Debt



	September 30, 2018		December 31, 2017
Debt
Current portion of Senior Secured Debenture	$	—	$	8,377
Short-term convertible promissory notes	76		—
Non-current portion of Senior Secured Debenture	—		2,611
Total debt	$	76	$	10,988

Senior Secured Debenture

On May 10, 2016, the Company's predecessor company, Galena, entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with JGB (the "Purchaser") pursuant to which Galena sold to the JGB, at a 6.375% original issue discount, a $25.5 million Senior Secured Debenture (the "Senior Secured Debenture") and warrants to purchase up to 3,333 shares of the Company's common stock. Net proceeds to Galena from the sale of the Senior Secured Debenture and warrants, after payment of commissions and legal fees, were approximately $23.4 million.

The Senior Secured Debenture originally matured November 10, 2018, with accrued interest at 9% per year, payable monthly. In addition, on the maturity date of the Senior Secured Debenture (or such earlier date that the principal amount of the Senior Secured Debenture is paid in full by acceleration or otherwise) a fixed amount, which would have been deemed interest under the Senior Secured Debenture, equal to $0.8 million was due and payable to JGB on such date in, at the option of the Company, cash and, subject to the same conditions for the payment of interest, in shares of the Company’s common stock, or a combination of cash and the Company’s common stock.

The Company’s obligations under the Senior Secured Debenture were secured under a security agreement by a senior lien on all of the Company’s assets, including all of the Company’s interests in its consolidated subsidiaries. Private SELLAS was not a party to the security agreement. Under the terms of a subsidiary guarantee agreement, each subsidiary guaranteed the performance of the Company of the Securities Purchase Agreement, Senior Secured Debenture and related agreements.


•

The Company was required to maintain a minimum of the lesser of $18.5 million or the outstanding principal amount of unencumbered cash in a restricted account. Any funds in the restricted account in excess of the outstanding principal balance were transferred to the Company's unrestricted account to fund its ongoing operations. As of December 31, 2017, the Company maintained $10.2 million of cash and cash equivalents in a restricted account.

As of December 31, 2017, the outstanding principal balance of the Senior Secured Debenture was $10.2 million. In addition to the outstanding principal balance, the Senior Secured Debenture had $0.8 million of additional interest that was included in the current portion of long-term debt as of December 31, 2017. During the nine months ended September 30, 2018, JGB redeemed $2.8 million of outstanding principal, which the Company satisfied with 659,529 shares of its common stock and redeemed $0.6 million of outstanding principal, which the Company satisfied with cash. As a result of the redemptions during 2018, the Company transferred $1.8 million of restricted cash into unrestricted cash and cash equivalents which was used to fund the Company’s ongoing operations.

JGB commenced a lawsuit against the Company as described in Note 8 ("JGB Action"). On September 24, 2018, JGB unilaterally issued a directive to (i) the financial institution that maintained the restricted cash and cash equivalents and (ii) the manager of the account to liquidate all assets in the restricted account. As a result of such directive, approximately $8.5 million in cash was removed from the restricted account, $1.6 million in excess of the outstanding principal balance of the Senior Secured Debenture at the time of the removal. On October 16, 2018, JGB was required to deposit the $1.6 million excess that JGB removed from the restricted account into an escrow account, as ordered by the Court in the JGB Action, pending resolution of the dispute between the Company and JGB. On October 23, 2018, the Court entered an order, granting, among other things, the Company's Motion for Judgment seeking dismissal of JGB's amended complaint and allowing four of the Company's counterclaims to proceed to trial. As a result of the October 23rd Court order, on November 5, 2018, the parties to the JGB Action entered into a settlement agreement. The settlement agreement provides, among other things, that JGB make a one-time payment to the Company of $6.6 million, representing the $1.6 million excess cash removed from the amount in the restricted account from the outstanding principal balance of the Senior Secured Debenture and reimbursement of approximately $5.0 million of legal fees incurred by the Company. The Company recognized a gain on extinguishment of debt of $0.8 million that was previously accrued in long-term debt representing an additional interest payable at maturity as the amount is no longer required to be repaid by the Company. Accordingly, the Senior Secured Debenture is no longer outstanding and the related agreements have been terminated.

Short-term Convertible Promissory Notes

During the nine months ended September 30, 2018, the Company entered into convertible promissory notes in the principal amount of $1.0 million in exchange for the surrender and cancellation of warrants to purchase 412,667 shares of its common stock pursuant to the February 2017 offering by Galena. The convertible promissory notes accrue interest at a rate of 5% per annum and the remaining outstanding principal balance and accrued interest is due and payable in November 2018. The outstanding principal balance and accrued interest is convertible into shares of the Company's common stock at a conversion price equal to $7.00. In April 2018, $0.8 million of outstanding principal and accrued interest was converted into 118,644 shares of common stock. As of September 30, 2018, $0.1 million principal balance and accrued interest remains outstanding.