Convertible Loan Notes

6 Months Ended

Jun. 30, 2020

5 –

CONVERTIBLE LOAN NOTES

On April 21, 2020, the Company entered into a note purchase agreement pursuant to which the Company issued unsecured convertible loan notes to investors for a total of $10.0 million in principal. The Company will pay simple interest on the outstanding principal amount to the extent not converted at the rate of 8% per annum. No repayment of principal or interest was due until maturity, which occurs 12 months after issuance of the convertible loan notes. Under the agreement, the convertible loan notes outstanding principal and unpaid accrued interest automatically convert upon a Qualified Financing. If the Qualified Financing is consummated within (i) three months after the date of the agreement, the conversion price shall be equal to 90% of the per share price paid by the investors; (ii) if consummated more than three months after the date of the agreement, but within six months, the conversion price shall be equal to 80% of the per share price paid by the investors; and (iii) is consummated more than six months after the date of the agreement, the conversion price shall be equal to 70% of the price per share paid by the investors.

On June 2, 2020, upon the series C preferred stock financing (Note 6), the outstanding principal and unpaid accrued interest of the convertible notes of $10.1 million converted into 6,295,756 shares of series C preferred stock. Upon execution of the series C preferred stock, the noteholder investors waived their right to the 90% conversion price and converted the notes at 100% of the per share price paid by the investors in the Qualified Financing.

The Company elected the fair value option to account for the convertible loan notes. The Company recorded the convertible loan notes at fair value and subsequently remeasured them to fair value upon settlement of the convertible loan notes. Changes in fair value were recognized as a component of other income (expense), net in the condensed statements of operations and comprehensive loss. The Company recognized

a loss

in the condensed statements of operations and comprehensive loss of $0.1 million as change in fair value of the convertible notes during the three and six months ended June 30, 2020.