Convertible Note and Long-Term Debt |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Note and Long-Term Debt |
Note 8 – Convertible Note and Long-Term Debt
On July 16, 2021 (the “Effective Date”), the Company entered into a loan facility (the “Kreos Loan Agreement”) with Kreos Capital VI (Expert Fund) LP (the “Lender”). Under the Kreos Loan Agreement, the Lender will provide the Company with access to term loans in an aggregate principal amount of up to $12,000 (the “Loan”) in three tranches as follows: (a) on the Effective Date, a loan in the aggregate principal amount of $4,000 (the “Convertible Note”, or “Tranche A”), (b) on the Effective Date, a loan in the aggregate principal amount of $5,000 (“Tranche B”), and (c) available until December 31, 2021, a loan in the aggregate principal amount of $3,000 (“Tranche C”, together with Tranche B, the “Long-term Debt”). The Kreos Loan Agreement contains customary representations and warranties, indemnification provisions in favor of the Lender, events of default and affirmative and negative covenants, including, among others, covenants that limit or restrict the Company’s ability to, among other things, incur additional indebtedness, merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity, make investments, dispose of assets and enter into certain transactions with affiliates, in each case subject to certain exceptions. Outstanding borrowings under the Loan are secured by a first priority security interest on substantially all of the personal property assets of the Company, including the Company’s material intellectual property and equity interests in its subsidiaries. There are no liquidity or financial covenants. The Convertible Note and Tranche B were funded on the Effective Date. As of December 31, 2021, the Company drew down the full $3,000 aggregate principal amount of Tranche C.
The Convertible Note requires forty-eight monthly interest only payments at 7.75% per annum commencing after the Effective Date and thereafter full payment of the then outstanding principal balance of the Convertible Note on July 1, 2025. The Kreos Loan Agreement contains features that would permit the Lender to convert all or any portion of the outstanding principal balance of the Convertible Note at any time, pursuant to which the converted part of the Convertible Note will be converted into that number of shares of common stock of the Company to be issued to the Lender at a price per share equal to the conversion price, of $420 per share. Following the conversion of any portion of the outstanding principal balance of the Convertible Note, the principal balance of the Convertible Note remaining outstanding shall continue to bear interest at 7.75% per annum. The Tranche B loan requires interest only monthly payments commencing on the Effective Date until September 30, 2022 and, thereafter, thirty-three monthly payments of principal and interest accrued thereon until June 1, 2025, as well as the payment of an end of loan payment of 1.75% of principal drawn. The Tranche C loan requires interest only monthly payments commencing on the date of the draw down until September 30, 2022 and, thereafter, thirty-two monthly payments of principal and interest accrued thereon until June 1, 2025, as well as the payment of an end of loan payment of 1.75% of principal drawn. The Lender retained the final payment of principal and interest due on June 1, 2025 for the Tranche B and Tranche C Loans upon their issuance in the amount of $274, which was recorded in other non-current assets in the balance sheet.
In connection with the Kreos Loan Agreement, the Company also issued to the Lender a warrant (“Warrant”), dated July 16, 2021, to purchase up to 9,547 shares of the Company’s common stock, at an exercise price of $20.948 per share, payable in cash or on a cashless basis according to the formula set forth in the Warrant. The exercise price of the Warrant and the number of shares issuable upon exercise of the Warrant are subject to adjustments for stock splits, combinations, stock dividends or similar events. The Warrant is exercisable until the date that is ten years after the date of issuance. The Company concluded that the Warrant is indexed to its own stock and, accordingly is classified as equity. See Note 11 for further discussion of the Warrant.
On November 28, 2023 (“Amendment Effective Date”), the Company and Kreos entered into the First Amendment (“First Amendment”) to the 2021 Loan Agreement, pursuant to which the Company:
The Company determined that the First Amendment should be accounted for as a modification as the change in cash flows expected under the 2021 Loan Agreement was less than 10% (not substantial). Additionally, the Company assessed the addition of the Convertible Note Securities exchange feature as a share-settled redemption provision and determined that it did not require bifurcation as a separate derivative liability upon execution of the First Amendment. As such, the Company accounted for the First Amendment on a prospective basis and capitalized $300 in fees paid to the Lender in relation to the First Amendment. The partial repayment required by the First Amendment was comprised of a reduction of $776 in principal of the Long-term Debt and end of loan payment obligations, as well as the application of $26 of the advance payment held by the Lender, resulting in a net cash payment of $750 to the Lender. In addition, the Company recognized a loss on debt extinguishment of $22 reflecting the proportional write-down of unamortized debt issuance costs upon the $750 partial repayment.
On December 21, 2023, immediately following the closing of the Company’s public offering (see Note 11), and pursuant to the terms of the First Amendment, the $4,000 outstanding principal amount of the Convertible Note was automatically exchanged, into (i) 54,461 shares of common stock (the “Private Shares”), (ii) pre-funded warrants (the “Private Pre-Funded Warrants”) exercisable for an aggregate of up to 2,612,205 shares of common stock, (iii) Series A common warrants (the “Series A Private Warrants”) exercisable for an aggregate of up to 2,666,666 shares of common stock and (iv) Series B common warrants (the “Series B Private Warrants,” together with the Series A Private Warrants and Private Pre-Funded Warrants, the “Private Warrants”) exercisable for an aggregate of up to 2,666,666 shares of Common Stock (the shares issuable upon exercise of the Private Warrants, the “Private Warrant Shares”). The terms of the Private Warrants are discussed in Note 11.
The Company applied the extinguishment model to recognize the exchange of the Convertible Note for the common stock and Private Warrants upon the First Amendment Capital Raise. The Company recognized a loss on debt extinguishment of $181, representing the difference between the $4,000 estimated fair value of the instruments issued in the exchange, determined in relation to the price paid by the purchasers in the Public Offering, and the carrying value of the Convertible Note. The partial repayment triggered by the First Amendment Capital Raise was comprised of a reduction of $1,551 in principal of the Long-term Debt and end of loan payment obligations as well as the application of $51 of the advance payment held by the Lender, resulting in a net cash payment of $1,500 to the Lender. In addition, the Company recognized a loss on debt extinguishment of $81 reflecting the proportional write-down of unamortized debt issuance costs upon the $1,500 partial repayment.
The Company recorded an adjustment to interest expense (included in finance expense, net in the consolidated statements of comprehensive loss) during the fourth quarter totaling $211, of which $128 related to prior years.
For the years ended December 31, 2023 and 2022, interest expense for the Loan was as follows:
Future principal payments under the Long-term Debt as of December 31, 2023 are as follows:
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