Item
2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
On
August 28, 2020, Celsion Corporation, a Delaware corporation (“Celsion”), entered into the First Amendment (the “Amendment”)
to the Venture Loan and Security Agreement with Horizon Technology Finance Corporation (“Horizon”) dated June 27,
2018 (the “Initial Horizon Credit Agreement”).
On
June 27, 2018, in connection with the closing of the Initial Horizon Credit Agreement, Celsion drew down $10 million in new capital,
as further described in Celsion’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on June
28, 2018. On August 28, 2020, in connection with the Amendment, Celsion repaid $5 million of the initial $10 million, 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 Initial Horizon Credit Agreement are secured by
a first-priority security interest in substantially all assets of Celsion other than intellectual property assets. The obligations
will bear interest at a rate calculated based an amount by which the one-month LIBOR exceeds 2% plus 9.625%. In no event shall
the interest rate be less than 9.625%. Payments pursuant to the Amendment are 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. In addition,
the remaining $5 million in obligations is subject to an end of term fee equal, in the aggregate, to $275,000 which amount shall
be payable upon the maturity of the obligations or upon the date of final payment or default, as applicable. In connection with
the Amendment, Celsion has 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 has agreed to provide evidence to Horizon
on or before March 31, 2021, that it has 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.
As
a fee in connection with the Initial 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. 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 outstanding $5 million in obligations described above, 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 Initial Horizon Credit Agreement remain outstanding at a per share exercise price
of $2.63.
The
Warrants are immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years from the
date of grant. Following the date of grant and within 90 days, Celsion is required to register the common stock underlying the
Warrants. 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
foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the Amendment,
a copy of which Celsion intends to file as an exhibit to its Quarterly Report on Form 10-Q for the quarter ending September 30,
2020.