Debt

12 Months Ended

Jun. 30, 2020

On June 30, 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with several banks and other financial institutions or entities from time to time parties to the Loan Agreement (collectively, referred to as the “Lenders”) and Hercules Capital, Inc., in its capacity as administrative agent and collateral agent for itself and the Lenders (in such capacity, the “Agent”).

The Loan Agreement provides for a term loan in an aggregate principal amount of up to $25.0 million to be delivered in multiple tranches (the “Term Loan”). The tranches consist of (i) a term loan advance of $10.0 million on June 30, 2020 (the “Closing Date”) and (ii) subject to the Lenders’ investment committee’s sole discretion, the Company has the right to request that the Lenders make additional term loan advances in an aggregate principal amount of up to $15.0 million prior to January 1, 2022 or, if certain conditions are satisfied, then July 1, 2022. There can be no assurances that any Term Loan advances will be funded by the Lenders in the future.

In connection with entering into the Loan Agreement, the Company paid an aggregate of $165,000 to the Lenders for an initial facility charge, due diligence fees and reimbursement of legal expenses. Such amount was recorded as either a debt discount or a deferred financing fee, both of which reduce the carrying value of the outstanding Term Loan.

The Term Loan matures on December 1, 2023; provided that, in the event that the Company meets certain conditions, including achievement of performance milestones, then the Term Loan matures on June 1, 2024. The date on which the Term Loan matures (i.e., either December 1, 2023 or June 1, 2024) is referred to as the “Term Loan Maturity Date.”

The Term Loan bears interest at a rate equal to the greater of either: (i) the sum of (x) the prime rate as reported in

The Wall Street Journal

minus 3.25% and (y) 9.75%; or (ii) 9.75%. Borrowings under the Loan Agreement are being repaid in monthly interest-only payments from the Closing Date through December 31, 2021, with the possibility to extend that date until June 30, 2022 upon the Company’s achievement of certain performance milestones. After the interest-only period ends, borrowings under the Loan Agreement will be repaid in equal monthly installments of principal and interest until the Term Loan Maturity Date.

The Company may, at its option, prepay all, but not less than all, of the outstanding Term Loan balance plus all accrued and unpaid interest thereon, together with a prepayment charge equal to: (i) 3.0% of the amount so prepaid if such prepayment occurs during the first 12 months following the Closing Date; (ii) 2.0% of the amount so prepaid if such prepayment occurs after 12 months but prior to 24 months from the Closing Date; (iii) 1.0% of the amount so prepaid if such prepayment occurs after 24 months but prior to 36 months from the Closing Date; and (iv) zero percent of the amount so prepaid if such prepayment occurs three years or more after the Closing Date.

On the earliest to occur of the (i) Term Loan Maturity Date, (ii) date that the Company prepays the outstanding secured payment obligations in full or (iii) date that the secured payment obligations become due and payable, the Company will pay (in addition to any prepayment charge) an end of term charge of 6.95% of the aggregate term loan advances. Such charge was recorded as a discount to the carrying value of the outstanding Term Loan.

The Term Loan is secured by substantially all of the Company’s assets, other than its intellectual property. However, the Company has agreed to not pledge or secure its intellectual property to others.

During the term of the Loan Agreement, the Lenders or their assignee or nominee have the right to participate in any equity offerings by the Company that are broadly marketed to multiple investors, in an amount up to $2.0 million, on the same terms, conditions and pricing afforded to other investors participating in any such subsequent offering.

The Loan Agreement contains customary representations, warranties and both affirmative and negative covenants. The Loan Agreement requires that after July 1, 2021 and upon term loan advances exceeding $10.0 million, the Company will maintain minimum unrestricted cash of at least $5.0 million, plus the amount of the Company’s accounts payable not paid after the 120

day following a vendor’s invoice date, until the Company has a market capitalization equal to or greater than $300.0 million. The negative covenants in the Loan Agreement include, among other things, agreements by the Company limiting additional indebtedness, liens (including a negative pledge on intellectual property and other assets), guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates, and fundamental changes. Additionally, the Company may not declare or pay any cash dividends during the term of the Loan Agreement. The Company was in full compliance with all covenants of the Loan Agreement as of June 30, 2020.

The Loan Agreement provides for events of default customary for term loans of this type, including, but not limited

to, non-payment

of interest or principal when due, breaches or defaults in the performance of covenants, insolvency, bankruptcy and the occurrence of an event that could have a material adverse effect on the Company. Upon the occurrence of an event of default that has not otherwise been remedied by the Company, the Agent may: (i) accelerate payment of all or any part of the secured obligations, impose a prepayment charge and terminate the Lenders’ commitments under the Loan Agreement; (ii) sign and file in the Company’s name any notices, assignment or agreements necessary to perfect payment; or (iii) notify any of the Company’s debtors to make payment directly to such agent.

As of June 30, 2020, the carrying value of the Term Loan on the Company’s balance sheet was $9.7 million, which consisted of

the

outstanding principal

of such loan

and the end of term charge accrual, less unamortized debt discounts and deferred financing fees of $1.0 million that are being amortized to interest expense over the duration of the Loan Agreement using an effective interest method. On such date, financing fees totaling $149,000 were unpaid and have been included in accrued and other liabilities on the Company’s balance sheets. As of June 30, 2020, the variable contractual interest rate on the Term Loan was 9.75% per annum and the effective rate on the Term Loan is projected to be 13.53% through the Term Loan Maturity Date. Interest expense on the Term Loan during the year ended June 30, 2020 was nominal.

Future minimum principal payments of the outstanding Term Loan balance, excluding the end of term charge, are as follows: $2.3 million in the year ending June 30, 2022; $5.0 million in the year ending June 30, 2023; and $2.7 million in the year ending June 30, 2024.