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Notes Payable | 3 Months Ended
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Mar. 31, 2023
Debt Disclosure [Abstract] |
Notes Payable | 6. Notes Payable On September 30, 2019 (the Effective Date), the Company entered into a Loan and Security Agreement (the Loan Agreement) with two lenders (the Lenders) pursuant to which the Company borrowed $10.0 million from the Lenders (the Term Loan), which represents the maximum amount the Company is permitted to borrow under the terms of the Loan Agreement. The Term Loan matures on June 1, 2024 (the Maturity Date) and is repaid through interest-only payments, which originally extended through June 30, 2021, followed by 36 equal monthly payments of principal and interest. The Term Loan bears interest at a floating per annum rate equal to the greater of (i) 8.25% and (ii) the sum of (a) the prime rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 3.00%. On April 23, 2021, the Loan Agreement was amended to (i) change the final payment percentage from 4.5% to 5.0% and (ii) extend the interest-only payment period based on achieving the following milestones: (a) the Company achieving positive data in the Company's Phase 1b aGVHD trial of itolizumab (EQ001) supporting a formal decision to advance into Phase 2 or Phase 3 development, and as confirmed by the Company's Board of Directors in written board minutes (the Interest-Only Extension Milestone) and (b) the Company initiating a pivotal Phase 3 aGVHD trial (the Interest-Only Extension II Milestone). In May 2021, the Company achieved the Interest-Only Extension Milestone, and in March 2022, the Company obtained confirmation from the Lenders that the Interest-Only Extension II Milestone had been achieved, which extended the interest-only payments through September 30, 2022, followed by 24 equal monthly principal payments and interest. In February 2022, the Company entered into a Third Amendment to the Loan Agreement (the Third Amendment) which added Bioniz as a secured party to the loan. Under authoritative guidance, the April 2021 amendment did not meet the criteria to be accounted for as a troubled debt restructuring. In addition, the Company performed a quantitative analysis and determined that the terms of the new debt and original debt instrument were not substantially different. Accordingly, the April 2021 amendment was accounted for as a debt modification. A new effective interest rate that equates the revised cash flows to the carrying amount of the original debt was computed and applied prospectively. The effective interest rate as of March 31, 2023 is 12.11%. The Company will be required to make a final payment of 5.00% of the original principal amount of the Term Loan drawn payable on the earlier of (i) the Maturity Date, (ii) the acceleration of the Term Loan in the event of a default, or (iii) the prepayment of the Term Loan (the Final Payment). The Company may prepay all, but not less than all, of the Term Loan upon 30 days’ advance written notice to the lender, provided that the Company will be obligated to pay a prepayment fee equal to (i) 3.00% of the principal amount of the Term Loan prepaid on or before the first anniversary of the applicable funding date, (ii) 2.00% of the principal amount of the Term Loan prepaid between the first and second anniversary of the funding date, and (iii) 1.00% of the principal amount of the Term Loan prepaid thereafter, and prior to the Maturity Date (each, a Prepayment Fee). In connection with entering into the Loan Agreement, the Company issued to the Lenders warrants exercisable for 80,428 shares of the Company’s common stock (the Warrants). The Warrants are exercisable in whole or in part, immediately, and have a per share exercise price of $3.73, which was the closing price of the Company’s common stock reported on the Nasdaq Global Market on the day prior to the Effective Date. The Warrants will terminate on the earlier of September 30, 2029 or the closing of certain merger or consolidation transactions. The aggregate carrying amounts of the Term Loans are comprised of the following (in thousands):
|  | March 31, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
Principal |  | $ | 7,143 |  |  | $ | 8,571 |
Add: accreted liability for final payment fee |  |  | 448 |  |  |  | 430 |
Less: unamortized discount |  |  | (36 | ) |  |  | (48 | )
Total |  | $ | 7,555 |  |  | $ | 8,953 |
Upon the occurrence of certain events, including but not limited to the Company’s failure to satisfy its payment obligations under the Loan Agreement, the breach of certain of its other covenants under the Loan Agreement, or the occurrence of a material adverse change, cross defaults to other indebtedness or material agreements, judgment defaults and defaults related to failure to maintain governmental approvals failure of which to maintain could result in a material adverse effect, the Lenders will have the right, among other remedies, to declare all principal and interest immediately due and payable, to exercise secured party remedies, to receive the Final Payment and, if the payment of principal and interest is due prior to the Maturity Date, to receive the applicable Prepayment Fee. At March 31, 2023, the Company was in compliance with the covenants contained in the Loan Agreement. Future maturities of the Term Loans, including the Final Payment fee, as of March 31, 2023 are as follows (in thousands):
Remainder of 2023 (nine months) |  | $ | 4,286 |
Year ending December 31, 2024 |  |  | 3,357 |
|  |  | 7,643 |
Unaccreted balance for Final Payment fee on Term Loans |  |  | (52 | )
Unamortized discounts |  |  | (36 | )
|  |  | 7,555 |
Less current portion |  |  | (5,714 | )
Noncurrent portion |  | $ | 1,841 |

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