Term Loan

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Term Loan

Note 6 – Term Loan

In October 2020, the Company entered into a loan facility (“Term Loan”) with an initial draw of $25.0 million. Proceeds were used to help fund the Company’s ongoing operations. As part of the Term Loan, Oxford Finance LLC, (“Oxford Finance”) committed to providing further loans of up to $35.0 million to the Company at its election (or for one specific draw, upon the occurrence of a revenue milestone) during various draw periods in the future, provided the Company is not in default at the time of the additional loan draws. In March 2021, the Company drew an additional $5.0 million from the facility for the purpose of funding ongoing operations. In June 2021, the Company drew an additional $10.0 million from the facility for the purpose of funding ongoing operations.

On May 3, 2022, the Company entered into a Second Amendment (“Second Amendment”) to the Term Loan (as amended through the Second Amendment, the (“Amended Term Loan”). The Amended Term Loan increased the loan and security agreement to $60.0 million, of which $40.0 million was fully funded as of May 3, 2022 from the original term loan. Under the Amended Term Loan, the Company may borrow an additional amount of up to $10.0 million through June 30, 2023, upon satisfaction of the applicable drawdown conditions and achieves sufficient

trailing twelve-month sales as provided in the agreement for the measurement period ending March 31, 2023. Subject to the terms and conditions of the Amended Term Loan, the Company may also borrow an additional amount of up to $10.0 million through September 30, 2023, upon satisfaction of the applicable drawdown conditions and achieves sufficient trailing twelve-month sales as provided in the agreement for the measurement period ending June 30, 2023. The Amended Term Loan bears interest at a rate per annum equal to the greater of (i) 9.25% or (ii) 1-Month Term Secured Overnight Financing Rate (“SOFR”) (or, if greater, 0.16%) plus an applicable margin of 9.09%. If there is an event of default under the Amended Term Loan, additional interest of 5% applies. The Amended Term Loan extends the maturity date of the loan and security agreement, which was due to expire on October 1, 2025, to February 1, 2027. The Company refers to its $60.0 million Amended Term Loan as its credit facility. The Amended Term Loan was recorded as a debt modification.

The Amended Term Loan is secured by substantially all of the Company's personal property other than its intellectual property, but includes any accounts receivable, other amounts owed and any proceeds of intellectual property. The Company also entered into a negative pledge arrangement with the collateral agent and lenders where the Company agreed not to encumber any of its intellectual property. The Amended Term Loan also includes certain customary representations and warranties, affirmative and negative covenants, and events of default, including a financial performance-to-plan covenant that requires the Company to achieve certain minimum net sales, measured on a trailing twelve-month basis.

The Amended Term Loan requires 35 months of interest-only payments, followed by 22-months of principal and accrued interest payments. If the Company is in compliance with its performance-to-plan covenant through April 1, 2025 and has not provided an IP lien election notice before May 1, 2025, the interest-only period is extended by 12 months, and the amortization period is reduced to ten months. Payments are due on the first day of each month in arrears. All unpaid amounts under the Amended Term Loan mature on February 1, 2027. The Company may elect to prepay the loans under the credit facility at any time in full or in part; however, the Company may only elect to prepay the loans in part once, in an amount not less than $5.0 million. Any amounts prepaid may not be subsequently reborrowed. Under the Amended Term Loan, a final payment (“Final Payment”) will be due at the earlier of the maturity date, acceleration of the loans, or a voluntary or mandatory prepayment of the loans, in an amount equal to (a) if the Final Payment is due on or after January 1, 2022 through and including October 31, 2022, three percent (3.00%) of the original principal amount of the loans (or, in the case of a partial prepayment, the amount of principal to be prepaid), (b) if the Final Payment is due on or after November 1, 2022 through and including October 31, 2023, four percent (4.00%) of the original principal amount of the loans (or, in the case of a partial prepayment, the amount of principal to be prepaid), and (c) if the Final Payment is due on or after November 1, 2023, five percent (5.00%) of the original principal amount of the loans (or, in the case of a partial prepayment, the amount of principal to be prepaid). The Final Payment is being accreted to the carrying value of the debt as a debt premium and interest expense over the life of the loan using the effective interest method.

The Company paid $0.1 million in loan amendment fees and other closing costs that are directly attributable to execution of the Amended Term Loan transaction. These issuance costs are recorded as a discount to the carrying amount of the debt and are being amortized, along with the unaccreted portion of the Final Payment and unamortized debt issuance costs from the original Term Loan, to interest expense over the expected term of the debt using the effective interest method. The loans may be accelerated by Oxford Finance in the event of default.

As of June 30, 2022 and December 31, 2021, the Company was in compliance with all Amended Term Loan and Term Loan covenants, respectively.

For the three and six months ended June 30, 2022 and 2021 the cash interest paid and effective interest rate on the Amended Term Loan and Term Loan were as follows:

	Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021
Cash interest paid		9.86	%		9.25	%		9.52	%		9.25	%
Effective interest rate		11.50	%		10.90	%		11.05	%		11.09	%

As of June 30, 2022 future principal payments due under the Amended Term Loan were as follows (in thousands):

Year Ended December 31,
2022 (remainder)	$	—
2023		—
2024		—
2025		16,364
2026		21,818
2027		1,818
Total		40,000
Less: unamortized issuance costs  and exit fee		(119	)
Term loan, net	$	39,881