Loan and Security Agreement | 6. Loan and Security Agreement In August 2014, the Company entered into a Loan Agreement with Silicon Valley Bank (“SVB”) and borrowed $7.0 million under the loan. In May 2016, the Loan Agreement was amended (“Amended Loan Agreement”) to borrow up to $10.0 million with a portion of the proceeds to be used to pay down the outstanding balance of the original $7.0 million of advances. At the time of the Amended Loan Agreement, SVB advanced a gross amount of $7.5 million to the Company. Net proceeds received by the Company were $1.6 million after deducting $5.3 million for repayment of the original advances and $0.6 million for final interest due upon maturity or prepayment of the original advances. In December 2016, upon the achievement of certain milestones, SVB advanced the remaining $2.5 million available under the Amended Loan Agreement. The borrowings were secured by a lien on all Company assets, excluding intellectual property. The May 2016 and December 2016 advances had a floating per annum interest rate of the greater of 4.0% or 0.5% above the prime rate. In December 2016, the interest only period was extended to 18 months. Upon the expiration of the interest only period, amounts borrowed were to be repaid over 30 equal monthly payments of principal and interest. At its option, the Company could prepay all, but not less than all, of the outstanding borrowings subject to a prepayment premium as defined in the Amended Loan Agreement. The Company was also required to make a final payment equal to 8.25% of the total borrowings (“Final Payment”) on the earliest of the loan maturity date, an acceleration of the loan as defined in the Amended Loan Agreement or at the time of prepayment. On June 29, 2018, the Company terminated the Amended Loan Agreement and repaid the $7.7 million outstanding principal balance and the Final Payment to SVB. The Company recorded a loss on extinguishment of debt of $0.6 million in the Statement of Operations, accordingly. On June 29, 2018 the Company also entered into a loan agreement with Pacific Western Bank (“PWB Loan Agreement”) providing up to $12.0 million of borrowings, of which $10.0 million was advanced on June 29, 2018. The remaining $2.0 million of borrowings available under the PWB Loan Agreement are available to the Company through one additional advance request until the end of the interest only period as defined below. Borrowings are secured by a lien on all Company assets, excluding intellectual property, and amounts borrowed have a floating per annum interest rate of the greater of 5.0% or the prime rate. The PWB Loan Agreement has a term of 48 months and an initial interest only period of 18 months. If the Company receives at least $50M of gross proceeds from the sale of its equity securities or upfront cash payment from a strategic partnership prior the expiration of the initial interest only period, the interest only period will be extended an additional six months. Upon the expiration of the initial interest only period on December 31, 2019, amounts borrowed will be repaid over 30 equal monthly payments of principal plus accrued but unpaid interest. If the interest only period is extended an additional six months, amounts borrowed will be repaid over 24 equal monthly payments of principal plus accrued but unpaid interest beginning July 1, 2020. At its option, the Company may prepay all, but not less than all, of the outstanding borrowings subject to a prepayment premium as defined in the Loan Agreement. Upon the closing of one or more financings, in which the Company receives aggregate gross proceeds of at least $25 million, a success fee will be paid to the Lender. If the gross proceeds are received on or before June 30, 2019, the Success Fee is $200,000, and f the gross proceeds are received after June 30, 2019, the Success Fee is $300,000. The Company’s obligation to pay this Success Fee survives termination of the Agreement. The PWB Loan Agreement contains negative covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions, incurring indebtedness or liens, paying dividends or making investments and certain other business transactions. There are no financial covenants associated with the PWB Loan Agreement. The obligations under the PWB Loan Agreement are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in the Company’s business, operations or financial or other condition. The Company has determined that the risk of subjective acceleration under the material adverse events clause is remote and therefore has classified the outstanding principal based on scheduled principal payments. The Company evaluated the PWB Loan Agreement for embedded features that require bifurcation, noting certain features were required to be bifurcated, but were concluded to be de minimis in value at September 30, 2018. |