Item 2.03Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
As previously reported, on March 22, 2016, Aspira Women’s Health Inc., formerly known as Vermillion, Inc. (the “Company”), entered into a loan agreement (as amended on March 7, 2018 and April 3, 2020, the “Loan Agreement”) with the State of Connecticut Department of Economic and Community Development (the “DECD”), pursuant to which the Company may borrow up to $4,000,000 from the DECD. The loan bears interest at a fixed rate of 2.0% per annum and requires equal monthly payments of principal and interest until maturity, which occurs on April 15, 2026. As security for the loan, the Company has granted the DECD a blanket security interest in the Company’s personal and intellectual property. The DECD’s security interest in the Company’s intellectual property may be subordinated to a qualified institutional lender.
The loan may be prepaid at any time without premium or penalty. An initial disbursement of $2,000,000 was made to the Company on April 15, 2016 under the Loan Agreement. On December 3, 2020, the Company received a disbursement of the remaining $2,000,000 under the Loan Agreement, as the Company had we achieved the target employment milestone necessary to receive an additional $1,000,000 under the Loan Agreement and the DECD determined to fund the remaining $1,000,000 under the Loan Agreement after concluding that the required revenue target would likely have been achieved in the first quarter of 2020 in the absence of the impacts of COVID-19.
Under the terms of the Loan Agreement, the Company may be eligible for forgiveness of up to $1,500,000 of the principal amount of the loan if the Company achieves certain job creation and retention milestones by December 31, 2022. Conversely, if the Company is either unable to retain 25 full-time employees with a specified average annual salary for a consecutive two-year period or does not maintain the Company’s Connecticut operations through March 22, 2026, the DECD may require early repayment of a portion or all of the loan plus a penalty of 5% of the total funded loan.
The above description of the Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Loan Agreement filed as Exhibit 10.1 to the Company’s Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) on May 16, 2016, Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2018 and Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed with the SEC on April 7, 2020, which are incorporated herein by reference.