Debt Obligation

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Debt Obligation

7. Debt Obligation

Loan and Security Agreement

On April 13, 2021, the Company entered into a senior secured term loan facility with Silicon Valley Bank (SVB) (the SVB Loan and Security Agreement), which provides for a $10.0 million term loan of which $2.5 million was drawn, with an option to borrow up to $7.5 million in additional term loans, subject to the Company achieving certain development milestones related to its IL-17 program (the SVB Term Loan).

The SVB Term Loan matures on February 1, 2025. Starting in May 2021, payments of interest only are due monthly. Starting in July 2022, 32 equal monthly payments of principal and interest are due. The SVB Term Loan bears interest at a floating rate equal to the greater of (i) the Wall Street Journal Prime Rate plus 1.75% and (ii) 5.0% per annum.

The SVB Term Loan calls for a final payment equal to 5.75% of the aggregate principal amount borrowed, due upon the earlier of maturity, prepayment or acceleration of the principal due to an event of default. Such final payment will be recorded as a debt discount and is being accreted to interest expense over the term of the loan using the effective interest method. The Company may, at its option, prepay the SVB Term Loan in full at any time prior to maturity, subject to a prepayment fee ranging between 1% and 2% of the outstanding principal amount of the SVB Term Loan. The prepayment fee would also be due and payable in the event of an acceleration of the principal amount of the loan due to an event of default. The SVB Term Loan is secured by substantially all of the Company’s assets, subject to certain exceptions. The SVB Loan and Security Agreement contains customary representations, warranties, and affirmative covenants and also contains certain restrictive covenants. The Company is in compliance with the SVB Loan and Security Agreement financial and nonfinancial covenants as of December 31, 2021.

The SVB Term Loan includes a compound embedded derivate related to the prepayment and interest upon the event of default features. The compound embedded derivative was determined to be not material to the consolidated financial statements.

In connection with the SVB Loan and Security Agreement, the Company issued to SVB warrants to purchase 38,058 shares of common stocks of the Company at an exercise price of $4.72 per share. If the Company makes additional borrowings under the term loan facility, the number of the common stock issuable upon exercise of the warrants will increase by up to 19,030 shares in the aggregate, depending on the amount borrowed. The estimated fair value of the warrants at issuance was recorded as a discount on the loan and is amortized to interest expense over the term of the agreement using the effective interest method. Refer to Note 2 for the accounting for the common stock warrants.

In connection with the SVB Term Loan, the Company recognized interest expense of $0.2 million for the year ended December 31, 2021.    

A schedule of the Company’s future debt payments as of December 31, 2021 is as follows:

	(In thousands)
2022	$	468
2023		938
2024		938
2025		300
Thereafter		—
Total principal debt payments		2,644
Less: debt discount		(248	)
Total debt	$	2,396