10.

Long-Term Debt

Long-term debt consisted of the following as of

December 31, 2019

and

2018:

		December 31,			December 31,
	Maturity Date	2019			2018
Pacific Western Bank note	October 25, 2022	$	15,878,121		$	10,802,355
CSC build-to-suit equipment financing, net of discount			—			1,142,194
Less current portion			(5,585,637	)		(316,906	)
Long-term debt, less current portion		$	10,292,484		$	11,627,643

Pacific Western Bank

January

2016

and

October 2016,

the Company entered into a Loan and Security Agreement (“LSA”) and an amendment, respectively, with Pacific Western Bank (“Pacific Western”). The LSA provided that the Company

may

borrow up to

$10.0

million in

three

tranches of a term loan (“Term Loan”) to supplement working capital and finance facility expansion and capital equipment purchases. The Term Loan was collateralized by a lien on all assets of the Company that are

not

otherwise encumbered, including a negative pledge on intellectual property prohibiting its sale without Pacific Western’s consent. Amounts borrowed under the Term Loan could be repaid at any time without penalty or premium. The Term Loan was interest-only through

July 6, 2017,

followed by an amortization period of

months of equal monthly payments of principal plus interest, beginning on

August

2017

and continuing on the same day of each month thereafter until paid in full. Any amounts borrowed under the Term Loan bore interest at

3.75%

during the initial

-month interest-only period. Following the interest-only period, the interest rate increased to

5.00%,

which was to be fixed for the duration of the Term Loan. Subsequent to the Company closing its IPO, on

August 6, 2018

the Company paid Pacific Western a liquidity event success fee of

$400,000,

which was recorded as Interest Expense in the Statement of Operations and Comprehensive Loss for the year ended

December 31, 2018.

March 2018,

the Company and Pacific Western executed the Ninth Amendment to the LSA (the “Ninth Amendment”). With the Ninth Amendment, new covenants were enacted requiring the Company to (

) at all times maintain a balance of cash at Pacific Western of at least

$8.0

million, an increase of

$5.5

million from its prior cash balance covenant, and (

)

not

observe any materially adverse data from its

LIQ861

Phase

study on or before

December 31, 2018.

Pursuant to this Ninth Amendment, the interest-only period for the Tranche I loan was amended to include the period from

January 7, 2018

July 6, 2018,

and the interest-only period for the Tranche II and Tranche III loans was amended to include the period from

January 13, 2018

July 12, 2018.

Prior to executing the amendment, the Company had made principal payments of

$0.6

million inside of the defined interest-only period, which were subsequently refunded on the same day. All amendments to the Pacific Western LSA were accounted for as a modification.

October 2018,

the Company and Pacific Western entered into an Amended and Restated Loan and Security Agreement (the “A&R LSA”) in which the Company received an initial tranche of

$11.0

million to extinguish its existing debt of

$8.0

million under the LSA, repay in full the

$1.8

million in outstanding indebtedness under the UNC Promissory Note and for general corporate purposes. The indebtedness under the A&R LSA bears interest at the greater of the Prime rate or

and has a

four

-year term maturing in

October 2022.

The A&R LSA provided for access to a

second

tranche of up to

$5.0

million available to be drawn at the Company’s option through

June 30, 2019.

The

second

tranche became accessible as a result of the full enrollment of the Company’s

LIQ861

INSPIRE clinical trial, without observing any materially adverse data through the

two

week endpoint. The entire

second

tranche of

$5.0

million was drawn by the Company in

May 2019

bringing the total amount outstanding to

$16.0

million. Both tranches require payments of interest-only through

December 31, 2019.

As a result of this refinancing, the Company recorded a gain of

$0.1

million in accordance with ASC

470

50,

Debt – Modifications and Extinguishments

The A&R LSA carries a

one

-time success fee of

$375,000

and a prepayment penalty of

if the drawn tranche is prepaid prior to

October 27, 2020.

The success fee was triggered in

December 2019

by the sale of common stock and this was recorded as interest expense of

$375,000

during the year ended

December 2019.

Accrued interest is included in Other accrued expenses in the Balance Sheet as of

December 31, 2019.

The minimum cash covenant is

$8.5

million. Pacific Western maintains a blanket lien on all assets excluding intellectual property, for which it has been provided a negative pledge. Pursuant to the A&R LSA, the Company is also obligated to comply with various other customary covenants, including, among others, restrictions on its ability to dispose of assets, replace or suffer the departure of the CEO or CFO without delivering

ten

days’ prior written notification to Pacific Western, suffer a change on the Board of Directors which would result in the failure of at least

one

partner of Canaan Partners or their respective affiliates to serve as a voting member in each case without having used best efforts to deliver at least

days’ prior written notification to Pacific Western, make acquisitions, be acquired, incur indebtedness, grant liens, make distributions to its stockholders, make investments, enter into certain transactions with affiliates or pay down subordinated debt, subject to specified exceptions.

May 2019,

the Company and Pacific Western entered a First Amendment to A&R LSA to provide for a limit of

$2.5

million of capital expenditures during the year ended

December 31, 2019.

As of

December 31, 2019,

the Company was in compliance with this and all other covenants.

Scheduled annual maturities of long-term debt as of

December

31,

2019

are as follows:

Year ending December 31:
2020	$	5,818,182
2021		5,818,182
2022		4,363,636
Thereafter		—
Total		16,000,000
Less: Unamortized discount		(91,520	)
Less: Unamortized debt issuance costs		(30,359	)
Less: Current portion of long-term debt		(5,585,637	)
Long-term debt, noncurrent	$	10,292,484