Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Debt

7. Debt

Long-term debt consisted of the following (in thousands):

	June 30,		December 31,
	2022		2021
Principal amount of long-term debt	$	—	$	12,733
Less: Current portion of long-term debt		—		(5,805	)
Long-term debt, net of current portion		—		6,928
Debt discount, net of accretion		—		(217	)
Accrued end-of-term payment		—		646
Long-term debt, net of discount and current portion	$	—	$	7,357

The Company entered into a loan and security agreement with Hercules Capital, Inc. (the “Lender”) in December 2019 (the “Term Loan”), pursuant to which it had $12.7 million in outstanding principal borrowings as of December 31, 2021. On February 25, 2022, the Company repaid to the Lender a payoff amount of $12.8 million and terminated the Term Loan, provided that the Company continues to be bound by certain indemnification obligations under Section 6.3 of the Term Loan. The payoff amount resulted in an

extinguishment loss of $0.2 million and included payment of approximately $0.9 million consisting of end of term costs of 5.25% of the $15.0 million amount drawn under the Term Loan and $0.1 million as outlined below, as well as an interest/non-use fee of less than $0.1 million.

In April 2020, the Term Loan was amended to permit indebtedness consisting of a loan under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided that such loan shall be unsecured, shall not contain any terms or conditions that are adverse to the Lender’s rights under the loan and that the Company will not prepay such loan. In June 2020, the Term Loan was amended and an additional end of term cost of $0.3 million became due upon repayment of the loan. Also in April 2020, prior to entering into the Proteostasis Merger Agreement with PTI in August 2020, the Company issued a Promissory Note to Silicon Valley Bank, pursuant to which it received loan proceeds of $1.1 million (the “Loan”) provided under the PPP established under the CARES Act and guaranteed by the U.S. Small Business Administration. On April 3, 2021, the Company was notified by Silicon Valley Bank that the Loan forgiveness application was accepted by the Small Business Association as of March 30, 2021. Accordingly, the Company has recognized $1.1 million in income for debt extinguishment.

On December 22, 2020, the Company entered into an Unconditional Secured Guaranty and Pledge Agreement (the “Guaranty”) with the Lender as a condition to the Lender’s consent to the Proteostasis Merger under the Term Loan between Yumanity, Inc. as borrower and the Lender. Immediately prior to the Proteostasis Merger, Yumanity, Inc. entered into a Fourth Amendment and Consent to Loan and Security Agreement dated as of December 22, 2020 with the Lender (the “Loan Amendment”). The Guaranty provides for the Company’s guaranty of Yumanity Inc.’s obligations under the Loan Agreement and provides the Lender a security interest in all of Company’s assets other than intellectual property as collateral. The Loan Amendment provides for the Lender’s consent to the Proteostasis Merger and to the creation and funding of a Silicon Valley Bank Paycheck Protection Program escrow account to hold funds in connection with Yumanity’s outstanding Paycheck Protection Program loan amounts for which Yumanity has submitted a forgiveness application. The Loan Amendment also amends the definition of “Change in Control” to include the situations in which the Company no longer controls Yumanity, Inc. The remaining terms and conditions of the Loan Agreement generally continue in the form existing prior to the Loan Amendment.

On March 29, 2021, the Term Loan was amended again to allow for the creation of a new foreign subsidiary, as well as changing certain covenants related to the financial operations of said subsidiary. The subsidiary was formed on April 23, 2021.

On April 13, 2021, the Term Loan was amended to reduce the end of term cost of $0.3 million to $0.1 million upon repayment of the loan.