Long-term debt

9 Months Ended

Sep. 30, 2022

Long-term debt

Long-term debt

Note 9—Long-term debt

The following is a summary of the Company’s indebtedness:

	September 30, 2022		December 31, 2021
Principal	$	10,000	$	10,000
Plus: End of term fee		395		395
Less: Debt discount attributable to warrants, net of accretion		(12)		(25)
Less: Unamortized deferred financing cost and end of term fee, net of accretion		(211)		(428)
Long-term debt, net	$	10,172	$	9,942

On September 14, 2020, the Company entered into a $10,000 Term Loan Agreement (as amended, the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”). Pursuant to the terms of the Loan Agreement, the Company borrowed $10,000 (the “Tranche 1 Advance”) from the lenders at closing. Beginning January 1, 2021 and upon the achievement of certain development milestones and continuing through September 30, 2021 the Company may borrow an additional $10,000 (the “Tranche 2 Advance”). The remaining $10,000 tranche (“Tranche 3 Advance”) is subject to Hercules’ investment committee’s sole discretion.

The Loan Agreement has a four-year term and an interest-only period of up to 30 months. The Company was in compliance with all provisions of the Loan Agreement as of September 30, 2022. Amounts borrowed under the Loan Agreement accrue interest at a floating rate per annum (based on a year of 360 days) equal to (i) the sum of (a) the greater of 6.30% plus (b) the prime rate as reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or (ii) 9.55%. The interest rate as of September 30, 2022 was 12.55%.

The Company incurred $410 in deferred financing costs. The Company is also required to pay the lenders an end of term fee of 3.95% of loan proceeds upon repayment or prepayment of any loans made under the Loan Agreement. The end of term fee is being recognized as interest expense and accreted over the term of the Loan Agreement using the effective interest method. The Company is also required to pay Hercules a prepayment charge equal to 2.00% of the loan amounts prepaid during the interest-only period and 1.00% thereafter on any loans made under the Loan Agreement.

The Company granted Hercules a lien on substantially all of the Company’s assets, excluding intellectual property.

The Company issued to Hercules warrants to purchase up to an aggregate of 16,112 shares of common stock. The warrants are exercisable for a period of ten years from the date of the issuance of each warrant at a per share exercise price equal to $13.96, subject to certain adjustments as specified in the warrants. The fair value of the warrants at issuance was $46. The Company accounted for the warrants as equity, and the fair value is recorded in additional paid-in capital. The warrant value is also recorded as a debt discount and classified as a contra- liability on the consolidated balance sheet and amortized to interest expense. If the Company borrows on the remaining two tranche advances outlined above, the Company will be required to issue warrants to Hercules equal to 2.25% of the aggregate amount funded.

Interest expense of the Loan Agreement is as follows:

	For the Three		For the Three		For the Nine		For the Nine
	Months Ended		Months Ended		Months Ended		Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Interest expense	$	296	$	245	$	787	$	725
Amortization of debt issuance costs, including end of term fee accretion		77		77		230		229
	$	373	$	322	$	1,017	$	954

Included in accrued expenses in the accompanying consolidated balance sheets as of September 30, 2022 and December 31, 2021 was $92 and $82 of accrued interest, respectively.

Future principal payments due (including the end of term fee) under the Loan Agreement are as follows (in thousands):

	Principal Payments
2023	$	6,544
2024		3,851
Total future payments	$	10,395