Quarterly report pursuant to Section 13 or 15(d)

Borrowing Arrangements

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Borrowing Arrangements
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Borrowing Arrangements

NOTE 8 — BORROWING ARRANGEMENTS

SVB Growth Capital Loan

In April 2014, the Company entered into a loan and security agreement (the “Loan Agreement”) with Silicon Valley Bank (“SVB”) that was subsequently amended, to provide for (1) growth capital advances to the Company of up to $6.0 million over three tranches based on corporate milestones; (2) term loans of up to $6.0 million in the aggregate (the “Growth Capital Loan”); (3) warrants to purchase 48,874 shares of the Company’s common stock at an exercise price of $3.07 per share; and (4) a final fee of $375,000 due at the loan maturity date in addition to the principal and interest payments.  

The Company drew down $0.8 million and $2.3 million in May and June 2015, respectively, and issued warrants to purchase 14,254 and 17,310 shares of the Company’s common stock at an exercise price of $3.07 per share. The Company drew down $3.0 million in April 2016 and issued warrants to purchase 17,310 shares of the Company’s common stock at an exercise price of $3.07 per share. The warrants issued in the Loan Agreement became exercisable upon issuance and were converted into common stock upon the closing of the Merger.

As of December 31, 2017, the Company had received $6.0 million in the aggregate from the Growth Capital Loan. The Company was required to repay the outstanding principal in 30 equal installments beginning November 1, 2016 and was due in full on April 30, 2019. Interest accrued at a rate of 1.19% above prime, or 5.44% per annum, as of December 31, 2017.  Interest only payments were made monthly and beginning November 1, 2016, the Company paid the first of 30 consecutive equal monthly payments of principal plus interest.

The Company paid down the Growth Capital Loan on February 27, 2018, from the proceeds of the Perceptive Credit Facility, discussed below. Until the termination of the Growth Capital Loan on February 27, 2018, the Company paid $3.2 million in principal, $375,000 in a final fee, and $42,000 in interest during the nine months ended September 30, 2018 and $1.8 million in principal and $187,000 in interest in the nine months ended September 30, 2017.  

 

As of September 30, 2018 the Growth Capital Loan had been repaid, and the balance was zero. As of December 31, 2017, the Growth Capital Loan principal balance was 3.5 million.

 

Perceptive Credit Facility

 

On February 27, 2018, the Company entered into a term loan facility with Perceptive Credit Holdings II, LP (“Perceptive”) in the amount of $10.0 million (the “Perceptive Credit Facility”). The Perceptive Credit Facility consists of a $5.0 million term loan, which was drawn on the effective date of the Perceptive Credit Facility, and an additional $5.0 million term loan to be drawn six months following the effective date of the Perceptive Credit Facility (as discussed above). The Company used a portion of the proceeds from the Perceptive Credit Facility to pay off the existing debt facility with SVB. Borrowings under the Perceptive Credit Facility are secured by all of the property and assets of the Company. The principal on the facility accrues interest at an annual rate equal to a three-month LIBOR plus the Applicable Margin. The Applicable Margin is 11.00%. Upon the occurrence, and during the continuance, of an event of default, the Applicable Margin, defined above, will be increased by 4.00% per annum. The interest rate at September 30, 2018 was 13.3%. Payments for the first 24 months are interest only and are paid quarterly. After the second anniversary of the closing date of the Perceptive Credit Facility, principal payments of $200,000 are due each calendar quarter, with a final payment of $3.4 million due on February 27, 2022. This term loan facility matures on February 27, 2022 and includes both financial and non-financial covenants, including a minimum cash balance requirement. The Company is required to pay an exit fee of $100,000 on a pro rata basis on the maturity date or the earlier date of repayment of the term loans in full. The exit fee is being accreted to interest expense over the term of the Perceptive Credit Facility using the effective interest method.

 

For the three months ended September 30, 2018, the Company recorded $170,000 of interest expense and $65,000 of amortization of debt discount related to the Perceptive Credit Facility.  For the nine months ended September 30, 2018, the Company recorded $398,000 of interest expense and $146,000 of amortization of debt discount related to the Perceptive Credit Facility. For the three and nine months ended September 30, 2017, the Company did not incur any interest expense related to the Perceptive Credit Facility, since the facility was not in place at that time.

In connection with the Perceptive Credit Facility, on February 27, 2018 the Company issued Perceptive a warrant to purchase 190,000 shares of the Company’s common stock. The warrant is exercisable for a period of seven years from the date of issuance at an exercise price per share of $9.5792, subject to certain adjustments as specified in the Warrant. See Note 10, “Stockholders’ Equity” for further discussion of the warrant. The fair value of the warrant of $1.5 million was recorded as a debt discount, which is being amortized to interest expense over the term of the Perceptive Credit Facility using the effective interest method

 

As of September 30, 2018 and December 31, 2017 the Perceptive Credit Facility principal balance was $5.0 million and zero, respectively. As of September 30, 2018, the Company was in compliance with the non-financial covenants of the Perceptive Credit Facility.

 

Future required principal and final payments on the Perceptive Credit Facility were as follows as of September 30, 2018:

 

2018 (remaining)

 

$

 

2019

 

 

 

2020

 

 

800

 

2021

 

 

800

 

2022

 

 

3,500

 

Total debt

 

 

5,100

 

Debt discount and deferred finance costs

 

 

(1,945

)

Total debt, net

 

$

3,155