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Notes Payable
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
Notes Payable

Note 10. Notes Payable

 

The SVB Loan Facility

 

On June 18, 2021, the Company entered into a $10 million loan facility (the “SVB Loan Facility”) with Silicon Valley Bank (“SVB”). The Company immediately used $6 million from the SVB Loan Facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation as further discussed below. Concurrently with this transaction, the Company used $6.0 million of other available funds to establish a restricted cash account which serves as security for the SVB Loan Facility.

 

The SVB Loan Facility is in the form of money market secured indebtedness bearing interest at a calculated WSJ Prime-based variable rate (currently 6.25%). A final payment equal to 3% of the total $10 million commitment amount is due upon maturity or prepayment of the SVB Loan Facility. There was no facility commitment fee and no stock or warrants were issued to SVB. Payments under the loan agreement are interest only for the first 24 months after loan closing, followed by a 24-month amortization period of principal and interest through the scheduled maturity date.

 

In connection with the SVB Loan Facility, the Company incurred financing fees and expenses totaling $243,370 which is recorded and classified as debt discount and are being amortized as interest expense using the effective interest method over the life of the loan. Also, in connection with the SVB Loan Facility, the Company is required to pay an end-of-term fee equal to 3.0% of the original loan amount at time of maturity. Therefore, these amounts totaling $300,000 are being amortized as interest expense using the effective interest method over the life of the loan. During the three-month period ended September 30, 2022, the Company incurred interest expense of $82,083 and amortized $44,942 as interest expense for debt discounts and end-of-term fee in connection with the SVB Financing Facility. During the nine-month period ended September 30, 2022, the Company incurred interest expense of $191,167 and amortized $135,572 as interest expense for debt discounts and end-of-term fee in connection with the SVB Financing Facility. During the three-month and nine-month periods ended September 30, 2021, the Company incurred interest expense of $49,883 and $56,875, respectively, and amortized $45,687 and $52,144, respectively, as interest expense for debt discounts and end-of-term fee in connection with the SVB Financing Facility.

 

Following is a schedule of future principal payments, net of unamortized debt discounts and amortized end-of-term fee, due on the SVB Loan Facility:

 

      
   As of September 30, 
2023  $750,000 
2024   3,000,000 
2025   2,250,000 
2026 and thereafter   – 
Subtotal of future principal payments   6,000,000 
Unamortized debt premium, net   (9,967)
Total  $5,990,033 

 

 

Horizon Credit Agreement

 

On June 27, 2018, the Company entered into a loan agreement with Horizon Technology Finance Corporation (“Horizon”) that provided $10 million in new capital (the “Horizon Credit Agreement”). The Company drew down $10 million upon closing of the Horizon Credit Agreement on June 27, 2018. On August 28, 2020, Horizon and the Company amended the Horizon Credit Agreement (the “Horizon Amendment”) whereby the Company repaid $5 million of the loan’s principal with $5 million of the loan remaining outstanding.

 

On June 18, 2021, as a condition of entering into the SVB Loan Facility, the Company paid the remaining outstanding principal balance, an early termination fee and the end of term charges in full satisfaction of the Horizon Credit Agreement, as amended.

 

Following is a schedule of the amounts paid to Horizon on June 18, 2021:

 

      
Principal balance at June 18, 2021  $5,000,000 
Early termination fees   150,000 
End of term charges   275,000 
Total  $5,425,000 

 

As an initial fee in connection with the Horizon Credit Agreement, the Company issued Horizon warrants exercisable for a total of 12,674 shares of the Company’s common stock (the “Existing Warrants”) at a per share exercise price of $39.45. The Existing Warrants were immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years from the date of grant. Pursuant to the Horizon Amendment, one-half of the aggregate Existing Warrants, exercisable for a total of 6,337 shares of the Company’s common stock, were cancelled, and the Company issued Horizon new warrants exercisable at a per share exercise price equal to $15.15 for a total of 16,501 shares of the Company’s common stock (the “New Warrants”). The New Warrants were immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years from the date of grant. The remaining 6,337 Existing Warrants issued in connection with the Horizon Credit Agreement remain outstanding at a per share exercise price of $39.45.

 

The Company valued the warrants issued to Horizon using the Black-Scholes option pricing model and recorded as of the respective issuance dates a total of $507,116 for the Existing Warrants and $247,548 for the New Warrants as a direct deduction from the debt liability, consistent with the presentation of debt discounts, which was amortized as interest expense using the effective interest method over the life of the loan until the loan was terminated on June 18, 2021.

 

During the three months ended September 30, 2021, no interest expense was recognized as the amounts owed under the Horizon Credit agreement were paid off in June 2021. During the nine month ended September 30, 2021, the Company incurred $225,920 in interest expense and amortized $139,428 as interest expense for debt discounts and end of term charges in connection with the Horizon Credit Agreement.