XML 25 R14.htm IDEA: XBRL DOCUMENT

LOAN PAYABLE

9 Months Ended

Sep. 30, 2021

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.

The Term Loan will mature on March 1, 2022 (the Loan Maturity Date). Each advance accrues interest at a per annum rate of interest equal to the greater of either (i) the “prime rate” as reported in The Wall Street Journal plus 4.75%, and (ii) 10.25%. As a result of the Company having raised in excess of $150 million before the required timeline in the Loan Agreement, the interest-only period was extended to April 1, 2021. At our option, we may prepay all or any portion greater than or equal to $5.0 million of the outstanding advances by paying the entire principal balance (or portion thereof) and all accrued and unpaid interest, subject to a prepayment charges of: 3.0% if such advance is prepaid in any of the first twelve months following the Closing Date; 1.5% if such advance is prepaid after the first twelve months following the Closing Date but on or prior to twenty-four months following the Closing Date; and 0% thereafter. In addition, a final payment equal to 3.5% of the aggregate principal amount of the loan extended by Hercules is due on the maturity date. As of September 30, 2021, we have paid approximately $14.6 million of the principal loan balance due to Hercules. The Term Loan repayment schedule continues with monthly principal payments ranging from approximately $2.5 million to $2.7 million per month through March 1, 2022.

The Term Loan is secured by a lien on substantially all of our assets, other than intellectual property, and contains customary covenants and representations. As of September 30, 2021 and through the filing date of this report, the Company has been in compliance with all covenants.

The Loan Agreement contains several events of default, which we are in compliance with all terms. If an event of default occurs, Hercules is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement. Amounts outstanding during an event of default shall be payable on demand and accrue interest at an additional rate of 4.0% per annum of the past due amount outstanding.

The Loan Agreement also contains warrant coverage of 2% of the total amount funded. A warrant (the Hercules Warrant) was issued to Hercules to purchase 147,058 shares of common stock with an exercise price of $4.08. We accounted for the Hercules Warrant as an equity instrument since it was indexed to our common shares and met the criteria for classification in shareholders’ (deficit) equity. The relative fair value of the Hercules Warrant on the date of issuance was approximately $1.0 million and was treated as debt issuance costs and as an offset to the Term Loan. This amount will be amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of the Term Loan.

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


Exercise price	$	4.08
Common share price on date of issuance	$	6.80
Volatility		195.9	%
Risk-free interest rate		2.63	%
Expected dividend yield		--	%
Contractual term (in years)		7.00 years

The Company incurred financing expenses of $2.8 million (including the fair value of the Hercules Warrant) related to the Hercules Loan Agreement which are recorded as debt issuance costs and as an offset to loan payable on the Company’s unaudited condensed 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 are included in interest expense in the Company’s unaudited condensed consolidated statements of operations. Amortization of debt issuance costs was $0.3 million and $0.2 million for each of the three months ended September 30, 2021 and 2020, respectively, and $0.7 million for each of the nine months ended September 30, 2021 and 2020, respectively. At September 30, 2021, the remaining unamortized balance of debt issuance costs was $0.4 million.

The loan payable as of September 30, 2021 and December 31, 2020 is as follows:


	September 30,		December 31,
(in thousands)	2021		2020
Loan payable	$	30,000	$	30,000
End of term fee		975		975
		30,975		30,975
Less: unamortized debt issuance costs		(386)		(1,080)
		30,589		29,895
Less: principal payments		(14,590)		—
Total loan payable		15,999		29,895
Less: current portion		(15,999)		(22,179)
Loan payable non-current	$	—	$	7,716