Term Notes

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Term Notes

7. Term Notes

Loan and Security Agreement

In February 2018, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (the “Loan and Security Agreement”). The terms of the Loan and Security Agreement included a term loan of $15.0 million and a revolving line of credit of $2.0 million. The term loan was available in two tranches, of which the first tranche of $10.0 million was funded in June 2018 and the second tranche of $5.0 million was funded in December 2018.

The term loan accrued interest at a floating per annum rate equal to the greater of (a) the Wall Street Journal prime rate minus 1.75% and (b) 2.75%. There was a final payment equal to 6.75% of the original aggregate principal amount, or $1.0 million, of the term loan advances, which was being accrued over the expected term of the loan using the effective-interest method.

In connection with the execution of the Loan and Security Agreement, the Company issued warrants to Silicon Valley Bank to purchase 34,440 shares of the Company’s common stock. Upon issuance, the fair value of the warrants of $0.1 million was recorded as a debt issuance cost. The debt issuance cost was being amortized to interest expense, net over the expected repayment period of the loan.

In February 2020, the Company entered into a First Amendment to its Loan and Security Agreement (the “Amended Credit Facility”) to, among other things, refinance its existing term loan, which is accounted for as a modification of the Loan and Security Agreement. Under the Amended Credit Facility, the existing revolving line of credit of $2.0 million was terminated and the termination fee of less than $0.1 million was waived. The Amended Credit Facility provides the Company with a supplemental term loan in the amount of $16.5 million. After repayment of the outstanding amount of the term loan, the Company received net proceeds of $3.3 million, which reflects an additional $4.3 million in principal as of the date of the modification less the final balloon payment fee of $1.0 million. The principal amount outstanding under the supplemental term loan accrues interest at a floating per annum rate equal to the greater of (a) the Prime Rate minus 1.25% and (b) 3.5%. The interest rate was 3.5% as of September 30, 2021.

The supplemental term loan matures on December 1, 2023. The Amended Credit Facility provides an interest-only payment period through June 30, 2022.

The additional final payment for the Amended Credit Facility is $1.6 million, which will be accrued over the term of the supplemental term loan using an effective interest rate that reflects the revised cash flows of the modified term loan.

The supplemental term loan is secured by all of the Company’s assets, excluding intellectual property and certain other assets. The loan contains customary affirmative and restrictive covenants, including with respect to the Company’s ability to enter into fundamental transactions, incur additional indebtedness, grant liens, pay any dividend or make any distributions to its holders, make investments, merge or consolidate with any other person or engage in transactions with the Company’s affiliates, but does not include any financial covenants.

Current and noncurrent debt and net discount or premium balances are as follows:

	September 30,			December 31,
	2021			2020
	(in thousands)
Principal amount of term note	$	16,500		$	16,500
Net premium associated with accretion of final payment, and other debt issuance costs		476			119
Term note, current and noncurrent		16,976			16,619
Less term note, current portion		(2,750	)		(3,300	)
Term note, noncurrent portion	$	14,226		$	13,319

Future minimum payments of principal and estimated payments of interest on the Company’s outstanding variable rate borrowings as of September 30, 2021 are as follows:

Year ending December 31:	(in thousands)
2021 (remainder)		146
2022		6,045
2023		12,779
Total future payments		18,970
Less amounts representing interest		(902	)
Less final payment		(1,568	)
Total principal amount of term note payments	$	16,500