Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Debt

6. Debt

Loan Agreement

On July 30, 2020, Private Viracta and Silicon Valley Bank (the “Lender”) entered into a loan and security agreement (the “SVB Loan Agreement”), providing for up to $15.0 million in four tranches. Upon entering into the SVB Loan Agreement, Private Viracta borrowed $5.0 million.

The loan was due on the scheduled maturity date of July 1, 2024 and had an interest only period through January 31, 2022, followed by 30 equal monthly payments of principal plus accrued interest commencing on February 1, 2022. The per annum interest rate for any outstanding loan was the lesser of (i) 10%, or (ii) the greater of (A) 3.5% above the prime rate or (B) 6.75%. The interest rate as of December 31, 2020 was 6.75% per annum. In addition, a final payment of 7.0% of the amount of the loan drawn was due on the earlier of the Maturity Date, acceleration of the loan, or prepayment of the loan. The final payment was accrued through interest expense using the effective interest method. The debt issuance costs and warrants issued (Note 8) were accounted for as a debt discount. The debt discount was being amortized as interest expense over the term of the loan using the effective interest method. If the Company elected to prepay the loan, a prepayment fee equal to 1% or 2% of the then outstanding principal balance was also due, depending upon when the prepayment occurs. No prepayment fee is charged if the credit is replaced with a new facility from the same bank.

On November 4, 2021, the Company entered into a new loan and security agreement (the “Loan Agreement”) with SVB and Oxford for up to $50.0 million. In connection with entering the new $50.0 million credit facility, the Company and SVB agreed to terminate the Company’s prior $15.0 million loan and security agreement with SVB. The existing $5.0 million debt balance from the Company’s previous credit facility with SVB was relieved under this new $50.0 million credit facility. The Loan Agreement was accounted for as a modification based on the effect of changes in terms from the original SVB Loan Agreement. Under the terms of the $50.0 million credit facility, the remaining $45.0 million is available in two additional tranches of $20.0 million and $25.0 million under certain circumstances, and the Company is under no obligation to draw funds in the future. The second tranche of $20.0 million would be available upon request by the Company and Lenders approval until August 31, 2022, and the third tranche, $25.0 million, would be available at the Company's request subject Lenders' discretion. As of March 31, 2022, neither tranche had been requested.

The loan will be due on the scheduled maturity date of November 1, 2026 (the “Maturity Date”). In accordance with the original terms of the Loan Agreement, repayment of the loan is interest only through December 31, 2023, and if evidence of positive Phase 1(b) data in the EBV+ solid tumor trial sufficient to advance into Phase 2 is delivered to the Lenders and confirmed by the Company's board of directors prior to December 31, 2023 (the “Milestone”), the interest-only period would be extended through December 31, 2024. This period of interest only will be followed by 35 equal monthly payments of principal plus accrued interest commencing on January 1, 2024, or if the Milestone is achieved, the period of interest only will be followed by 23 equal monthly payments of principal plus accrued interest commencing on January 1, 2025. The per annum interest rate for any outstanding loan is equal to the greater of (i) 8.15% and (ii) the sum of (a) the Prime Rate, as reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 4.90%. In addition, a final payment of 5.0% of the amount of the loan drawn will be due on the earlier of the Maturity Date, acceleration of the loan, or prepayment of the loan. The final payment is being accrued through interest expense using the effective interest method. If the Company elects to prepay the loan, a prepayment fee equal to 1% or 2% of the then outstanding principal balance will also be due, depending upon when the prepayment occurs. If the Company elects to not draw certain portions of the loan, the Company will incur a 3% fee of the undrawn portion.

The Company is subject to customary affirmative and restrictive covenants under the Loan Agreement. The Company’s obligations under the Loan Agreement are secured by a first priority security interest in substantially all of its current and future assets, other than the Company's intellectual property. The Company has also agreed not to encumber its intellectual property assets, except as permitted by the Loan Agreement. As of March 31, 2022, the Company was in compliance with nonfinancial covenants.

The Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, the Company’s failure to fulfill certain obligations under the Loan Agreement and the occurrence of a material adverse change in the Company’s business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of Lenders' lien in the collateral or in the value of such collateral. In the event of default by the Company under the Loan Agreement, the Lenders would be entitled to exercise their remedies thereunder, including the right to accelerate the debt, upon which the Company may be required to repay all amounts then outstanding under the Loan Agreement. As of March 31, 2022, the Company was in compliance with all financial covenants under the Loan Agreement and there had been no material adverse change.

The debt issuance costs are being accounted for as a debt discount. The debt discount is being amortized as interest expense over the term of the loan using the effective interest method. The carrying value of the debt approximates the fair value (Level 2) as of March 31, 2022.

The following table summarizes future principal payments (in thousands) under the terms of the Loan Agreement:

Years Ending December 31,
2022 (remaining)	$	—
2023		—
2024		1,714
2025		1,714
Thereafter		1,572
Total future principal payments		5,000
Unamortized discount		(159	)
Total, net	$	4,841