

$32,027,000.

(See Note

– Preferred Stock.) The Company determined the fair value of the warrants on the date of issuance to be approximately

$3,502,000

using the Black-Scholes option pricing model (see Note

– Common Stock.) After consideration of the fair value of the equity interests transferred and the carrying value of the debt, the remaining difference is the loss on debt restructuring of

$6,705,000,

which was recorded in the consolidated statement of operations for the year ended

December 31, 2019.

As of

December 31,

2020,

future minimum payments under the note payable were as follows (in thousands):

Year Ending December 31,
2021	$	-
2022		-
2023		5,992
Total payments		5,992
Less: Amount representing interest		(1,465	)
Present value of obligations		4,527
Less: Unamortized debt discount		(9	)
Note payable, noncurrent portion	$	4,518