| Notes | Note
11. Notes Payable The
SVB Loan Facility On
June 18, 2021, the Company entered into a $ 10
million loan facility (the “SVB Loan Facility”)
with Silicon Valley Bank (“SVB”). Celsion immediately used $ 6
million from the SVB Loan Facility to
retire all outstanding indebtedness with Horizon Technology Finance Corporation as further discussed below. Simultaneously with this
transaction, the Company used $ 6.0 4
million will be available to be drawn down up
to 12 months after closing and will be used for working capital and to fund the advancement of the Company’s product pipeline,
including GEN-1 for the treatment of newly diagnosed advanced ovarian cancer, as well as other strategic initiatives intended to broaden
its product pipeline. The
SVB Loan Facility is in the form of money market secured indebtedness bearing interest at a calculated WSJ Prime-based variable rate
(currently 3.25% ).
A final payment equal to 3%
of the total $ 10
million commitment amount is due upon maturity
or prepayment of the SVB Loan Facility. There was no
facility commitment fee and no
stock or warrants were issued to SVB. Payments
under the loan agreement are interest only for the first 24 months after loan closing, followed by a 24-month amortization period of
principal and interest through the scheduled maturity date. In
connection with the SVB Loan Facility, the Company incurred financing fees and expenses totaling $ 243,370
which is recorded and classified as debt discount
and are being amortized as interest expense using the effective interest method over the life of the loan. Also, in connection with the
SVB Loan Facility, the Company is required to pay an end-of-term fee equal to 3.0%
of the original loan amount at time of maturity.
Therefore, these amounts totaling $ 300,000
were being amortized as interest expense using
the effective interest method over the life of the loan. During the three and six-month periods ended June 30, 2021, the Company incurred
$ 7,042
in interest expense and amortized $ 6,457
as interest expense for debt discounts and end-of-term
fee in connection with the SVB Financing Facility. Following
is a schedule of future principal payments, net of unamortized debt discounts and amortized end-of-term fee, due on the SVB Loan
Facility: Schedule
of Future Principle Payments, Net of Unamortized Debt Discounts
As
of June 30,
2022 $ –
2023 –
2024 3,000,000
2025 and
thereafter 3,000,000
Subtotal of future principal payments 6,000,000
Unamortized debt premium,
net (236,913 )
Total $ 5,763,087 Horizon
Credit Agreement On
June 27, 2018, the Company entered into a loan agreement with Horizon Technology Finance Corporation (“Horizon”) that provided
$ 10
million in new capital (the “Horizon Credit
Agreement”). The Company drew down $ 10
million upon closing of the Horizon Credit Agreement
on June 27, 2018. On August 28, 2020, Horizon and the Company amended the Horizon Credit Agreement (the “Amendment”) whereby
Celsion repaid $ 5
million of the $10 million loan and $ 0.2
million in related end of term charges, and the
remaining $ 5
million in obligations were restructured as set
forth below. Pursuant
to the Amendment, the remaining $ 5
million in obligations of Celsion under the Horizon
Credit Agreement was secured by a first-priority security interest in substantially all assets of Celsion other than intellectual
property assets. The
obligations bore interest at a rate calculated based an amount by which the one-month LIBOR exceeds 2% plus 7.625%. In no event
shall the interest rate be less than 9.625%. Payments pursuant to the Amendment were interest only for the first twelve (12) months
after August 1, 2020, followed by a 21-month amortization period of principal and interest through the scheduled maturity date on April
1, 2023. In addition, the remaining $5 million in obligations was subject to an end of term fee equal, in the aggregate, to $ 275,000 ,
which amount was payable upon the maturity of the obligations or upon the date of final payment or default, as applicable. In
connection with the Amendment, Celsion agreed to a liquidity covenant which provides that, at all times, Celsion shall maintain unrestricted
cash and/or cash equivalents on deposit in accounts over which the applicable Lenders maintain an account control agreement in an amount
not less than $2.5 million. In addition, pursuant to the Amendment, Celsion agreed to provide evidence to Horizon on or before March
31, 2021, that it received aggregate cash proceeds of not less than $5 million from the sale of equity, debt, its New Jersey net operating
losses, or a combination thereof, subsequent to the date of the Amendment. The
Company met this requirement during the fourth quarter of 2020. In
connection with the Horizon Credit Agreement, the Company incurred financing fees and expenses totaling $ 175,000
which were recorded and classified as debt discount.
In addition, the Company paid loan origination fees of $ 100,000
which were recorded and classified as debt discount.
These debt discount amounts totaling $ 782,116
were being amortized as interest expense using
the effective interest method over the life of the loan. Also, in connection with each of the Horizon Credit Agreement, the Company was
required to pay an end of term charge equal to 4.0%
of the original loan amount at time of maturity.
Therefore, those amounts totaling $ 400,000
were being amortized as interest expense using
the effective interest method over the life of the loan. As
a fee in connection with the Horizon Credit Agreement, Celsion issued Horizon warrants exercisable for a total of 190,114
shares of Celsion’s common stock (the “Existing
Warrants”) at a per share exercise price of $ 2.63 .
The Horizon Warrants were immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years
from the date of grant. The Company valued the Horizon Warrants issued using the Black-Scholes option pricing model and recorded a total
of $ 507,116
as a direct deduction from the debt liability,
consistent with the presentation of debt discounts, and are being amortized as interest expense using the effective interest method over
the life of the loan. Pursuant to the Amendment, one-half of the aggregate Existing Warrants, exercisable for a total of 95,057
shares of Celsion’s common stock, have
been canceled, and, in connection with the Amendment, Celsion issued Horizon new warrants exercisable at a per share exercise price equal
to $ 1.01
for a total of 247,525
shares of Celsion’s common stock (the “New
Warrants” and, together with the Existing Warrants, the “Warrants”). The remaining 95,057
Existing Warrants issued in connection with the
Horizon Credit Agreement remain outstanding at a per share exercise price of $2.63. The
New Warrants were immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years from
the date of grant. Effective October 27, 2020. The Horizon Credit Agreement contains customary representations, warranties and affirmative
and negative covenants including, among other things, covenants that limit or restrict Celsion’s ability to grant liens, incur
indebtedness, make certain restricted payments, merge, or consolidate and make dispositions of assets. The
Amendment was evaluated in accordance with FASB ASC 470-50, Debt-Modifications and Extinguishments 5
million we repaid as a debt extinguishment thereby
reducing the principal obligations accordingly. Also, in connection with the $5 million repayment, we recognized as interest expense,
approximately $ 0.2
million of unamortized debt discount, deferred
financing and end of term fees related to the repaid obligation in August 2020. We
accounted for the remaining $5 million of obligation under the Amendment as a debt modification to the initial agreement with respect
to the minor changes in cash flows. Also, in connection with the $5 million remaining obligations, we recorded $ 5,000
of financing fees and the New Warrant fair value
of $ 247,548
as additional debt discount on the $5 million
remaining obligation. Therefore, approximately $ 109,706
of unamortized debt discount will be amortized
over the remaining life of the new obligations. The $ 275,000
of end of term fees, net of previously amortized
end of term fees totaling $ 142,605
previously accrued on the original note associated
with the $5 million remaining obligation, will be amortized as interest expense over the remaining life of the new obligations. During
the three and six-month periods ended June 30, 2021, the Company incurred $ 105,607
and $ 225,920 ,
respectively, in interest expense and amortized $ 102,126
and $ 139,428
as interest expense for debt discounts and end
of term charges in connection with the Horizon Credit Agreement. During the three and six-month periods ended June 30, 2020, the Company
incurred $ 243,299
and $ 486,597 ,
respectively, in interest expense and amortized $ 96,727
and $ 192,793 ,
respectfully, as interest expense for debt discounts and end of term charges in connection with the Horizon Credit Agreement. On
June 18, 2021, as a condition of entering into the SVB Loan Facility, the Company paid the outstanding principal balance,
an early termination fee and the end of term charges in full satisfaction of the Horizon Credit Agreement, as amended.
Following is a schedule of the amounts paid to Horizon on June 18, 2021. Schedule
of Debt
Principal balance at June 18, 2021 $ 5,000,000
Early termination fees 150,000
End of term charges 275,000
Total $ 5,425,000 During
the three and six months ended June 30, 2021, the Company recorded a loss of $ 234,419
on the termination of the Horizon Credit Agreement,
as amended, which represented the early termination fee and the end of term fees, net of previously amortized interest expense totaling
$ 190,581
on the date of its payoff. |
