Debt Obligations

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Debt Obligations

Note 8. Debt Obligations

Current portion of long-term debt consisted of the following as of the dates indicated:

	December 31,
	2022		2021
SVB Term Loan, net of discount and debt issuance costs	$	3,812,498	$	5,000,000
2021 Insurance Note		—		167,586
	$	3,812,498	$	5,167,586

Long-term debt, net of current portion, discount and debt issuance costs, consisted of the following as of the dates indicated:

	December 31,
	2022		2021
SVB Term Loan, net of discount and debt issuance costs	$	-	$	5,178,629

SVB Term Loan

On June 24, 2020 (the “Closing Date”), the Company entered into the SVB Term Loan with SVB, which provided a secured term loan in the principal amount of $10.0 million. The proceeds from the SVB Term Loan were fully funded on June 25, 2020.

The SVB Term Loan bears interest at a floating rate equal to the greater of 2.50% above the Prime Rate (as defined in the Loan Agreement) and 5.75%. Interest on the SVB Term Loan is due and payable monthly in arrears. The SVB Term Loan originally required interest-only payments through June 30, 2021. As a result of the Company’s achievement of an equity milestone defined in the Loan Agreement during the quarter ended June 30, 2021, the interest-only period was extended for six months through December 31, 2021. Following the extended interest-only period, the Loan Agreement required equal monthly payments of principal and interest through the maturity date of December 1, 2023.

Prepayments of the SVB Term Loan, in whole or in part, are subject to early termination fees in an amount equal to 1.0% of principal prepaid if prepayment occurs after the second anniversary of the Closing Date and prior to the maturity date. Upon termination of the Loan Agreement, the Company is required to pay a final fee premium equal to 8.00% of the principal amount of the SVB Term Loan.

In July 2022, the Company and SVB entered into an amendment to the SVB Term Loan (the "Term Loan Amendment"). Under the Term Loan Amendment, the Company and SVB agreed to remove the financial covenant under the Loan Agreement that had required the Company to maintain unrestricted cash, including short term investments available-for-sale, of not less than the greater of (i) $12.5 million and (ii) an amount equal to six times the amount of the Company's average monthly Cash Burn (as defined in the Loan Agreement) over the trailing three months. In exchange for this accommodation, the Company prepaid $2.5 million of outstanding principal under the Term Loan (the "Prepayment"). SVB waived the prepayment fee that otherwise would have applied to the Prepayment. The remaining outstanding principal amount due under the Term Loan will continue to be paid in equal monthly payments of principal and interest through the maturity date of December 1, 2023. The Term Loan Amendment was accounted for as a modification of the original SVB Term Loan.

On March 10, 2023, the FDIC took control and was appointed receiver of SVB. The SVB Term Loan remains intact and the Company will continue to make required payments through the end of the current year, at which time the SVB Term Loan will be repaid in full.

The Company’s obligations under the Loan Agreement are secured by a security interest in substantially all of its assets, excluding intellectual property (which is subject to a negative pledge), and the Company’s future subsidiaries, if any, may be required to become co-borrowers or guarantors under the Loan Agreement. If we default under our obligations under the SVB Term Loan, including as a result of a material adverse change, as defined in the SVB Term Loan, the lender could proceed against the collateral granted to them to secure our indebtedness or declare all obligations under the SVB Term Loan to be due and payable. The determination as to whether a material adverse change has occurred is not within the Company's control and it is unclear how the current managers of Silicon Valley Bridge Bank will view the SVB Term Loan from a risk standpoint and what actions they may elect to take under the SVB Term Loan to protect the financial interests of the lender.

The remaining principal repayments due under the SVB Term Loan as of December 31, 2022 are as follows:

2023	$	3,235,294
Less discount and deferred financing costs		(222,796	)
Plus final fee premium		800,000
Total SVB Term Loan, net	$	3,812,498

The Company included $0.2 million and $0.6 million of debt discount associated with the SVB Term Loan, resulting from fees and debt issuance costs, inclusive of the fair value of warrants issued, in current portion of long-term debt, net of discount and debt issuance costs and long-term debt, net of current portion, discount and debt issuance costs, respectively, in the accompanying consolidated balance sheets as of December 31, 2022 and 2021, respectively. Amortization of the debt discount associated with the SVB Term Loan was $0.4 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively, and was included in interest expense in the consolidated statements of operations. The effective interest rates for the years ended December 31, 2022 and 2021 were 16.15% and 10.47%, respectively.

Insurance Note

In May 2021, the Company entered into a new commercial financing agreement to extend the payment period related to its directors and officers insurance policy (the “2021 Insurance Note”). The 2021 Insurance Note required a down payment to be made upon signing the agreement equal to approximately $0.4 million. The remaining unpaid premium balance of approximately $0.7 million was financed at an annual rate of 3.57% and was repaid in nine equal monthly payments of principal and interest through February 2022.

In May 2022, the Company entered into a new commercial financing agreement to extend the payment period related to its directors and officers insurance policy (the "2022 Insurance Note"). The 2022 Insurance Note required a down payment to be made upon signing the agreement equal to approximately $0.3 million. The remaining unpaid premium balance of approximately $0.8 million was financed at an annual rate of 3.32% and was to be repaid in nine equal monthly payments of principal and interest beginning in June 2022. The 2022 Insurance Note contained customary events of default relating to, among other things, payment defaults and breaches of representations, warranties or terms of the 2022 Insurance Note documents, and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. In November 2022, the Company prepaid the remainder of the 2022 Insurance Note.