Debt

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Debt

4. Debt

The carrying values of our debt obligation were as follows:

	September 30,
	2021
Term Loan Agreement	$	25,078
Unamortized discount on Term Loan Agreement		(867	)
Total debt		24,211
Less: current portion of long-term debt		(12,037	)
Long-term debt	$	12,174

On August 6, 2021, the Company entered into a $50.0 million Term Loan Agreement with SVB, with an initial borrowing of $25.0 million ("Term A Tranche"). Loans under the Term Loan Agreement are secured by a first lien of substantially all the assets of the Company, other than the Company's intellectual property. Proceeds from intellectual property are available as security for amounts borrowed.

The Term Loan Agreement requires the Company to meet certain funding and clinical milestones in order to either: (i) extend the maturity date of the initial loan ("Equity Milestone") or (ii) to utilize the Term Loan Agreement's remaining $25.0 million available borrowing capacity (“Term B Tranche”).

Principal repayments for the Term A Tranche will start on April 1, 2022, with a maturity date of March 1, 2023; however, if an Equity Milestone is achieved on or before March 31, 2022, principal repayments for the Term A Tranche will start on September 1, 2022, with a maturity date of August 1, 2025. Upon achievement of certain funding and clinical milestones associated with the Term B Tranche on or before August 31, 2022, the Company may borrow the remaining $25.0 million available under the Term Loan Agreement with principal repayments for the Term Loan Agreement starting on September 1, 2023 and a maturity date of August 1, 2025.

Outstanding loans bear interest, payable monthly, at the greater of (a) 7.75% and (b) the current published U.S. prime rate, plus a margin of 4.5%. As of September 30, 2021, interest on outstanding loans was 7.75%. In addition to the payment of the outstanding principal plus accrued interest due, the Company will also owe SVB 5.75% of the original principal amounts borrowed as a final payment ("Final Payment"). The Final Payment will be accreted over the term of the loan using the effective interest method.

The Company may, at its option, make up to two prepayments, each prepayment consisting of no less than $5,000,000 of any outstanding borrowings under the Term Loan Agreement, plus accrued and unpaid interest, subject to a prepayment premium. In addition to any outstanding principal plus accrued interest selected for prepayment, the Company would also prepay a pro-rata portion of the prepayment premium and the Final Payment associated with the principal amount being repaid. The Company cannot re-borrow any amounts previously paid.

Should the Company fail to achieve the Equity Milestone on or before December 31, 2021, cash and cash equivalents equal to 50% of the then outstanding principal plus associated Final Payment must be deposited into an account pledged to SVB as additional cash collateral.

The Term Loan Agreement restricts the Company, apart from conducting its operations in the normal course of business and certain other permitted exceptions, from entering into mergers or acquisitions, incurring additional indebtedness, paying dividends, delisting its stock from the Nasdaq stock exchange or disposing of assets or making changes to its business operations without the consent of SVB.

The Term Loan Agreement also contains standard conditions, as well as insolvency and delisting of the Company’s common stock from Nasdaq, as deemed events of default. Should the debt become mandatorily repayable upon an event of default, a default interest rate of 3% above otherwise applicable rates would be due on any balances outstanding.

In connection with the Term Loan Agreement, the Company also issued warrants to SVB providing for the purchase of a total of 432,844 shares of its common stock at an exercise price of $2.22 per share. The warrants are exercisable in whole or in part any time prior to August 6, 2031, and were recorded at their relative fair value amount of $0.8 million in additional paid-in capital upon issuance (with an offsetting reduction to the carrying value of outstanding debt).

Should the Company achieve the Term B Milestone and borrow the remaining $25.0 million available under the Term Loan Agreement, an additional 432,842 warrants will be issued and recorded at that time to SVB with similar terms to the initial issuance described above.

The Term Loan Agreement issuance costs were approximately $1.0 million and primarily related to the warrants issued to SVB, which will be amortized into interest expense over the period to March 1, 2023. Interest expense, including the amortization of issuance costs, was $0.4 million for the third quarter of 2021.

The fair value of the Term Loan Agreement as of September 30, 2021 approximates its face value due to proximity to the transaction.