Long-term debt – related party

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Long-term debt – related party

Long-term debt – related party

Long-term debt – related party consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Term Loan — related party, net of unamortized debt issuance costs and debt discount of $665 and $1,018 at June 30, 2023 and December 31, 2022, respectively	$	10,335	$	11,482
Less: current portion	10,335		2,287
Total long-term debt — related party, net of current and discount	—		9,195

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 was outstanding as of June 30, 2023. The Company elected not to draw down the second tranche, which expired on June 30, 2021. The Term Loan bore interest at a variable rate using the greater of LIBOR or 1.75%, plus 9.50%. The interest rate was 14.68% as of June 30, 2023, and the Term Loan is secured by a lien on substantially all of the Company’s assets.

On May 17, 2023, the Company entered into an amendment to the Credit Agreement pursuant to which the Company and its lender agreed to replace the LIBOR benchmark with SOFR, which is regulated by the Federal Reserve Bank of New York. The Company amended its Credit Agreement due to the Financial Conduct Authority's planned phase-out of LIBOR on June 30, 2023. The use of the SOFR rate will be effective as of July 1, 2023, at which point the amended Credit Agreement will bear interest at a variable rate using SOFR plus 9.50%.

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 interest-only payments on the Term Loan through December 5, 2022. In 2023, the Company began making monthly principal payments equal to 2.0% of the Term Loan, plus interest. These payments will continue 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 was $0.1 million as of June 30, 2023.

The following table contains the anticipated future minimum payments on long-term debt as of June 30, 2023 for each of the years ending December 31, 2023 and 2024 (in thousands):

Undiscounted, minimum long-term debt payments:
2023 (six months ending December 31)	$	1,500
2024	9,500
Total undiscounted, minimum long-term debt payments	$	11,000

In July 2023, the Company's obligation to pay a prepayment fee was extinguished based on the terms of the Credit Agreement and, as a result, the Company elected to repay the remaining outstanding principal balance on the Term Loan on July 26, 2023.

In connection with the repayment of the outstanding balance on the Term Loan, the liens on substantially all of our and our subsidiaries’ assets will be released.