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DEBT | 9 Months Ended
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Sep. 30, 2020
Debt Disclosure [Abstract] |
DEBT | 6. DEBT On September 30, 2020, or the Closing Date, we, Hercules Capital, Inc., or Hercules, and Silicon Valley Bank, or SVB, entered into a term loan facility of up to $75,000,000, or the Term Loan. The Term Loan can be drawn in three tranches as follows: (i) Tranche A loan of up to $35,000,000 of which $25,000,000 was funded on the Closing Date and the remaining $10,000,000 is available to be drawn until June 15, 2021, (ii) Tranche B loan of up to $15,000,000 which is available to be drawn from January 1, 2021 to December 15, 2021, subject to the achievement of certain clinical milestones, and (iii) Tranche C loan of up to $25,000,000 available to be drawn through December 31, 2022, subject to approval by an investment committee comprised of Hercules and SVB. As of September 30, 2020, $25,000,000 under Tranche A has been drawn, and there have been no other amounts drawn under the other Tranches. The Term Loan matures on October 1, 2024, or the Loan Maturity Date, and may be extended up to an additional 12 months upon the achievement of certain clinical, regulatory and financial milestones. The Term Loan bears interest at a floating rate per annum equal to the greater of either (i) 9.0% or (ii) 9.0% plus the prime rate as reported in The Wall Street Journal (3.25% as of September 30, 2020) less 3.25%. The Tranche A Loan bears an interest rate of 9.0%. The Term Loan provides for an interest-only payment period from the Closing Date until November 1, 2022. The interest-only period may be extended up to an additional 12 months upon the achievement of certain clinical, regulatory and financial milestones. Following the expiration of the interest-only period, we will repay the Term Loan in equal monthly amortization payments of principal and interest until the Loan Maturity Date. Upon full repayment of the Term Loan, we are also obligated to pay an end of term charge in an amount equal to 6.55% of the amount of the Term Loan actually borrowed. Such end of term charge is being accrued to interest expense over the term of the Term Loan using the effective interest rate method. At our option, upon at least five business days’ prior written notice to Hercules, we may prepay all or any portion greater than or equal to $5,000,000 of the outstanding loan by paying the entire principal balance (or portion thereof) and all accrued and unpaid interest. Such prepayment is subject to a prepayment charge of 1.5% of the prepayment amount, if the prepayment is made in any of the first 36 months following the Closing Date. Thereafter, any prepayment is not subject to a prepayment charge. The Term Loan is secured by substantially all of Geron’s assets, except our intellectual property, which is the subject of a negative pledge. The Term Loan contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings. We are in compliance with the covenants under the Term Loan as of September 30, 2020. The Term Loan also contains a minimum cash covenant that requires us to hold at least $25,000,000 in cash beginning June 1, 2022. Such minimum cash covenant ceases to apply if certain regulatory milestones are achieved as set forth in the Term Loan. However, a minimum cash covenant of $30,000,000 is required upon certain licensing transactions being executed. In the event of default (subject, in certain instances, to specified grace periods), the principal, interest and any other monetary obligations on all the then outstanding amounts under the Term Loan may become due and payable immediately. Upon the occurrence of an event of default, a default interest rate of an additional 5% may be applied to the outstanding principal balance, and Hercules, as the administrative agent, may declare all outstanding obligations immediately due and payable (subject, in certain instances, to specified grace periods) and take such other actions as set forth in the Term Loan. Upon the occurrence of certain bankruptcy and insolvency events, the obligations under the Term Loan would automatically become due and payable. Embedded Derivatives and Debt Discounts The conditional exercisable call option related to the event of default is considered to be an embedded derivative which is required to be bifurcated and accounted for as a separate financial instrument. In the periods presented, the value of the embedded derivative is not material and therefore, no amount has been recognized. If an event of default becomes more probable than is currently estimated, then the embedded derivate could become material in future periods and would be recognized as a separate financial instrument at that time. As of September 30, 2020, the net carrying value of the Tranche A loan was $23,885,000, after deducting $445,000 for various discounts on issuance and $670,000 in debt issuance costs. The debt discounts and debt issuance costs are being amortized to interest expense over the life of the Tranche A loan using the effective interest rate method. As of September 30, 2020, accrued interest of approximately $6,000 for the Tranche A loan has been included in accrued liabilities on our condensed balance sheets and no amount has been accrued for the end of term charge. Future Minimum Payments The following table presents future minimum payments, including interest and the end of term charge, under the Term Loan as of September 30, 2020 (in thousands):
Remainder of 2020 |  | $ | 388 |
2021 |  |  | 2,281 |
2022 |  |  | 4,184 |
2023 |  |  | 13,705 |
2024 |  |  | 13,098 |
Total |  |  | 33,656 |
Less: amount representing interest |  |  | (7,019 | )
Less: unamortized debt discounts and issuance costs |  |  | (1,115 | )
Less: end of term charge |  |  | (1,637 | )
Less: current portion of debt |  |  | — |
Noncurrent portion of debt |  | $ | 23,885 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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