7. Loan and Security Agreement

In August 2017, the Company entered into a loan and security agreement with Oxford and SVB under which it borrowed $15.0 million (the “August 2017 Loan”). The loan is due in 30 monthly installments from March 2019 through its repayment in August 2021, with interest-only monthly payments until March 2019. If certain qualified funding events occur, the loan will be due in 24 monthly installments from September 2019 through its repayment in August 2021, with interest-only payments until September 2019.  While the aforementioned qualified funding events occurred during the year ended December 31, 2018, the Company commenced monthly principal and interest installment payments in March 2019.

The August 2017 Loan is secured by all assets of the Company, excluding intellectual property and certain other assets. The August 2017 Loan contains customary affirmative and restrictive covenants, including with respect to fundamental transactions, the incurrence of additional indebtedness, grant liens, pay any dividend or make any distributions to the Company’s holders, make investments, merge or consolidate with any other person, or engage in transactions with its affiliates, but does not include any financial covenants. The loan agreement provides that an event of default will occur if, among other triggers, there occurs any circumstances that could reasonably be expected to result in a material adverse effect on the Company’s business, operations or condition, or on its ability to perform its obligations under the loan. The loan agreement also includes customary representations and warranties, other events of default and termination provisions.

As discussed in Note 1, the Company disclosed in its audited financial statements as of December 31, 2017 there was substantial doubt about the Company’s ability to continue as a going concern given its continuing operating losses and its then available capital resources, which could be deemed to be an event of default if such condition was considered to have a material adverse effect on the Company’s business, operations or condition. As a result, the Company classified the entire debt balance as a current liability as of December 31, 2017, given that a determination of such an event of default is outside of the Company’s control. As of December 31, 2018, the Company has classified $4.7 million of the outstanding debt balance as current and $10.0 million as non-current, which reflects the scheduled repayment terms under the August 2017 Loan.

The interest charges on the loan are based on a floating rate that equals the greater of 7.39% or the sum of the 30-day U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus 6.40%. For the year ended December 31, 2018, the average interest rate was 8.39%. In addition, the Company will make a final payment equal to 3.83% of the original principal amount of the loan, or $0.6 million, which will be accrued over the term of the loan using the effective-interest method.  As of December 31, 2018, total interest expense accrued was $0.3 million.

In connection with the August 2017 Loan, the Company issued to Oxford and SVB a warrant to purchase 454,820 shares and 227,410 shares, respectively, of Series D-2 redeemable convertible preferred stock at an exercise price of $0.6596 per share (the “2017 Warrant”). If there was a subsequent convertible preferred stock or other senior equity securities financing with a per share price less than the Series D-2 redeemable convertible preferred per share price, then the warrant would instead be to purchase such class of shares, based on the per share price of such. In May and July 2018, the Company raised a total of $85.4 million in funding through the sale and issuance of 319,305,718 shares of Series E redeemable convertible preferred stock at $0.2674 per share. Given that the price per share of the Series E redeemable convertible preferred stock was less than the Series D-2 redeemable convertible preferred per share price, the 2017 Warrant converted into a warrant to purchase a total of 1,682,871 shares of Series E redeemable convertible preferred stock at an exercise price of $0.2674 per share. Upon the closing of the Company’s IPO on October 1, 2018, all Series E redeemable convertible preferred stock warrants were converted on a 1-for-0.0275 basis to 46,359 shares of warrants to purchase common stock . The warrants were exercisable from the date of issuance and have a 10-year term. As of December 31, 2018, no warrant was exercised. The estimated fair value upon issuance of the 2017 Warrant based on Series D-2 redeemable convertible preferred stock was $0.3 million, which was recorded as redeemable convertible preferred stock warrant liability. The fair value of the warrant at the date of issuance was determined using an Option Pricing Method and was recorded as a redeemable convertible preferred stock warrant liability with an offset to debt discount on the associated borrowings on the Company’s balance sheet. The debt discount is being amortized to interest expense over the repayment period of the loan using the effective-interest method.

During the years ended December 31, 2018 and 2017, the Company recorded interest expense related to this loan of $1.6 million and $0.6 million, respectively. During the years ended December 31, 2018 and 2017, the Company recorded accretion of debt discount of $0.2 million and $0.1 million, respectively.

As of December 31, 2018, the Company’s scheduled future principal payments for the loan are as follows: