NOTES PAYABLE

6 Months Ended

Jun. 30, 2020

2017 Silicon Valley Bank Loan Agreement

In November 2017, the Company entered into a loan and security agreement with Silicon Valley Bank (the “2017 SVB Loan Agreement”). Upon entry into the 2017 SVB Loan Agreement, the Company borrowed $10.0 million with a 30-month payment period following an 18-month interest-only payment period ending in November 2021. In April 2020, the 2017 Loan Agreement was amended to extend the interest-only payment period and extended maturity date by an additional six months. Amounts outstanding bear interest at the prime rate (3.25% and 4.75% at June 30, 2020 and December 31, 2019, respectively), with a final payment fee equal to $0.9 million due upon maturity. As of June 30, 2020, no additional amounts are available under the 2017 SVB Loan Agreement.

The Company may elect to prepay prior to maturity all or any portion of the outstanding principal amounts under the 2017 SVB Loan Agreement, subject to a prepayment charge, depending on the date of prepayment or upon the occurrence of an event of default in which the Company’s obligations to repay the outstanding principal is accelerated. The Company’s obligations under the 2017 SVB Loan Agreement are secured by a first-priority security interest, right, and title in all business assets, excluding the Company’s intellectual property, which is subject to a negative pledge.

The 2017 SVB Loan Agreement includes customary representations, warranties, and covenants (affirmative and negative), including restrictive covenants that limit the Company’s ability to: encumber or dispose of the collateral securing the loan; change the business of the Company; transfer a material portion of the Company’s assets; acquire other businesses; and merge or consolidate with or into any other business organization; incur additional indebtedness; declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest; enter into specified material transactions with Company affiliates; make non-ordinary course payments or enter into any amendment regarding subordinated debt of the Company; or become an “investment company” under the Investment Company Act of 1940, as amended; in each case subject to specified exceptions.

The 2017 SVB Loan Agreement also includes standard events of default, including payment defaults; breaches of covenants following any applicable cure period; material breaches of representations or warranties; the occurrence of a material adverse change (as defined in the 2017 SVB Loan Agreement); events relating to bankruptcy or insolvency; breaches of material third-party agreements; the occurrence of an unsatisfied material judgment against the Company; and specified governmental actions against the Company, including specified actions by the U.S. Food and Drug Administration. Upon the occurrence of an event of default, Silicon Valley Bank may declare all outstanding obligations immediately due and payable, including a prepayment charge, and take such other actions as are set forth in the 2017 SVB Loan Agreement. Upon the occurrence of an event of default, at the Silicon Valley Bank’s discretion, interest on the 2017 SVB Loan Agreement will accrue at 5.0% above the rate that is otherwise applicable thereto until the earlier of the repayment of the Company’s obligations under the 2017 SVB Loan Agreement or the cure of such event of default.

Amounts outstanding under the 2017 SVB Loan Agreement were as follows (in thousands):



	June 30, 2020		December 31, 2019





Principal amount outstanding	$	6,333	$	7,667
Unamortized debt discount	(21)		(32)

Accreted final payment fee	759		669
Total note payable	7,071		8,304
Less: current maturities	(2,650)		(3,976)
Note payable, net of current portion	$	4,421	$	4,328

Future annual minimum principal payments under the 2017 SVB Loan Agreement as of June 30, 2020 for the respective calendar years are as follows (in thousands):



2020	$	666
2021	4,000
2022	1,667
Total	$	6,333

Paycheck Protection Program Loan

In April 2020, the Company received approximately $1.7 million in loan funding under the Paycheck Protection Program (the “PPP”), established pursuant to the CARES Act and administered by the U.S. Small Business Administration (the “SBA”). The unsecured loan (the “PPP Loan”) is evidenced by a promissory note of the Company (the “Note”) in the principal amount of approximately $1.7 million, to Silicon Valley Bank (the “Bank”), the lender.

Under the terms of the Note and the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0% per annum. The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note. To the extent the loan amount is not forgiven under the PPP, the Company is obligated to make equal monthly payments of principal and interest. Payments of principal and interest on the PPP Loan will be deferred for the first six months of the PPP Loan term.

The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, the Company may apply for and be granted forgiveness for all or part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during the eight-week period after the loan origination for certain purposes, including payroll costs, interest on certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments, provided that at least 75% of the loan amount is used for eligible payroll costs. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered eight-week period will qualify for forgiveness. The Company intends to use the PPP Loan for qualifying and other related expenses. The Company can provide no assurance that it will obtain forgiveness of the PPP Loan in whole or in part.

The Note may be prepaid in part or in full, at any time, without penalty. The Note provides for certain customary events of default, including (i) the Company’s failure to make a payment when due under the Note, (ii) the Company’s failure to do anything required by the Note or any other loan document, (iii) if the Company defaults on any other loan with the Bank, (iv) the Company’s failure to preserve, or account to the Bank’s satisfaction for, any of the collateral or its proceeds, (v) the Company’s failure, or anyone acting on behalf of the Company’s failure, to disclose any material fact to the Bank or the SBA, (vi) if the Company makes, or anyone acting on behalf of the Company makes, a materially false or misleading representation to the Bank or the SBA, (vii) the Company’s default on any loan or agreement with another creditor, if the Bank believes the default may materially affect the Company’s ability to pay the Note, (viii) the Company’s failure to pay any taxes when due, (ix) if the Company becomes the subject of a proceeding under any bankruptcy or insolvency law, (x) if the Company has a receiver or liquidator appointed for any part of the Company’s business or property, (xi) if the Company makes an assignment for the benefit of creditors, (xii) if the Company has any adverse change in financial condition or business operation that the Bank believes may materially affect the Company’s ability to pay the Note, (xiii) if the Company reorganizes, merges, consolidates, or otherwise changes ownership or business structure without the Bank’s prior written consent, or (xiv) if the Company becomes the subject of a civil or criminal action that the Bank believes may materially affect the Company’s ability to pay the Note. Upon the occurrence of an event of default, the Bank has customary remedies and may, among other things,

require immediate payment of all amounts owed under the Note, collect all amounts owing from the Company, and file suit and obtain judgment against the Company.

Amounts outstanding under the PPP Loan were as follows (in thousands):



	June 30, 2020





Principal amount outstanding	$	1,726




Less: current maturities	(767)
Note payable, net of current portion	$	959

Future annual minimum principal payments under the PPP Loan as of June 30, 2020 for the respective calendar years are as follows (in thousands):



2020	$	192
2021	1,150
2022	384
Total	$	1,726