Long-term debt and warrant – related party

12 Months Ended

Dec. 31, 2022

Long-term debt and warrant – related party

On June 5, 2020, contemporaneously with the completion of its Series B Financing the Company entered into a Credit Agreement, or the Credit Agreement, with Perceptive Credit Holdings III, LP, an affiliate of Perceptive Advisors LLC, or Perceptive, that provided for an aggregate principal borrowing amount of up to $20.0 million, available in two tranches of $12.5 million and $7.5 million. Perceptive was considered a related party to the Company based on its ownership of the Company’s common stock at inception of the Credit Agreement.

In June 2020, the Company drew down on the first tranche of $12.5 million, or the Term Loan, which is outstanding as of December 31, 2022. The Company elected not to draw down the second tranche, which expired on June 30, 2021. The Term Loan bears interest at a variable rate using the greater of LIBOR or 1.75%, plus 9.50%. The interest rate was 13.63% as of December 31, 2022, and the Term Loan is secured by a lien on substantially all of the Company's asset. When the LIBOR interest rate is discontinued in the future, it is expected that the interest rate of the Term Loan would switch to Secured Overnight Financing Rate, or SOFR. As of December 31, 2022, the effect of switching from LIBOR to SOFR is not material to the Company’s consolidated financial statements.

The Credit Agreement requires the Company to maintain a minimum aggregate cash balance of $3.0 million in one or more controlled accounts and contains various affirmative and negative covenants that limit its ability to engage in specified types of transactions.

The Company was required to make monthly interest-only payments on the Term Loan through December 5, 2022. In 2023, the Company began to make principal only payments of 2.00% of the Term Loan, plus interest, until June 5, 2024, or the Maturity Date, at which time the outstanding principal and unpaid interest balance is due. If the Company pays off the Term Loan prior to the Maturity Date, it will be required to pay a prepayment fee, which would have been $1.1 million as of December 31, 2022.

Under the terms of the Credit Agreement, Perceptive held a warrant to purchase up to 338,784 shares of the Company’s common stock at an exercise price of $8.86 per share. As further described in Note 10, Stockholders’ equity, in May 2021, Perceptive exercised its warrant using the net exercise method provided by the Credit Agreement.

The following table contains the anticipated future minimum payments on long-term debt as of December 31, 2022 for each of the years ending December 31 and a reconciliation to the carrying value of long-term debt on the Company’s consolidated balance sheets (in thousands):


Undiscounted, minimum long-term debt payments:
2023	$	3,000
2024	9,500
Total undiscounted, minimum long-term debt payments	12,500
Less: Unamortized debt issuance costs and debt discount	(1,018)
Total long-term debt—related party	$	11,482