Debt, Net

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Debt, Net

3. Debt, Net

Cogent Bank Loan

On August 15, 2022, the Company entered into a loan and security agreement (the “2022 Loan Agreement”) with Cogent Bank, pursuant to which it received $6.5 million in proceeds to purchase a building that will become the Company's new headquarters. The loan is secured by a first priority lien on the building.

As of June 30, 2024, the Company had $6.3 million in principal outstanding in a loan under the 2022 Loan Agreement. The interest-only period was one year followed by 48 months of equal payments of principal and interest beginning on September 15, 2023 based on a 25-year amortization rate. The unamortized balance is due on August 15, 2027 (the “Maturity Date”), and bears interest at a fixed per annum rate equal to 5.75%. Upon the Maturity Date, a final payment of unamortized principal will be due. The Company is in compliance with all covenants as of June 30, 2024. The Company has the option to prepay the outstanding balance of the loan prior to the Maturity Date without penalty.

As of June 30, 2024, the current portion of $123,956 is included in Accrued liabilities and other current liabilities, and the noncurrent portion of $6.3 million is included in Debt, net in the accompanying condensed interim balance sheet.

Senior Secured Notes

On March 31, 2024, the Company entered into a Note Purchase Agreement with the Purchasers (as defined in the Note Purchase Agreement), pursuant to which the Company may issue secured notes up to an aggregate principal amount up to $10.0 million (“Secured Notes”).

As of June 30, 2024, the Company received $3.7 million in funding from the issuance of Secured Notes, which is included within Debt, Net on the accompanying condensed interim balance sheet. Investors included Dr. Hing C. Wong, Founder and Chief Executive Officer, who invested $2.2 million; Rebecca Byam, Chief Financial Officer, who invested $220,000; Scott T. Garrett, the Chairman of the Company’s board of directors, who invested $90,000; and Gary M. Winer, a member of our board of directors, who invested $60,000, as well as unrelated parties.

As of June 30, 2024, existing investors in Secured Notes unanimously agreed to an Amended and Restated Note Purchase Agreement and related documents (“Amended and Restated Note Purchase Agreement”). Under the terms of the Amended and Restated Note Purchase Agreement, the Secured Notes continue to bear interest at a rate of 9% per annum, payable quarterly in arrears. The Secured Notes will mature on August 30, 2026 (the “Maturity Date”), on which date the principal balance, accrued but unpaid interest and other amounts owed under the terms of the Amended and Restated Note Purchase Agreement shall be due and payable. The Company pledged its equity ownership interest in Wugen, which was equivalent to a 5.6% ownership stake in that company as of June 30, 2024 (“Pledged Collateral”). The Pledged Collateral will be held and released according to the terms of the Escrow Agreement, as security for the Secured Notes.

If the Company elects to prepay the Senior Notes on or before December 31, 2024, there is a 5% prepayment penalty. The Secured Notes have a Mandatory Prepayment provision, according to which the Company is required to prepay the Secured Notes before the Maturity Date under certain circumstances. In the event of a Mandatory Prepayment, Secured Notes may receive a bonus payment based on the gross proceeds of the sale of the Pledged Collateral. If a bonus payment is paid, then there is no prepayment penalty. The Amended and Restated Note Purchase Agreement also contains default provisions, according to which, following an event of default, the Company may be required to distribute the Pledged Collateral to the Purchasers on a pro rata basis based on a $10.0 million issuance of Secured Notes, in full satisfaction of the indebtedness evidenced by the Secured Notes.

Amended terms of the Amended and Restated Note Purchase Agreement include a conversion feature, which gives the holder a right to convert the outstanding indebtedness to shares of the Company’s common stock under certain conditions, subject to final documentation. The holders of the Secured Notes have no obligation to exercise the conversion option, however, if the holders of the majority of principal of Secured Notes outstanding choose to do so, then all the holders of Secured Notes must do so.