Term Loan

6 Months Ended

Jun. 30, 2019

On August 21, 2018, the Company entered into a Loan and Security Agreement (Loan Agreement) with Silicon Valley Bank (SVB), pursuant to which the Company could obtain a loan of aggregate principal amount of up to $15.0 million (Term Loans), which would become available in three tranches, each of an aggregate principal amount of up to $5.0 million. Contemporaneously with executing the Loan Agreement, the Company drew down the first $5.0 million tranche. The second $5.0 million tranche expired on

June 30, 2019

and the third $5.0 million tranche may be drawn only upon the achievement of a certain development milestone. Borrowings under the Loan Agreement bear interest at the greater of (i) 6.0% or (ii) a floating per annum rate 1.0% above the prime rate (for an interest rate of 6.50% at June 30, 2019), with interest only due and payable monthly, until March 1, 2020, at which time interest and principal will be due and payable monthly in equal monthly payments; are subject to a final payment fee equal to 6.75% of the aggregate principal amount.

The Company may prepay all, but not less than all, of the loaned amounts subject to a prepayment fee. The Loan Agreement is secured by substantially all of the Company’s personal property, except for its intellectual property and requires the Company to maintain the lesser of $10 million or 80% of its cash and cash equivalents with SVB. The Loan Agreement contains customary covenants and customary events of default. The occurrence of an event of default could result in an increase to the applicable interest rate of 5.0%, and the consequent obligation for the Company to repay all amounts outstanding under the Loan Agreement.

In connection with the Loan Agreement, the Company issued a warrant to SVB to purchase 73,529 of the Company’s common stock at a price per share of $1.87. The warrant was immediately exercisable, will expire on August 21, 2028, contains a cashless exercise provision and is classified as equity. If the Company is to draw the third tranche available under the Loan Agreement, the Company will grant an additional amount of common stock issuable upon exercise of the warrant based upon the principal amount advanced. In no event will the number of common stock issuable pursuant to the exercise of the warrant exceed 147,059 in the aggregate.

The fair value of the warrant and the debt issuance costs were recorded as debt discounts and together with the final payment fee are being amortized using the effective interest rate method over the term of the loan. As of June 30, 2019, the effective interest rate on the initial tranche of the loan was 9.89% and the unamortized debt discount was $0.1 million. Amortization of the debt discount and accretion of final payment was $40,000 and $0.1 million for the three and six months ended June 30, 2019, respectively.

Scheduled payments due under the Loan Agreement, excluding the final payment fee of $0.3 million and interest payments, are as follows:


	June 30, 2019
	(in thousands)
2020	$	1,667
2021		2,000
2022		1,333
Total	$	5,000

During the three and six months ended June 30, 2019, the Company recognized $0.1 million and $0.2 million of interest expense, respectively, related to the Loan Agreement. The Company did not incur interest expense for the three and six months ended June 30, 2018.