Note 12.

12.5% Senior Secured Notes and Loans Payable

12.5% Senior Secured Notes - First Supplemental Indenture

On November 3, 2020, the Company entered into the First Supplemental Indenture (the “Supplemental Indenture”) by and among the Company and U.S. Bank National Association, as Trustee (the “Trustee”) and Collateral Agent thereunder to the Indenture, dated as of July 15, 2019 (the “Base Indenture” and, as supplemented by the Supplemental Indenture, the “Indenture”), by and between the Company and the Trustee. Under the Supplemental Indenture, the Company repaid $22,500 of its $70,000 outstanding 12.5% Notes from the $40,000 upfront proceeds received from its Monetization of Future Revenue Stream associated with Sunovion’s KYNMOBI^® (apomorphine) product. Further, the Company entered into an additional Purchase Agreement with its lenders whereby the Company issued in aggregate $4,000 of additional 12.5% senior notes (the “2020 Additional Notes”) in lieu of paying a prepayment premium to two lenders on the early repayment of the 12.5% Notes discussed above. The result of these two transactions reduced the net balance of the Company’s 12.5% Senior Notes outstanding in the aggregate to $51,500 at December 31, 2020. The $4,000 principal issuance is to be repaid proportionally over the same maturities as the remaining outstanding Initial Notes. The Company also paid to one its lenders a $2,250 premium as result of the early retirement of debt.

The Company accounted for the $22,500 debt repayment as a debt modification. The fees paid to lenders inclusive of (i) $2,250 early premium prepayment and (ii) $4,000 issuance of additional debt in lieu of paying a prepayment penalty have been recorded as additional debt discount, amortized over the remaining life of the Notes using the effective interest method. Loan origination costs of $220 associated with the new debt of were expensed as incurred. Existing deferred discounts and loan origination fees are amortized as an adjustment of interest expense over the remaining term of modified debt using the effective interest method.

The Amendment contains a provision whereby as the Company receives any cash proceeds from the Permitted Apomorphine Monetization (the Monetization Proceeds), each Noteholder has the right to require the Company to repay all or any part of such Noteholder’s outstanding 12.5% Notes at a repurchase price in cash equal to 112.5% of the principle amount, plus accrued and unpaid interest. This repurchase offer is capped at 30% of the cash proceeds received by the Company as the contingent milestones are attained, if any, up through June 30, 2025. This repurchase offer or put option gives holders of the option the right, but not the obligation, to receive a specified amount of the future royalties up to the capped amount. A valuation study was performed by an independent third party appraiser. Based on the valuation study, the put option was valued at $535, of which $115 has been recorded in Accrued expenses and $420 has been recorded in Other non-current liabilities. The embedded put option is deemed to be a derivative under ASC 815 Derivatives and Hedging, which requires the recording of the embedded put option at fair value and subject to remeasurement at each reporting period.

In addition, the holders of the 12.5% Notes have extended to December 31, 2021 from March 31, 2021, the Company’s ability to access, at the Company’s option, $30,000 of senior notes re-openers under the Indenture. The first $10,000 senior notes re-opener represents a commitment of such amount by current holders of 12.5% Notes, at the option of the Company, contingent upon FDA approval of the Company’s product candidate Libervant (diazepam) Bucca Film for the management of seizure clusters. A second $20,000 senior notes re-opener represents a right, at the Company’s option, to market to current holders of the Company’s 12.5% Notes, and/or other lenders, additional senior notes up to such amount, contingent upon FDA approval of Libervant for U.S. market access.

The 12.5% Notes provide a stated fixed rate of 12.5%, payable quarterly in arrears, with the initial quarterly principal repayment of the Initial Notes due on September 30, 2021 and the final quarterly payment due at maturity on June 30, 2025. The Company has recorded $2,575 as Loan Payable, Current to reflect this obligation in its Consolidated Balance Sheet. Principal payments are scheduled to increase annually from 10% of the face amount of the debt then outstanding during the first four quarters to 40% of the initial loan principal during the final four quarters.

A debt maturity table is presented below:

2021	$	2,575
2022		7,725
2023		12,875
2024		18,025
2025		10,300
Total	$	51,500

The Company may elect, at its option, to prepay the 12.5% Notes at any time at premiums that range from 101.56% of outstanding principal if prepayment occurs on or after the fifth anniversary of the issue date of the Initial Notes to 112.50% if payment occurs during the third year after the issuance of the Notes. In the event that redemption occurs within the two years after the issuance of the 12.5% Notes, a make-whole fee is required, based on the present value of remaining interest payments using an agreed-upon discount rate linked to the then-current U.S. Treasury rate. The Indenture also includes change of control provisions under which the Company may be required to repurchase the 12.5% Notes at 101% of the remaining principal plus accrued interest at the election of the Lenders.

The Company capitalizes legal and other third-party costs incurred in connection with obtaining debt as deferred debt issuance costs and applies the unamortized portion as a reduction of the outstanding face amount of the related loan in accordance with ASU 2015-3, Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs. Similarly, the Company amortizes debt discounts, such as those represented by warrants issued to its lenders, and offsets those as a direct reduction of its outstanding debt. Amortization expense arising from deferred debt issuance costs and debt discounts related to the 12.5% Notes and the Perceptive loan for the years ended December 31, 2020 and 2019 were $2,587 and $1,929, respectively. Unamortized deferred debt issuance costs and deferred debt discounts totaled $14,596 and $9,662 as of December 31, 2020 and 2019, respectively.

Collateral for the loan under the 12.5% Notes consists of a first priority lien on substantially all property and assets, including intellectual property, of the Company. This secured obligation provides payment rights that are senior to all existing and future subordinated indebtedness of the Company and provides Lenders with perfected security interests in substantially all of the Company’s assets.

12.5% Senior Secured Notes

On July 15, 2019, the Company completed the private placement of up to $100,000 aggregate principal of its 12.5% Senior Secured Notes due 2025 (the “Notes”) and issued warrants for 2,000,000 shares of common stock (the “Warrants”), $0.001 per value per share, through its structuring agent, Morgan Stanley & Co., LLC, and entered into a purchase agreement and related indenture (the “Purchase Agreement” or “Indenture”) governing these Notes. The Company simultaneously entered into related agreements including a Collateral Agreement with U.S. Bank National Association, as trustee and collateral agent, and a Lien Subordination and Intercreditor Agreement for the benefit of Madryn Health Partners, other institutional noteholders (the “Noteholders”) and U.S. Bank National Association in dual roles providing terms governing an asset-based loan facility.

Upon closing of the Indenture for the 12.5% Notes (“Indenture”), the Company issued $70,000 of the principal of the 12.5% Notes (the “Initial Notes”) along with the Warrants and rights of first offer (the “First Offer Rights”) to the lenders participating in this transaction for Notes and Warrants (the “Lenders”). Issuance of the Initial Notes and Warrants provided net proceeds of $66,082.

Proceeds from issuance of the Initial Notes and Warrants were used to fully repay the Company’s $56,340 outstanding indebtedness to Perceptive Credit Holdings, LP, (the “Perceptive Loan”) related early repayment fees and legal and other fees incurred in obtaining this loan and executing this Indenture.

Loans Payable - Perceptive

In August 2016, the Company entered into a Loan Agreement and Guaranty with Perceptive Credit Opportunities Fund, LP (“Perceptive”) under which the total available facility of $50,000` had been borrowed as of March 2017. At closing, Perceptive received a warrant to purchase senior common equity interests representing 4.5% of the fully diluted common units of the Company on an as converted basis, which was automatically exercised in full at the time of the IPO (see also Note 13). In July 2019, the Perceptive Loan was paid in full in connection with the completion of the sale of the Initial Notes and Warrants described above. The early extinguishment of this debt resulted in a charge to 2019 earnings in the amount of $4,896, including an early retirement premium of $2,944 and the remaining balances of the unamortized loan discount and loan acquisition costs.