STANDBY EQUITY PURCHASE AGREEMENT AND CONVERTIBLE PROMISSORY NOTES	12 Months Ended
Dec. 31, 2022
STANDBY EQUITY PURCHASE AGREEMENT AND CONVERTIBLE PROMISSORY NOTES
STANDBY EQUITY PURCHASE AGREEMENT AND CONVERTIBLE PROMISSORY NOTES	NOTE 10 – STANDBY EQUITY PURCHASE AGREEMENT AND CONVERTIBLE PROMISSORY NOTES Standby Equity Purchase Agreement On June 2, 2022, the Company entered into a Standby Equity Purchase Agreement (“SEPA”) with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, the Company had the right, but not the obligation, to sell to Yorkville up to $50,000,000 of its shares of Common Stock, at the Company’s request any time during the commitment period commencing on June 2, 2022 and terminating on the earliest of (i) the first day of the month following the 36-month anniversary of the SEPA and (ii) the date on which Yorkville shall have made payment of any advances requested pursuant to the SEPA for shares of the Common Stock equal to the commitment amount of $50,000,000. Each sale the Company requested under the SEPA (an “Advance”) may have been for a number of shares of Common Stock with an aggregate value of the greater of (1) an amount equal to 30% of the daily value traded, as defined, of Common Stock on the trading day prior to the delivery of the Advance notice or (2) $5,000,000. The Common Stock would have been purchased at 97.0% of the Market Price, (as defined below) and would have been subject to certain limitations, including that Yorkville could not purchase any Common Stock that would result in it owning more than 4.99% of the Company’s outstanding Common Stock at the time of an Advance (the "Ownership Limitation") or an aggregate of 19.99% of the Company's outstanding Common Stock as of the date of the SEPA (the "Exchange Cap"). The Exchange Cap would no longer have applied under certain circumstances, including to any sales of common stock under the SEPA that equal or exceeds $3.04 per share of Common Stock. “Market Price” was defined in the SEPA as the average of the daily volume weighted average price, as defined, during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance notice to Yorkville. The SEPA contained customary registration rights, representations, warranties, conditions and indemnification obligations by each party. Certain conditions precedent would have been required to have been satisfied in order for the Company to deliver a notice of Advance. These conditions included, but are not limited to, the existence of an effective registrations statement pursuant to which Yorkville is permitted to utilize the prospectus thereunder to resell all of the Common Stock issuable pursuant to the Notice. The issuance and sale of the Common Stock by the Company under the SEPA would have been made pursuant to the prospectus and prospectus supplement forming a part of the Company’s shelf registration statement on Form S-3 (Registration Statement No. 333- 262226), which was declared effective on February 4, 2022 (“the 2022 Registration Statement”), including a final prospectus supplement dated June 10, 2022. In addition to the Company’s right to request Advances, subject to certain conditions precedent, the Company had the option to, but was not obligated to, effect a pre-advance loan with a principal amount of $15.0 million through the issuance and sale to Yorkville of a convertible promissory note (the “Promissory Note”). The Company elected to issue and sell the Promissory Note to Yorkville on June 2, 2022. Subject to the terms of the SEPA, the Company had the right to terminate the SEPA at any time, at no cost or penalty, upon five trading days’ prior written notice so long as there are no outstanding Advances, no outstanding balance on the Promissory Note and no other amounts owed to Yorkville. No termination of the SEPA affects the indemnification provisions contained within the SEPA, which provisions survived a termination. The SEPA was terminated on December 20, 2022. No Advances occurred while the SEPA was outstanding. Yorkville Convertible Promissory Note On June 2, 2022, the Company issued the Promissory Note to Yorkville, which was issued with a 2% original issue discount, for proceeds of $14.7 million. The maturity date of the $15.0 Promissory Note was originally November 25, 2022 and the Company was required to pay the outstanding principal balance in five monthly $3.0 million payments commencing July 27, 2022. Upon reasonable advance notice, the Company had the right to defer 50% of a monthly payment amount due on two such monthly payments to later dates to be mutually agreed by the Company and Yorkville. In July 2022, $1.5 million of the $3.0 million July monthly payment amount was deferred until the October 2022 monthly payment due date. In August 2022, $1.5 million of the $3.0 million August monthly payment amount was deferred until the November 2022 monthly payment due date. The Promissory Note bore an interest rate of 4.0%. Upon the occurrence of an event of default, as defined, the applicable interest rate would have been 15% until the Promissory Note was paid in full. Interest payments were due monthly in conjunction with scheduled principal payments. The Promissory Note may have been repaid with the proceeds of an Advance or repaid in cash and, if repaid in cash, together with a cash payment premium originally of 6%, provided that if the Company’s Common Stock market price, as defined, was less than $2.25 per share, the cash payment premium would have been 4%. If the Promissory Note was outstanding, the proceeds of an Advance would have been applied to the outstanding amounts due, first to outstanding interest. Under the Promissory Note, Yorkville originally had the right to convert any portion of the Promissory Note (a “Yorkville Conversion”), including accrued and unpaid interest into shares of Common Stock at a conversion price of $3.75 per share of Common Stock (the “Conversion Price”). The Conversion Price would have been adjusted for certain dilutive events or fundamental Company transactions and events, including, but not limited to, mergers, consolidations, a change of control, sale of substantially all the assets of the Company and transactions where holders of the Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock. In certain of these events, upon a Yorkville Conversion, Yorkville would have been entitled to receive such benefits as if it were a Common Share holder at the time of the underlying event. Upon any Yorkville Conversion, the Company was required to deliver in a timely manner, as defined, the Common Shares issuable per the conversion. If the Company did not deliver the Common Shares in a timely manner, as defined, Yorkville may have purchased such Common Shares (in an open market transaction or otherwise) and may have sought a cash-based or cash and stock-based remedy from the Company. The Company had the right to redeem early a portion or all amounts outstanding under the Promissory Note provided that (1) if the market price, as defined, of the Company’s Common Stock was less than or equal to the Conversion Price, the Company would have provided five trading days notice or (2) if the market price, as defined, of the Company’s Common Stock was greater than the Conversion Price, (i) the Company would have provided fifteen trading days notice and (ii) the Company may only have exercised its early redemption right if Yorkville was able to exercise its rights under the SEPA. Upon receipt of a redemption notice, Yorkville would first have the right to exercise its conversion rights prior to the effectiveness of a Company redemption. The specified redemption amount would have been reduced by any Yorkville Conversion amount. The Company shall maintain the effectiveness of a registration statement pursuant to which Yorkville is permitted to utilize the prospectus thereunder to resell all of the Common Stock issuable pursuant to the conversion of the Promissory Note. The issuance and sale of the Common Stock by the Company under the Promissory Note, including shares issued upon a Yorkville Conversion, are made pursuant to the prospectus and prospectus supplement forming a part of the 2022 Registration Statement, including a final prospectus supplement dated June 10, 2022. The aggregate debt discount and debt issuance costs recorded for the Promissory Note was $404,000, comprised of the original issue discount of $300,000 and other debt issuance expenses of $104,000, and was originally being accreted into the Promissory Note balance over the six-month term of the Promissory Note at an effective interest rate of 7.5%, which was in addition to the stated interest rate. In October 2022, the Company entered into an amended and restated convertible promissory note (the “A&R Promissory Note”) to Yorkville which, among other things, (a) granted Yorkville, but not the Company, the right to extend the maturity date of the Promissory Note from November 25, 2022 to December 23, 2022 upon advance notice to the Company, (b) changed the then-existing repayment schedule such that all outstanding principal amounts would be due November 25, 2022, (c) changed the cash payment premium to 12% and (d) changed the conversion price from $3.75 to $1.26 per share of Common Stock. The Company determined that extinguishment of debt accounting applied because the change in the fair value of the embedded conversion feature was greater than 10% of the carrying value of the Promissory Note immediately prior to the modification. The Company recorded a loss on debt extinguishment of $2.1 million, which is included in loss on extinguishment of debt in the consolidated statement of operations for the year ended December 31, 2022. This extinguishment loss was primarily related to the change in the fair value of the embedded conversion feature of $1.6 million and the excess of the fair value of the A&R Promissory Note of $9.4 million over the carrying value of the Promissory Note immediately prior to the modification. In November 2022, the Company entered into a second amended and restated convertible promissory note (the “Second A&R Promissory Note”) to Yorkville which, among other things, (a) changed the principal repayment provisions such that $1.3 million was due by November 25, 2022, $1.7 million was due by November 29, 2022 and the balance of $6.0 million was due by December 23, 2022 and (b) changed the conversion price per share of Common Stock from $1.26 to, if lower, a variable rate based on 88% of the lowest volume weighted average price during the three trading days prior to the conversion date. The new variable conversion price would have been effective for conversions commencing December 16, 2022 and also included certain volume restrictions. The Company determined that debt modification accounting applied. The $20,000 change in the fair value of the embedded conversion feature was accounted for as a debt discount and amortized as an adjustment of interest expense over the remaining term of the Second A&R Promissory Note at an effective rate of 3.1%. The Second A&R Promissory Note was paid in full on December 13, 2022. In aggregate for the Second A&R Promissory Note and its predecessors for the year ended December 31, 2022, the Company amortized $396,000 of the capitalized debt issuance costs and debt discount and expensed $1.1 million of contractual interest to interest expense in the consolidated statement of operations. For the year ended December 31, 2022, the Company paid cash principal payments of $15.3 million and made Common Stock principal reductions of $168,000. Convertible Promissory Notes In November 2022, the Company issued convertible promissory notes (the “Convertible Notes”) in an aggregate principal amount of approximately $3.4 million to certain accredited investors, including to members of Company management in the amount of $1.7 million. The Convertible Notes were issued in privately negotiated transactions as part of a private placement exempt from registration under the Securities Act of 1933, as amended. The Convertible Notes, which contain usual and customary antidilution provisions, have a maturity date of April 1, 2025 and accrue annual interest at a rate of 4%, which increases to 15% upon the occurrence of an event of default, as defined. The Convertible Notes are automatically convertible into shares of equity securities of the Company upon the closing of a Qualified Financing, as defined in the Convertible Notes as the issuance and sale of equity securities with an aggregate gross sales price of not less than $5.0 million, with certain sales of equity securities excluded, at a conversion price equal to the price per share paid by the investors purchasing such equity securities in such Qualified Financing. The Convertible Notes embodied an unconditional obligation to settle a fixed monetary amount with, upon a Qualified Financing, with a variable number of shares and was initially considered potentially share settled debt. On December 12, 2022, the Company entered into a private placement (see Note 15) which met the definition of a Qualified Financing and contemporaneously amended the Convertible Notes to (a) change the conversion date to March 1, 2023 and (b) allow for the conversion price to be reduced if an additional Qualified Financing were to occur prior to the conversion date at a price lower than the then existing Convertible Note conversion price. The Company determined that debt modification accounting applies in connection with the December 12, 2022 amendment to the Convertible Notes. There was no change to the effective interest rate as the result of this amendment. As of December 31, 2022, the conversion price was $0.40 per share of Common Stock. If the Convertible Notes were converted at the conversion price as of December 31, 2022, the Company would issue approximately 8.5 million shares of Common Stock. The Convertible Notes are included in convertible promissory notes in the consolidated balance sheet as of December 31, 2022. During the year ended December 31, 2022, the Company expensed $13,000 of contractual interest to interest expense in the consolidated statement of operations. On January 30, 2023, the Convertible Notes were amended to change the conversion date to the third business day following the Shareholder Approval Date (as defined in Note 19). In March 2022, the Convertible Notes and accrued but unpaid interest were converted into 8,628,024 shares of Common Stock.

STANDBY EQUITY PURCHASE AGREEMENT AND CONVERTIBLE PROMISSORY NOTES

12 Months Ended

Dec. 31, 2022

STANDBY EQUITY PURCHASE AGREEMENT AND CONVERTIBLE PROMISSORY NOTES

STANDBY EQUITY PURCHASE AGREEMENT AND CONVERTIBLE PROMISSORY NOTES

NOTE 10 – STANDBY EQUITY PURCHASE AGREEMENT AND CONVERTIBLE PROMISSORY NOTES

Standby Equity Purchase Agreement

On June 2, 2022, the Company entered into a Standby Equity Purchase Agreement (“SEPA”) with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, the Company had the right, but not the obligation, to sell to Yorkville up to $50,000,000 of its shares of Common Stock, at the Company’s request any time during the commitment period commencing on June 2, 2022 and terminating on the earliest of (i) the first day of the month following the 36-month anniversary of the SEPA and (ii) the date on which Yorkville shall have made payment of any advances requested pursuant to the SEPA for shares of the Common Stock equal to the commitment amount of $50,000,000. Each sale the Company requested under the SEPA (an “Advance”) may have been for a number of shares of Common Stock with an aggregate value of the greater of (1) an amount equal to 30% of the daily value traded, as defined, of Common Stock on the trading day prior to the delivery of the Advance notice or (2) $5,000,000. The Common Stock would have been purchased at 97.0% of the Market Price, (as defined below) and would have been subject to certain limitations, including that Yorkville could not purchase any Common Stock that would result in it owning more than 4.99% of the Company’s outstanding Common Stock at the time of an Advance (the "Ownership Limitation") or an aggregate of 19.99% of the Company's outstanding Common Stock as of the date of the SEPA (the "Exchange Cap"). The Exchange Cap would no longer have applied under certain circumstances, including to any sales of common stock under the SEPA that equal or exceeds $3.04 per share of Common Stock. “Market Price” was defined in the SEPA as the average of the daily volume weighted average price, as defined, during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance notice to Yorkville. The SEPA contained customary registration rights, representations, warranties, conditions and indemnification obligations by each party. Certain conditions precedent would have been required to have been satisfied in order for the Company to deliver a notice of Advance. These conditions included, but are not limited to, the existence of an effective registrations statement pursuant to which Yorkville is permitted to utilize the prospectus thereunder to resell all of the Common Stock issuable pursuant to the Notice. The issuance and sale of the Common Stock by the Company under the SEPA would have been made pursuant to the prospectus and prospectus supplement forming a part of the Company’s shelf registration statement on Form S-3 (Registration Statement No. 333-

262226), which was declared effective on February 4, 2022 (“the 2022 Registration Statement”), including a final prospectus supplement dated June 10, 2022.

In addition to the Company’s right to request Advances, subject to certain conditions precedent, the Company had the option to, but was not obligated to, effect a pre-advance loan with a principal amount of $15.0 million through the issuance and sale to Yorkville of a convertible promissory note (the “Promissory Note”). The Company elected to issue and sell the Promissory Note to Yorkville on June 2, 2022.

Subject to the terms of the SEPA, the Company had the right to terminate the SEPA at any time, at no cost or penalty, upon five trading days’ prior written notice so long as there are no outstanding Advances, no outstanding balance on the Promissory Note and no other amounts owed to Yorkville. No termination of the SEPA affects the indemnification provisions contained within the SEPA, which provisions survived a termination. The SEPA was terminated on December 20, 2022. No Advances occurred while the SEPA was outstanding.

Yorkville Convertible Promissory Note

On June 2, 2022, the Company issued the Promissory Note to Yorkville, which was issued with a 2% original issue discount, for proceeds of $14.7 million. The maturity date of the $15.0 Promissory Note was originally November 25, 2022 and the Company was required to pay the outstanding principal balance in five monthly $3.0 million payments commencing July 27, 2022. Upon reasonable advance notice, the Company had the right to defer 50% of a monthly payment amount due on two such monthly payments to later dates to be mutually agreed by the Company and Yorkville. In July 2022, $1.5 million of the $3.0 million July monthly payment amount was deferred until the October 2022 monthly payment due date. In August 2022, $1.5 million of the $3.0 million August monthly payment amount was deferred until the November 2022 monthly payment due date. The Promissory Note bore an interest rate of 4.0%. Upon the occurrence of an event of default, as defined, the applicable interest rate would have been 15% until the Promissory Note was paid in full. Interest payments were due monthly in conjunction with scheduled principal payments. The Promissory Note may have been repaid with the proceeds of an Advance or repaid in cash and, if repaid in cash, together with a cash payment premium originally of 6%, provided that if the Company’s Common Stock market price, as defined, was less than $2.25 per share, the cash payment premium would have been 4%. If the Promissory Note was outstanding, the proceeds of an Advance would have been applied to the outstanding amounts due, first to outstanding interest. Under the Promissory Note, Yorkville originally had the right to convert any portion of the Promissory Note (a “Yorkville Conversion”), including accrued and unpaid interest into shares of Common Stock at a conversion price of $3.75 per share of Common Stock (the “Conversion Price”). The Conversion Price would have been adjusted for certain dilutive events or fundamental Company transactions and events, including, but not limited to, mergers, consolidations, a change of control, sale of substantially all the assets of the Company and transactions where holders of the Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock. In certain of these events, upon a Yorkville Conversion, Yorkville would have been entitled to receive such benefits as if it were a Common Share holder at the time of the underlying event. Upon any Yorkville Conversion, the Company was required to deliver in a timely manner, as defined, the Common Shares issuable per the conversion. If the Company did not deliver the Common Shares in a timely manner, as defined, Yorkville may have purchased such Common Shares (in an open market transaction or otherwise) and may have sought a cash-based or cash and stock-based remedy from the Company.

The Company had the right to redeem early a portion or all amounts outstanding under the Promissory Note provided that (1) if the market price, as defined, of the Company’s Common Stock was less than or equal to the Conversion Price, the Company would have provided five trading days notice or (2) if the market price, as defined, of the Company’s Common Stock was greater than the Conversion Price, (i) the Company would have provided fifteen trading days notice and (ii) the Company may only have exercised its early redemption right if Yorkville was able to exercise its rights under the SEPA. Upon receipt of a redemption notice, Yorkville would first have the right to exercise its conversion rights prior to the effectiveness of a Company redemption. The specified redemption amount would have been reduced by any Yorkville Conversion amount.

The Company shall maintain the effectiveness of a registration statement pursuant to which Yorkville is permitted to utilize the prospectus thereunder to resell all of the Common Stock issuable pursuant to the conversion of the Promissory Note. The issuance and sale of the Common Stock by the Company under the Promissory Note, including shares issued upon a Yorkville Conversion, are made pursuant to the prospectus and prospectus supplement forming a part of the 2022 Registration Statement, including a final prospectus supplement dated June 10, 2022. The aggregate debt discount and debt issuance costs recorded for the Promissory Note

was $404,000, comprised of the original issue discount of $300,000 and other debt issuance expenses of $104,000, and was originally being accreted into the Promissory Note balance over the six-month term of the Promissory Note at an effective interest rate of 7.5%, which was in addition to the stated interest rate.

In October 2022, the Company entered into an amended and restated convertible promissory note (the “A&R Promissory Note”) to Yorkville which, among other things, (a) granted Yorkville, but not the Company, the right to extend the maturity date of the Promissory Note from November 25, 2022 to December 23, 2022 upon advance notice to the Company, (b) changed the then-existing repayment schedule such that all outstanding principal amounts would be due November 25, 2022, (c) changed the cash payment premium to 12% and (d) changed the conversion price from $3.75 to $1.26 per share of Common Stock. The Company determined that extinguishment of debt accounting applied because the change in the fair value of the embedded conversion feature was greater than 10% of the carrying value of the Promissory Note immediately prior to the modification. The Company recorded a loss on debt extinguishment of $2.1 million, which is included in loss on extinguishment of debt in the consolidated statement of operations for the year ended December 31, 2022. This extinguishment loss was primarily related to the change in the fair value of the embedded conversion feature of $1.6 million and the excess of the fair value of the A&R Promissory Note of $9.4 million over the carrying value of the Promissory Note immediately prior to the modification.

In November 2022, the Company entered into a second amended and restated convertible promissory note (the “Second A&R Promissory Note”) to Yorkville which, among other things, (a) changed the principal repayment provisions such that $1.3 million was due by November 25, 2022, $1.7 million was due by November 29, 2022 and the balance of $6.0 million was due by December 23, 2022 and (b) changed the conversion price per share of Common Stock from $1.26 to, if lower, a variable rate based on 88% of the lowest volume weighted average price during the three trading days prior to the conversion date. The new variable conversion price would have been effective for conversions commencing December 16, 2022 and also included certain volume restrictions. The Company determined that debt modification accounting applied. The $20,000 change in the fair value of the embedded conversion feature was accounted for as a debt discount and amortized as an adjustment of interest expense over the remaining term of the Second A&R Promissory Note at an effective rate of 3.1%. The Second A&R Promissory Note was paid in full on December 13, 2022.

In aggregate for the Second A&R Promissory Note and its predecessors for the year ended December 31, 2022, the Company amortized $396,000 of the capitalized debt issuance costs and debt discount and expensed $1.1 million of contractual interest to interest expense in the consolidated statement of operations. For the year ended December 31, 2022, the Company paid cash principal payments of $15.3 million and made Common Stock principal reductions of $168,000.

Convertible Promissory Notes

In November 2022, the Company issued convertible promissory notes (the “Convertible Notes”) in an aggregate principal amount of approximately $3.4 million to certain accredited investors, including to members of Company management in the amount of $1.7 million. The Convertible Notes were issued in privately negotiated transactions as part of a private placement exempt from registration under the Securities Act of 1933, as amended. The Convertible Notes, which contain usual and customary antidilution provisions, have a maturity date of April 1, 2025 and accrue annual interest at a rate of 4%, which increases to 15% upon the occurrence of an event of default, as defined. The Convertible Notes are automatically convertible into shares of equity securities of the Company upon the closing of a Qualified Financing, as defined in the Convertible Notes as the issuance and sale of equity securities with an aggregate gross sales price of not less than $5.0 million, with certain sales of equity securities excluded, at a conversion price equal to the price per share paid by the investors purchasing such equity securities in such Qualified Financing. The Convertible Notes embodied an unconditional obligation to settle a fixed monetary amount with, upon a Qualified Financing, with a variable number of shares and was initially considered potentially share settled debt. On December 12, 2022, the Company entered into a private placement (see Note 15) which met the definition of a Qualified Financing and contemporaneously amended the Convertible Notes to (a) change the conversion date to March 1, 2023 and (b) allow for the conversion price to be reduced if an additional Qualified Financing were to occur prior to the conversion date at a price lower than the then existing Convertible Note conversion price. The Company determined that debt modification accounting applies in connection with the December 12, 2022 amendment to the Convertible Notes. There was no change to the effective interest rate as the result of this amendment. As of December 31, 2022, the conversion price was $0.40 per share of Common Stock. If the Convertible Notes were converted at the conversion price as of December 31, 2022, the Company would issue approximately 8.5 million shares of Common Stock. The Convertible Notes are included in convertible promissory notes in the consolidated balance sheet as of December 31, 2022. During the year ended December 31, 2022, the Company expensed $13,000 of

contractual interest to interest expense in the consolidated statement of operations. On January 30, 2023, the Convertible Notes were amended to change the conversion date to the third business day following the Shareholder Approval Date (as defined in Note 19). In March 2022, the Convertible Notes and accrued but unpaid interest were converted into 8,628,024 shares of Common Stock.