XML 33 R16.htm IDEA: XBRL DOCUMENT v3.22.4
DEBT
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
DEBT

8. 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, or the Term Loan, up to $75,000,000, which was amended in August 2021, or the Original Loan Agreement. On June 30, 2022, or the Effective Date, we entered into a second amendment to the Original Loan Agreement, or as amended, the Loan Agreement. Under the second amendment, the aggregate principal amount available to us increased from $75,000,000 to $125,000,000, with such principal being available in a series of tranches, subject to certain terms and conditions. As of December 31, 2022, a total of $50,000,000 has been drawn under the Loan Agreement.

Under the second amendment, the $75,000,000 in remaining loan principal as of December 31, 2022 can be drawn as follows: (a) the first tranche of $20,000,000 is available within the earlier of 30 days of the achievement of certain clinical and financial milestones or September 15, 2023, subject to the achievement of such milestones; (b) the second tranche of $10,000,000 is available from January 1, 2023 until December 15, 2023, subject to the achievement of certain clinical and regulatory milestones, and satisfaction of certain other requirements; (c) the third tranche of $20,000,000 is available from September 15, 2023 until September 15, 2024, subject to the achievement of certain clinical and regulatory milestones, and satisfaction of certain capitalization requirements; and (d) the final tranche of $25,000,000 is available through December 31, 2024, subject to approval by an investment committee comprised of Hercules and SVB (or its successor, if any). However, on March 10, 2023, the Federal Deposit Insurance Corporation, or FDIC, issued a press release stating that SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. Of the remaining term commitments under the Loan Agreement, Hercules and its affiliates hold 65% and 35% were held by SVB. As a result of the closure of SVB, we do not know whether and to what extent we would be able to draw down the remaining $55.0 million under the Loan Agreement, even if we meet the conditions set forth in the Loan Agreement necessary for additional draw downs, and it is possible that we will not be able to access any additional funding under the Loan Agreement. With the exception of the final tranche, and subject to achievement of the applicable milestones and other requirements with respect to each tranche, draw downs are at our election.

Under the second amendment, the maturity date, interest only payment dates, end of term charges, collateral, events of default, representations, warranties and covenants remain consistent with the terms of the Original Loan Agreement, except as follows:

•
Beginning June 1, 2022 and prior to the regulatory approval for imetelstat, or the potential Regulatory Approval, if any, we are required to maintain a minimum cash balance in an amount equal to the greater of: 50% of the outstanding principal amount under the Loan Agreement or $30,000,000.
•
After the potential Regulatory Approval, if any, the minimum cash requirement may be satisfied through one of the following three options, as elected by us: (a) maintaining a cash balance in an amount not less than 40% of the outstanding principal amount under the Loan Agreement; (b) maintaining a cash balance in an amount not less than 25% of the outstanding principal amount under the Loan Agreement, if our market cap is or exceeds $750,000,000; or (c) maintaining six month net product revenues of at least 70% of net product revenues forecasted by us, should any potential Regulatory Approval for imetelstat be obtained.

On the Effective Date of the second amendment, we paid $100,000 as a facility charge that we recognized as a debt discount and are amortizing such cost to interest expense over the life of the loan using the effective interest rate method. Additional facility charges applied to future draw downs will be treated similarly. We incurred approximately $75,000 in legal fees in connection with the second amendment, which we recognized as debt

issuance costs and are amortizing such cost to interest expense over the life of the loan using the effective interest rate method. Future debt issuance costs will be treated similarly. Under the second amendment, if we choose to prepay the principal with respect to any future draw down after the Effective Date, any such prepayment within the first 36 months after the Effective Date will be subject to a prepayment charge equal to 1.5% of the principal amount prepaid. No prepayment charge will be assessed for any prepayment occurring more than 36 months after the Effective Date.

Unchanged from the Original Loan Agreement, 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 (7.5% as of December 31, 2022) less 3.25%. The Term Loan provided for an initial interest-only payment period from the Closing Date until November 1, 2022. As of December 31, 2022, the interest-only period expires May 1, 2023. Upon the achievement of certain regulatory and financial milestones, the interest-only period may be extended for another six months until November 1, 2023. 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 for any draw downs prior to the second amendment. 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 December 31, 2022.

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 derivative could become material in future periods and would be recognized as a separate financial instrument at that time.

As of December 31, 2022, the net carrying value of the Term Loan was $51,157,000, which includes the principal amount of $50,000,000 less the net unamortized discounts and debt issuance costs of $628,000 plus accrued end of term charge of $1,785,000. The carrying value of the debt approximates the fair value as of December 31, 2022. The debt discounts and debt issuance costs are being amortized to interest expense over the life of loan amounts under Term Loan using the effective interest rate method.

Future Minimum Payments

The following table presents future minimum payments, including interest and the end of term charge, under the Term Loan as of December 31, 2022 (in thousands):

 

2023

 

$

26,843

 

2024

 

 

34,160

 

Total

 

61,003

 

Less: amount representing interest

 

(7,728

)

Less: unamortized debt discount and issuance costs

 

(628

)

Less: unamortized end of term charge

 

(1,490

)

Less: current portion of debt

 

(20,945

)

Noncurrent portion of debt

$

30,212