Item 1A. Risk Factors
Item 1A. Risk Factors.
In addition to the other information
set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect our business, financial condition
or future results.
There have been no material
changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,
filed with the SEC on March 31, 2021, except as noted below.
Risks related to the Hercules Loan Agreement
The terms of the Hercules
Loan Agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the
terms of any new debt could further restrict our ability to operate our business.
In August 2021, we entered
into Hercules Loan Agreement, providing for the Term Loan in an aggregate principal amount of up to $30.0 million, subject to funding
in three tranches and subject to certain terms and conditions. We expect to receive the first tranche of $15.0 million promptly after
signing the agreement in August 2021. Two additional tranches in the amounts of $10 million and $5 million may become available to us
to borrow upon the occurrence of certain milestone events. Our obligations under the Hercules Loan Agreement are secured by a lien on
substantially all of our assets, other than intellectual property. We also agreed not to pledge or secure our intellectual property to
others.
The Hercules Loan Agreement includes affirmative
and negative covenants and events of default applicable to us. The affirmative covenants include, among others, covenants requiring us
to maintain our legal existence and governmental approvals, deliver certain financial reports and maintain insurance coverage. The negative
covenants include, among others, restrictions on our transferring collateral, making changes to the nature of our business, incurring
additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, engaging
in transactions with affiliates. Events of default include, among other things and subject to customary exceptions: (i) insolvency, liquidation,
bankruptcy or similar events; (ii) failure to pay any debts due under the Hercules Loan Agreement or other loan documents on a timely
basis; (iii) failure to observe certain covenants under the loan and security agreement with Hercules; (v) occurrence of a material adverse
effect; (vi) material misrepresentation by us; (vii) occurrence of any default under any other agreement involving material indebtedness;
and (viii) certain material money judgments. If we default under the Hercules Loan Agreement, Hercules may accelerate all of our repayment
obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us
or to immediately cease operations. Further, if we are liquidated, the lenders’ right to repayment would be senior to the rights
of the holders of our common stock to receive any proceeds from the liquidation. Any declaration by Hercules of an event of default could
significantly harm our business and prospects and could cause the price of our common stock to decline. If we raise any additional debt
financing, the terms of such additional debt could further restrict our operating and financial flexibility.
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