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Debt | 9 Months Ended
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Sep. 30, 2021
Debt Disclosure [Abstract] |
Debt | Note 5. Debt In January 2019, the Company entered into credit and security agreements with MidCap Financial Services, or the Lender, which provided a maximum of $25.0 million credit facility consisting of a $20.0 million senior secured term loan (the "2019 Term Loan") and a $5.0 million 2019 revolving loan (the "2019 Revolver" and collectively with the 2019 Term Loan, the “2019 MidCap Credit Facility”). In November 2020, the Company entered into amended and restated credit and security agreements with the same institution, which replaced the 2019 MidCap Credit Facility, and provided for a maximum of $40.0 million credit facility consisting of a $35.0 million senior secured term loan (the "2020 Term Loan") and a $5.0 million revolving loan (the "2020 Revolver and collectively with the 2020 Term Loan, the “2020 MidCap Credit Facility”). 2019 Term Loan The 2019 Term Loan had a four-year term and had a stated floating interest rate which equates to reserve- adjusted LIBOR + 6.75%. The 2019 Term Loan was split into three tranches as follows: (i) the Tranche One Loans provided for $12.0 million in term loans, (ii) the Tranche Two Loans provided for up to $2.0 million in term loans, and (iii) the Tranche Three Loans provided for up to $6.0 million in term loans. The Company borrowed $14.0 million under the Tranche One Loans and Tranche Two Loans. While the conditions necessary to draw the Tranche Three Loans had been met as of December 31, 2019, the Company did not elect to draw the Tranche Three Loans. The 2019 Term Loan originally required 18 monthly interest-only payments, which began on January 31, 2019, followed by 30 equal monthly installments of principal, plus interest. The interest-only period was extended by an additional six months upon achievement of the Tranche Three Milestone. The 2019 Term Loan had an effective interest rate of 14.52% per year. The 2019 Term Loan interest expense for the three months ended September 30, 2021 and 2020 was $0.0 and $0.5 million, respectively. The 2019 Term Loan interest expense for the nine months ended September 30, 2021 and 2020 was $0.0 and $1.6 million, respectively. In conjunction with the funding of Tranche One Loans and Tranche Two Loans under the 2019 Term Loan, the Company issued a 10-year warrant to the Lender to purchase 29,514 shares of the Company’s Series C redeemable convertible preferred stock (the “2019 Initial Warrant”) at an exercise price of $9.49 per share (the “Exercise Price”). Further, depending on the funding of the Tranche Three Loans, the Company was obligated to issue an additional Warrant to the Lender to purchase up to 12,649 shares of Series C redeemable convertible preferred stock at the Exercise Price (the “2019 Additional Warrant” and together with “2019 Initial Warrant” the “2019 Warrants”) (see Note 9). The conditions precedent to issuance of the 2019 Additional Warrant were never satisfied, so the warrant was not issued, and the Company's prospective obligation to issue the 2019 Additional Warrant expired upon modification of the 2019 Term Loan. In August 2021, the Lender effected a net exercise in full of the 2019 Initial Warrant and the Company issued the Lender 51,846 shares of common stock. The estimated fair value of the 2019 Warrants of $0.2 million upon draw down was based on the Black- Scholes option-pricing model and probability of future draw downs. The 2019 Warrants were recorded at the fair value as a debt discount and as a warrant liability. The debt discount was being accreted using the effective interest method as interest expense over the contractual period of four years for the 2019 Term Loan. The Company incurred $1.5 million of issuance costs in conjunction with the 2019 Term Loan. The issuance costs were netted against the borrowed funds in the condensed consolidated balance sheet and were accreted using the effective interest method as interest expense over the contractual period of four years for the 2019 Term Loan. The Company could voluntarily prepay the 2019 Term Loan borrowings in full, with a prepayment premium beginning at 3% in the first year from tranche funding, to 2% in the second year from tranche funding, to 1% in the third year from tranche funding thereafter. In addition, a final payment fee of 5% of the amounts borrowed was payable at the end of the term or when the borrowings were repaid in full. A long-term liability was being accreted using the effective interest method for the final payment fee over the term of the loan agreement. The borrowings were collateralized by a security interest in substantially all of the Company’s assets. The Company was subject to financial covenants related to minimum trailing revenue targets that began on January 1, 2019, and were tested on a monthly basis. Upon funding of only the Tranche One Loans, the Company had to achieve minimum net revenue of $7 million over a trailing 12-month period increasing to a maximum net revenue covenant of $35 million for the trailing 12-month period ending December 31, 2022, and thereafter. Upon funding of both the Tranche One Loans and Tranche Two Loans, the Company had to achieve minimum net revenue of $7 million over a trailing 12-month period increasing to a maximum net revenue covenant of $37.3 million for the 12-month period ending December 31, 2022, and thereafter. If Tranche Three Loans had been funded regardless of whether Tranche Two Loans had been funded, the Company would have been required to achieve minimum net revenue of $15 million over a trailing 12-month period increasing to a maximum net revenue covenant of $46.7 million for the 12-month period ending December 31, 2022, and thereafter. On November 23, 2020, the 2019 Term Loan was replaced with 2020 Term Loan (see below). 2019 Revolver The 2019 Revolver had a four-year term and has a stated floating interest rate which equates to reserve- adjusted LIBOR plus 4.25%. An unused line fee of 0.5% was payable monthly based on the average unused balance and a collateral management fee of 0.5% was payable monthly based on the outstanding balance of the 2019 Revolver. The Company could request to increase the 2019 Revolver commitment amount to $10.0 million under the term of the agreement. On November 23, 2020, the 2019 Revolver was replaced with the 2020 Revolver (see below). 2020 Term Loan The 2020 Term Loan has a five-year term and has a stated floating interest rate which equates to reserve- adjusted LIBOR + 7.00%. The 2020 Term Loan is split into three tranches as follows: (i) the Tranche One Loans provide for $12.0 million in term loans which are deemed to have been converted from Tranche One Loans that were drawn and outstanding under the 2019 Term Loan immediately prior to entering into 2020 MidCap Credit Facility, (ii) the Tranche Two Loans provided for up to $2.0 million in term loans which are deemed to have been converted from Tranche Two Loans that were drawn and outstanding under the 2019 Term Loan immediately prior to entering into 2020 MidCap Credit Facility, and (iii) the Tranche Three Loans provided for up to $21.0 million in new term loans. The Company borrowed $21.0 million under the Tranche Three Loans in November 2020. The 2020 Term Loan requires 24 monthly interest-only payments, which began on December 1, 2020, followed by 36 equal monthly installments of principal, plus interest. The interest-only period can be extended by an additional 12 months provided that the Company is in compliance with the minimum trailing revenue targets (as described below), and has unrestricted cash and cash equivalents of at least 12 times of the amortization monthly cash burn amount, measured as defined in the 2020 Term Loan agreement (“First IO Extension”). If the First IO Extension conditions are satisfied, the interest-only period can be further extended by an additional 12 months, provided that the Company is in compliance with the minimum trailing revenue targets (as described below), has unrestricted cash and cash equivalents of at least 12 times of the amortization monthly cash burn amount, and has consummated an IPO in which the Company has received cash proceeds of at least $60.0 million. The 2020 Term Loan has an effective interest rate of 13.59% per year. The 2020 Term Loan interest expense for the three months ended September 30, 2021 and 2020 was $1.1 million and $0.0, respectively. The 2020 Term Loan interest expense for the nine months ended September 30, 2021 and 2020 was $3.3 million and $0.0, respectively. In conjunction with entry into the 2020 MidCap Credit Facility, the Company issued a 10-year warrant to the Lender to purchase 300,000 shares of the Company’s Series F redeemable convertible preferred stock (the “2020 Warrant”) at an exercise price of $21.88 per share (see Note 9). The estimated fair value at issuance of the 2020 Warrant of $1.8 million was based on the Option-Pricing Method with Discounts for Lack of Marketability for each class of security. In addition, the Company incurred $0.5 million of issuance costs paid to the Lender in conjunction with the 2020 Term Loan which represents a debt discount. The Company concluded that the 2020 Term Loan represented a modification of the 2019 Term Loan and accounted for the 2020 Term Loan as debt modification. The 2020 Warrant was recorded at the fair value as a debt discount and as a warrant liability. At each balance sheet date, the 2020 Warrant was remeasured to fair value with any changes in fair value recognized as other income or expense in the statements of operations. The debt discount is being amortized using the effective interest method as interest expense over the contractual period of five years for the 2020 Term Loan. In August 2021, the Lender effected a net exercise in full of the 2020 Warrant and the Company issued the Lender 431,708 shares of common stock. The Company can voluntarily prepay the borrowings in full, with a prepayment premium beginning at 3% in the first year from entering into the 2020 MidCap Credit facility and declining to 2% in the second year to 1% in the third year thereafter. In addition, a final payment fee of 6% of the amounts borrowed is payable at the end of the term or when the borrowings are repaid in full. A long-term liability is being accreted using the effective interest method for the final payment fee over the term of the loan agreement. The borrowings are collateralized by a security interest in substantially all of the Company’s assets. The Company accrued $0.8 million and $0.5 million as of September 30, 2021 and December 31, 2020, respectively, related to accretion of final payment due at maturity per the agreement using the effective interest rate method. The final payment accrual is recorded in Other noncurrent liabilities on the balance sheets. The Company is subject to financial covenants related to minimum trailing revenue targets that began on September 30, 2020 and are tested on a monthly basis. The Company has to achieve minimum net revenue of $20.0 million over a trailing 12-month period increasing to a maximum net revenue covenant of $84.8 million for the trailing 12-month period ending October 31, 2025. As of September 30, 2021, the Company was in compliance with the applicable financial covenant. 2020 Revolver The 2020 Revolver has a four-year term and has a stated floating interest rate which equates to reserve- adjusted LIBOR plus 4.50%. An unused line fee of 0.5% is payable monthly based on the average unused balance and a collateral management fee of 0.5% is payable monthly based on the outstanding balance of the 2020 Revolver. The Company can request to increase the 2020 Revolver commitment amount to $15.0 million under the term of the agreement. As of September 30, 2021, $5.0 million was available to be drawn under the 2020 Revolver. The 2020 Revolver has not been drawn upon as of September 30, 2021. Long-term and short-term debt was as follows (in thousands):
|  | As of September 30, |  |  | As of December 31, |
|  | 2021 |  |  | 2020 |
Term Loan |  | $ | 35,000 |  |  | $ | 35,000 |
Total principal payments due |  |  | 35,000 |  |  |  | 35,000 |
Less: debt discount related to warrant liability and issuance costs |  |  | (2,514 | ) |  |  | (3,045 | )
Total amounts outstanding |  |  | 32,486 |  |  |  | 31,955 |
Less: Current portion |  |  | — |  |  |  | — |
Total accrued and other current liabilities |  | $ | 32,486 |  |  | $ | 31,955 |
The repayment schedule relating to the Company’s debt as of September 30, 2021, is as follows (in thousands):
|  | Amount |
2021 (remainder) |  |  | — |
2022 |  |  | (1,944 | )
2023 |  |  | (11,667 | )
2024 |  |  | (11,667 | )
2025 |  |  | (9,722 | )
Total repayments |  | $ | (35,000 | )

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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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