XML 29 R16.htm IDEA: XBRL DOCUMENT v3.23.1
NOTES PAYABLE
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
NOTES PAYABLE

9. 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”). Imunon immediately drew down $6 million from the SVB Loan Facility and used the funds to retire all outstanding indebtedness with Horizon 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 7.75%). 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 years ended December 31, 2022 and 2021, the Company incurred interest expense of $295,792 and $106,709 and amortized $181,259 and $97,831, respectively, as interest expense for debt discounts and end-of-term fee in connection with the SVB Loan Facility.

 

The 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

December 31,

 
2023  $1,500,000 
2024   3,000,000 
2025 and thereafter   1,500,000 
Subtotal of future principal payments   6,000,000 
Amortized end-of-term fee, net   (35,720)
Total  $5,964,280 

 

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 “Amendment”) whereby Imunon repaid $5 million of the $10 million loan and $0.2 million in related end of term charges, and the remaining $5 million in obligations were restructured as set forth below.

 

 

Pursuant to the Amendment, the remaining $5 million in obligations of Imunon under the Horizon Credit Agreement was secured by a first-priority security interest in substantially all assets of Imunon other than intellectual property assets. The obligations bore interest at a rate calculated based on an amount by which the one-month LIBOR exceeds 2% plus 7.625%. In no event could the interest rate be less than 9.625%. Payments pursuant to the Amendment were interest only for the first 12 months after August 1, 2020, followed by a 21-month amortization period of principal and interest through the scheduled maturity date on April 1, 2023. In addition, the remaining $5 million in obligations was subject to an end of term fee equal, in the aggregate, to $275,000, which amount was payable upon the maturity of the obligations or upon the date of final payment or default, as applicable. In connection with the Amendment, Imunon agreed to a liquidity covenant which provided that, at all times, Imunon maintain unrestricted cash and/or cash equivalents on deposit in accounts over which the applicable lenders maintained an account control agreement in an amount not less than $2.5 million. In addition, pursuant to the Amendment, Imunon agreed to provide evidence to Horizon on or before March 31, 2021, that it received aggregate cash proceeds of not less than $5 million from the sale of equity, debt, its New Jersey NOLs, or a combination thereof, subsequent to the date of the Amendment. The Company met this requirement during the fourth quarter of 2020.

 

In connection with the Horizon Credit Agreement, the Company incurred financing fees and expenses totaling $175,000 which were recorded and classified as debt discount. In addition, the Company paid loan origination fees of $100,000 which were recorded and classified as debt discount. These debt discount amounts totaling $782,116 were being amortized as interest expense using the effective interest method over the life of the loan. Also, in connection with each of the Horizon Credit Agreement, the Company was required to pay an end of term charge equal to 4.0% of the original loan amount at time of maturity. Therefore, those amounts totaling $400,000 were being amortized as interest expense using the effective interest method over the life of the loan.

 

As a fee in connection with the Horizon Credit Agreement, Imunon issued Horizon warrants exercisable for a total of 12,674 shares of Imunon’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. The Company valued the Existing Warrants issued using the Black-Scholes option pricing model and recorded a total of $507,116 as a direct deduction from the debt liability, consistent with the presentation of debt discounts, and are being amortized as interest expense using the effective interest method over the life of the loan. Pursuant to the Amendment, one-half of the aggregate Existing Warrants, exercisable for a total of 6,337 shares of Imunon’s common stock, have been canceled, and, in connection with the Amendment, Imunon issued Horizon new warrants exercisable at a per share exercise price equal to $15.15 for a total of 16,501 shares of Imunon’s common stock (the “New Warrants” and, together with the Existing Warrants, the “Warrants”). The remaining 6,337 Existing Warrants issued in connection with the Horizon Credit Agreement remain outstanding at the exercise price of $39.45 per share.

 

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 Horizon Credit Agreement contains customary representations, warranties and affirmative and negative covenants including, among other things, covenants that limit or restrict Imunon’s ability to grant liens, incur indebtedness, make certain restricted payments, merge, or consolidate and make dispositions of assets.

 

The Amendment was evaluated in accordance with FASB ASC 470-50, Debt-Modifications and Extinguishments, for debt modification and extinguishment accounting. The Company accounted for the $5 million it repaid as a debt extinguishment thereby reducing the principal obligations accordingly.

 

The Company accounted for the remaining $5 million of obligation under the Amendment as a debt modification to the initial agreement with respect to the minor changes in cash flows. Also, in connection with the $5 million remaining obligations, the Company recorded $5,000 of financing fees and the New Warrant fair value of $247,548 as additional debt discount on the $5 million remaining obligation. Therefore, approximately $109,706 of unamortized debt discount will be amortized over the remaining life of the new obligations. The $275,000 of end of term fees, net of previously amortized end of term fees totaling $142,605 previously accrued on the original note associated with the $5 million remaining obligation, will be amortized as interest expense over the remaining life of the new obligations.

 

During the year ended December 31, 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.

 

 

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

 

During the year ended December 31, 2021, the Company recorded a loss of $234,419 on the termination of the Horizon Credit Agreement, as amended, which represented the early termination fee and the end of term fees, net of previously amortized interest expense totaling $190,581 on the date of its payoff.