Long-Term Debt

9 Months Ended

Sep. 30, 2021

Long-term debt consisted of the following:


(in thousands)	September 30, 2021		December 31, 2020
Principal amount of long-term debt	$	32,500	$	32,500
Debt discount, net of accretion	266		223
Cumulative accretion of end of term payments	970		455
Long-term debt	$	33,736	$	33,178
Less: current portion of long-term debt	$	(693)	$	—
Long-term debt, net of current portion	$	33,043	$	33,178

Hercules Loan Agreement, As Amended

In October 2018, the Company entered into a Loan and Security Agreement (the “Hercules Loan Agreement”), as amended in December 2019, June 2019, March 2020 and December 2020, with Hercules, under which the Company has borrowed an aggregate of $32.5 million of term loans to date. The Hercules Loan Agreement provides for maximum borrowings of up to $50.0 million, which include (i) subject to the achievement of certain performance milestones and conditions, a right of the Company to request that Hercules make additional term loan advances in an aggregate amount of up to $7.5 million through June 30, 2022 and (ii) subject to Hercules investment committee’s sole discretion, a right of the Company to request that Hercules make additional term loan advances in an aggregate amount of up to $10.0 million through December 31, 2022. Borrowings under the Hercules Loan Agreement accrues interest at a variable rate equal to the greater of (i) 8.75% or (ii) 8.75% plus The Wall Street Journal prime rate minus 6.0%. In an event of default and until such event is no longer continuing, the interest rate applicable to borrowings would be increased by 4.0%.

Borrowings under the Hercules Loan Agreement are repayable in monthly interest-only payments through January 1, 2023, and in equal monthly payments of principal and accrued interest from February 1, 2023 until the maturity date of the loan, which is July 1, 2024. The Company may prepay all, but not less than all, of the outstanding borrowings, subject to a prepayment premium of up to 2.0%, 1.0% or 0.5% of the principal amount outstanding as of the date of repayment, in each case depending on when such repayment is made. In addition, the Hercules Loan Agreement provides for payments of $0.8 million, $1.3 million, and $0.8 million payable on January 1, 2022, July 1, 2023 and July 1, 2024, respectively, which payments are accelerated upon the prepayment of the borrowings upon the Company’s election on upon default of the loan.

Borrowings under the Hercules Loan Agreement are collateralized by substantially all of the Company’s personal property and other assets except for their intellectual property (but including rights to payment and proceeds from the sale, licensing or disposition of the intellectual property).

Pursuant to the Hercules Loan Agreement, effective as of the earlier of (a) certain specified events impacting the Company’s Phase III trial of mavorixafor for the treatment of WHIM syndrome and (b) April 1, 2022 (which date is extended if the Company meets certain financial milestones related to third party funding), the Company at all times thereafter must maintain cash in an account or accounts in which Hercules has a first priority security interest, in an aggregate amount greater than or equal to the greater of (i) $30.0 million or (ii) 6 multiplied by a metric based on prior months’ cash expenditures; provided,

however, that from and after the Company’s achievement of certain performance milestones, the required level shall be reduced to the greater of (x) $20.0 million, or (y) 3 multiplied by the current cash expenditures metric; and provided further, that subject to the achievement of certain milestones, this covenant will be extinguished. The Hercules Loan Agreement also restricts the Company’s ability to incur additional indebtedness, pay dividends, encumber its intellectual property, or engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses, with certain exceptions.

The Company recognized interest expense under the Hercules Loan Agreement as follows:


(dollars in thousands)	For the Three Months ended September 30,				For the Nine Months ended September 30,
	2021		2020		2021		2020
Total interest expense	$	920	$	697	$	2,716	$	1,967
Non-cash interest expense	$	193	$	138	$	557	$	390

The annual effective interest rate of the Hercules Loan Agreement as of September 30, 2021 is 10.7%. There were no principal payments due or paid under the Hercules Loan Agreement during the nine months ended September 30, 2021.

As of September 30, 2021, future principal payments due under the Hercules Loan Agreement were as follows (in thousands):


Year Ending December 31,	Total
2021	$	—
2022	—
2023	21,185
2024	11,315

Long-term debt	$	32,500