LOAN PAYABLE

12 Months Ended

Dec. 31, 2021

LOAN PAYABLE

LOAN PAYABLE

NOTE 6 – LOAN PAYABLE

On February 28, 2019 (the Closing Date), we entered into a term loan facility of up to $60.0 million (Term Loan) with Hercules Capital, Inc. (Hercules), the proceeds of which were used for research and development programs and for general corporate purposes. The Term Loan is governed by a loan and security agreement, dated February 28, 2019 (the Loan Agreement), which provides for up to four separate advances. The first advance of $30.0 million was drawn on the Closing Date. An additional $30.0 million was available with different milestones and time points that have lapsed.

On December 30, 2021 (the First Amendment Closing Date), the Company entered into an Amended and Restated Loan and Security Agreement (the Amended Loan Agreement) with Hercules Capital, Inc. The Amended Loan Agreement amended the terms of the Loan Agreement to, among other things, (i) increase the aggregate principal amount of the loan, available at the Company’s option, from $60.0 million to $200.0 million (the Amended Term Loan), (ii) issue a first advance of $70.0 million drawn at the First Amendment Closing date, a portion of which was used to refinance the current outstanding loan balance of approximately $7.8 million and pay for expenses incurred by the Lender in executing the agreements, (iii) change the draw amounts and dates available in Tranche 2 through Tranche 4 including increasing the amount available under Tranche 2 subject to the achievement of performance milestones from $10.0 million to

$20.0 million, increasing the amount available under Tranche 3 subject to the achievement of performance milestones from $10.0 million to $45.0 million, and increasing the amount under Tranche 4 subject to the approval of Hercules’ investment committee from $10.0 million to $65.0 million, (iv) extend the maturity date of the facility from the original March 1, 2022 to January 1, 2026, (v) reset and extend the interest only period from April 1, 2021 to February 1, 2025 and extendable to August 1, 2025 subject to the achievement of certain performance milestones, and (vi) modify the cash interest rate to be the greater of either (a) the “prime rate” as reported in The Wall Street Journal plus 2.15%, and (b) 5.40%. The performance milestones are based on achievement of certain U.S. Food and Drug Administration approvals and impact the potential extension of the interest only period, access to future advances under the Loan Agreement and minimum cash levels required under the Amended Loan Agreement.

The Amended Loan Agreement contains financial covenants from and after October 15, 2022 that require the Company to maintain certain levels of unrestricted cash and additional financial covenants related to market capitalization and unrestricted cash commencing on July 1, 2023 at any time when the Amended Term Loan advances made under the Amended Loan Agreement are greater than $70 million.

The Amended Loan Agreement also contains warrant coverage of 2.95% of the total amount funded. A warrant (the Warrant) was issued by the Company to Hercules to purchase 115,042 shares of common stock with an exercise price of $17.95 for the initial amount funded at closing. The Warrant shall be exercisable for seven years from the date of issuance. Hercules may exercise the Warrant either by (a) cash or check or (b) through a net issuance conversion.

In addition, the Company is required to pay a final payment fee equal to 5.95% of the aggregate principal amount of the Term Loan Advances.

The Company may, at its option, prepay the Amended Term Loan in full or in part, subject to a prepayment penalty equal to (i) 2.0% of the principal amount prepaid if the prepayment occurs prior to the first anniversary of the First Amendment Closing Date, (ii) 1.5% of the principal amount prepaid if the prepayment occurs on or after the first anniversary and prior to the second anniversary of the First Amendment Closing Date, and (iii) 1.0% of the principal amount prepaid if the prepayment occurs on or after the second anniversary and prior to the third anniversary of the First Amendment Closing Date.

The Company evaluated whether the Amended Term Loan entered into in December 2021 represented a debt modification or extinguishment of the Term Loan in accordance with ASC 470-50, Debt – Modifications and Extinguishments. As a result of the repayment and retirement of the Term Loan, the Term Loan was accounted for by the Company under the extinguishment accounting model. The Company recorded a loss on extinguishment of debt of approximately $0.2 million on the Company’s statement of operations for the twelve months ended December 31, 2021, representing the write-off of deferred financing costs.

The Company estimated the fair value of the Warrant using the Black-Scholes model based on the following key assumptions:

	Amended Term Loan
Exercise price	$	17.95
Common share price on date of issuance	$	19.35
Volatility		184.4	%
Risk-free interest rate		1.44	%
Expected dividend yield		—	%
Contractual term (in years)		7.00 years

The Company incurred financing expenses of $7.4 million (including the fair value of the Warrant) related to the Amended Loan Agreement which are recorded as debt issuance costs and as an offset to loan payable on the Company’s consolidated balance sheet. The debt issuance costs are being amortized over the term of the debt using the straight-line method, which approximates the effective interest method, and will be included in interest expense in the Company’s consolidated statements of operations. Amortization of debt issuance costs was $1.1 million, $0.9 million and $0.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. At December 31, 2021, the remaining unamortized balance of debt issuance costs was $7.4 million.

The loan payable as of December 31, 2021 and 2020, is as follows:

	December 31,		December 31,
(in thousands)	2021		2020
Loan payable	$	70,000	$	30,000
End of term fee		5,140		975
		75,140		30,975
Less: unamortized debt issuance costs		(7,377)		(1,080)
		67,763		29,895
Less: principal payments		—		—
Total loan payable		67,763		29,895
Less: current portion		(975)		(22,179)
Loan payable non-current	$	66,788	$	7,716