Term Loan

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Term Loan

6. Term Loan

In September 2019, the Company entered into a Loan and Security Agreement, as subsequently amended (the Loan Agreement) with Silicon Valley Bank (SVB) providing for a term loan (the Term Loan) for an aggregate principal amount of $4.5 million.

In September 2019 and in connection with the Loan Agreement, the Company issued a warrant to purchase up to an aggregate of 49,609 shares of common stock at $1.44 per share. The Company determined the initial fair value of the warrant to be $0.1 million using the Black-Scholes option-pricing model. The fair value of the warrant was recorded to equity and as a debt discount, which was being amortized to interest expense using the effective interest method over the term of the Term Loan. In November 2020, the warrant was net-exercised for 46,358 shares of common stock.

In March 2021, the Company entered into a First Amendment to Loan and Security Agreement (the First Amendment), which increased the aggregate principal amount of the Term Loan to $30.0 million, of which $20.0 million was immediately available under the first tranche (First Tranche) and $10.0 million was available under the second tranche through December 31, 2022 (Second Tranche), subject to the completion of certain clinical or financial milestones. Pursuant to the First Amendment, the Term Loan will mature on January 1, 2026.

In May 2022, the Company entered into a Second Amendment to Loan and Security Agreement (the Second Amendment), which amended the milestones for the Second Tranche, added a liquidity covenant for the Second Tranche and amended the interest and prepayment terms.

As of December 31, 2022, the carrying value of the Term Loan was $4.9 million, consisting of the outstanding principal under the First Tranche of $5.0 million, less unamortized debt discount and issuance costs of $0.1 million which are being amortized using the effective interest method over the life of the Term Loan. Commitments available under the Second Tranche of $10.0 million expired on December 31, 2022.

The Loan Agreement provides for monthly cash interest-only payments following the funding date of each respective tranche and continuing thereafter through December 31, 2022. The Term Loan is subject to a floating per annum interest rate equal to the greater of (a) 0.50% above the Prime Rate (as defined in the Loan Agreement) or (b) 3.75%. Following the interest-only period, the outstanding Term Loan balance will be payable in (i) 37 consecutive monthly payments after the end of the interest-only period and continuing on the same day of each month thereafter, in amounts that would fully amortize such Term Loan balance, as of the first business day of the first month following the amended interest-only period, over the repayment period, plus (ii) monthly payments of accrued but unpaid interest. As of December 31, 2022, the stated interest rate of the Term Loan was 8.0%.

The final payment is due on the maturity date and includes all outstanding principal plus accrued unpaid interest and an end of term payment totaling $0.3 million (the Supplemental Final Payment which is 6.0% of the original funded principal amount of the First Tranche). The Company may prepay amounts outstanding under the Term Loan at any time provided certain notification conditions are met, in which case, all outstanding principal plus accrued and unpaid interest, the Supplemental Final Payment, a prepayment fee of 1% or 2% of the principal amount of the First Tranche, and any bank expenses become due and payable.

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 intellectual property. The Company also agreed not to encumber its intellectual property assets, except as permitted by the Loan Agreement.

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 its 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 lender’s lien in the collateral or in the value of such collateral. In the event of default by the Company under the Loan Agreement, the lender 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 December 31, 2022, the Company was in compliance with all covenants under the Loan Agreement and there has been no material adverse change.

As of December 31, 2022, future payments of principal and interest are as follows (in thousands):

Year ending December 31,
2023	$	1,966
2024		1,836
2025		1,704
2026		136
Total	$	5,642
Less: interest		(642	)
Term loan, gross	$	5,000
Less: unamortized debt issuance costs		(85	)
Less: term loan, current portion		(1,622	)
Term loan, net of current portion	$	3,293