On March 8, 2018, the Company entered into a Convertible Note Purchase Agreement (the “Original Agreement”) with existing investors of the Company. Under the terms of the Original Agreement, the Company agreed to issue up to $5,000 in principle Convertible Notes (the “Original Notes”). The Original Notes accrued interest at 4.0% per annum from the date of issuance with a maturity date of February 27, 2020 (subsequently extended — see below). The Company issued $2,965 in Original Notes in March and April 2018. Under the terms of the Original Agreement, the following features were included:

On November 15, 2018, the Company entered into a Convertible Note Purchase Agreement (the “Additional Agreement”) with existing investors of the Company. Under the terms of the Additional Agreement, the Company agreed to issue up to an aggregate of $8,000 in principle Convertible Notes (the “Additional Notes”). In connection with the Additional Agreement, the Company amended the Original Notes (the “Amendment”). The Amendment resulted in the following changes to the Original Notes:

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the interest rate of the Original Notes accrue interest at 4.0% from issuance to November 15, 2018, and accrue interest at 8.0% from November 15, 2018 to maturity or conversion;

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the conversion price was amended to 80.0% of the price per share in connection with conversion of the notes upon a Qualified or Non-Qualified Financing;

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the holder’s option upon a sale event to receive repayment, at two times the principal plus accrued and unpaid interest, (“Optional Redemption Upon a Sales Transaction”); and

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a condition that each holder of $1,000 in aggregate principal must be included in the 66 2/3% of the holders of the principal amount of the Notes to provide consent to make any further amendments or waivers.

On February 27, 2020, the Company entered into a Convertible Note Purchase Agreement (the “Second Amendment”) with existing investors of the Company. Under the terms of the Second Amendment, the Company agreed to issue up to an aggregate of $10,035 in principle Convertible Notes (the “Second Amendment Notes”). In connection with the Second Amendment, the Company amended the Original Notes and Additional Notes. The Second Amendment resulted in the following changes:

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extend the maturity date to June 30, 2021;

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add a cap for a conversion in connection with a Qualified Financing; and

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provide for mandatory conversion of the Combined Notes into Series B-1 Preferred Convertible Stock of the Company if the Company has not completed a Qualified Financing on or before June 30, 2021.

The Company applied extinguishment accounting to the Original Notes upon execution of the Amendment in 2018 on the basis that the present value of the cash flows under the terms of the Amendment of the Original notes were determined to be substantially different. The Company applied extinguishment accounting upon execution of the Second Amendment as the addition of the conversion features are substantive and recorded a loss on debt extinguishment of $0

and $129 in the consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2020, respectively.

Each Additional Note and Second Amendment Note (collectively with the Original Notes, the “Convertible Notes” or the “Notes) included the features set forth above. The Company issued $2,965 Original Notes in 2018, $4,661 Additional Notes in 2018 and 2019, and $5,372 Second Amendment Notes in 2020.

The total issuance costs incurred in connection with all closings of the Convertible Notes was $205.

The Convertible Notes were considered to be a hybrid financial instrument consisting of a fixed interest rate host with certain embedded features requiring evaluation for bifurcation and separate accounting. The Company determined that the Automatic Conversion Upon a Qualified Financing, Optional Conversion Upon a Non-Qualified Financing and the Optional Redemption Upon a Sales Transaction were considered freestanding financial instruments which required bifurcation from the host debt instruments.

The resulting debt discount from the derivative liabilities was presented as a direct deduction from the carrying amount of the Convertible Notes and amortized to interest expense using the effective interest rate method.

Interest expense on the convertible notes, including amortization of debt issuance costs, consisted of the following for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Coupon interest	$	—	$	262	$	512	$	660
Issuance costs amortization		—		18		31		34
Discount amortization		—		228		352		536
	$	—	$	508	$	895	$	1,230

In May of 2021, the convertible notes and accrued interest thereon were converted into shares of the Company’s Series B-1 convertible preferred stock (Note 7).

In April 2020, the Company received a $443 unsecured loan, bearing interest at 1.0%, pursuant to the Paycheck Protection Program (the “PPP”), a program implemented by the U.S. Small Business Administration (the “SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (the “PPP Loan”). The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan and accrued interest are forgivable after eight weeks if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1.0%, with a deferral of payments for the first six months. The Company used the proceeds for purposes consistent with the PPP.

On January 21, 2021, the Company received confirmation from the SBA that the PPP Loan had been forgiven in full, including all interest incurred. Accordingly, the Company recognized $0 and $443 of income for the debt extinguishment pursuant to ASC 470-50-15-4 for the three and nine months ended September 30, 2021, respectively.