SPRUCE BIOSCIENCES, INC. 8-K

What Happened
Spruce Biosciences, Inc. announced on Jan 7, 2026 that it entered into a Loan and Security Agreement (and a Supplement) with Avenue Capital (Avenue Capital Management II, L.P. as agent; Avenue Venture Opportunities Fund II, L.P. as lender) providing up to $50.0 million in term loans. The facility includes an initial Tranche 1 of $15.0 million (to be funded within five business days of closing), conditional Tranche 2 of up to $10.0 million (available Mar 1–Sep 30, 2026 upon a regulatory milestone for TA-ERT), Tranche 3 of up to $15.0 million (available Sep 1, 2026–Mar 31, 2027 upon an additional milestone), and a Discretionary Tranche 4 of up to $10.0 million (fundable Oct 1, 2027–Jun 30, 2028 subject to commercial milestone and lender approval). The company also reported preliminary, unaudited cash and cash equivalents of approximately $48.9 million as of Dec 31, 2025 (filed Jan 8, 2026).

Key Details

• Facility size and timing: up to $50.0M total (Tranche 1 = $15.0M funded promptly; Tranche 2 up to $10.0M; Tranche 3 up to $15.0M; Discretionary Tranche 4 up to $10.0M).
• Interest and term: interest = greater of (prime + 5.25%) or 12.25% annually; maturity date = July 1, 2029; interest-only payments initially, then principal amortization to maturity.
• Collateral and covenants: loans secured by liens on all company assets (including IP) with customary covenants and defaults; no minimum cash requirement or other financial covenants.
• Fees and equity features: $400,000 commitment fee paid at closing; prepayment fees (3%/2%/1% depending on prepayment timing); final payment equal to 4.0% of aggregate commitments for Tranches 1–3; upon filing the 2025 Form 10-K the lender will receive a warrant to purchase up to $3.2M of common stock (exercise price = lesser of $84.75 or next bona fide financing price before Jun 30, 2026; expires Jan 31, 2031) and may convert up to $4.0M of outstanding principal into equity at a price equal to 120% of the warrant exercise price (subject to terms). Lender also has a participation right up to $1.0M in future equity financings.

Why It Matters
This agreement gives Spruce an immediate capital infusion option and conditional follow‑on funding tied to regulatory and commercial milestones for its TA‑ERT program, improving near‑term liquidity while preserving flexibility (no financial covenants). However, the facility is secured by the company’s assets and includes relatively high interest rates and equity-linked components (warrant and conversion option) that could dilute shareholders or convert debt to equity under specified conditions. Investors should note the company’s preliminary cash balance (~$48.9M) and that additional details and audited results will appear in the company’s 2025 Form 10‑K and subsequent disclosures.