Convertible Promissory Notes

6 Months Ended

Jun. 30, 2025

Debt Disclosure [Abstract]

Convertible Promissory Notes

7. Convertible Promissory Notes

2024 Convertible Promissory Note

In March 2024, the Company issued a convertible promissory note to Samsara (the “2024 Note”) for total proceeds of up to $10.0 million. The 2024 Note was payable in two advances at Samsara’s discretion, carried an annual interest rate of 10%, and had an original maturity date of March 2025. In March and May 2024, Samsara advanced to the Company $5.0 million for an aggregate advance of $10.0 million under the 2024 Note. All unpaid interest and principal were due and payable upon request of Samsara on or after maturity, or in the event of default. The Company could not prepay the principal amount and accrued interest at any time before maturity without the consent of Samsara.

In the event that the Company issued and sold shares of its redeemable convertible preferred stock to investors following the issuance date of the 2024 Note in a single transaction or a series of related transactions that resulted in either (i) gross proceeds of at least $10.0 million (excluding conversion of the (a) 2024 Note and any other convertible notes or convertible securities issued by the Company and then outstanding and (b) aggregate gross proceeds to the Company yielded by any cash investment by Samsara, or (ii) designated as a qualified financing by Samsara (a “2024 Note Qualified Financing”)), then the outstanding principal amount of the 2024 Note and any unpaid accrued interest would automatically convert into shares of redeemable convertible preferred stock issued in the 2024 Note Qualified Financing at a conversion price equal to 80% of the per share price paid by investors for the redeemable convertible preferred stock in the 2024 Note Qualified Financing.

Upon a change in control, the 2024 Note, at the election of Samsara, would either (i) become due and payable in cash upon the closing of such change in control, in an amount equal to twice the outstanding principal amount plus any unpaid accrued interest, or (ii) convert into shares of the Company’s Series B-2 Stock. The conversion would have been based on a price equal to 100% of the total aggregate consideration paid for each share of the Company’s capital stock on an as-converted to common stock basis (including any earn-out amounts).

Unless earlier converted or repaid in connection with the 2024 Note Qualified Financing or a change in control on or prior to the maturity date, or at any time at Samsara’s option, Samsara could have elected to convert the 2024 Note and any unpaid accrued interest into the Company’s common stock at a conversion price equal to the Series B-2 Stock conversion price then in effect.

The 2024 Note contained customary representations and warranties and event of default provisions. Upon any event of default, Samsara could declare the principal and unpaid accrued interest under the 2024 Note immediately due and payable.

The 2024 Note was issued to Samsara at the estimated fair value of $12.1 million at the issuance date. Since the convertible promissory notes were issued to a related party and considered not at arm’s length, the total premium of $2.1 million, which was the difference between the fair value at the issuance date and the principal amount of the note, was recognized as a loss on issuance of convertible promissory notes – related party in the condensed consolidated statement of operations and as additional paid-in-capital in the condensed statement of redeemable convertible preferred stock and stockholders’ deficit in March and May 2024 when amounts were advanced under the 2024 Note. The Company recognized a $0.2 million loss on the issuance of convertible promissory notes to a related party for the six months ended June 30, 2025. The Company recognized a $1.3 million and a $2.1 million loss on issuance of convertible promissory notes – related party for the three and six months ended June 30, 2024, respectively. The fair value of convertible promissory notes at issuance was estimated using the probability weighted settlements scenarios model discounted to present value with the following range of assumptions: expected term of 0.4 – 1.3 years, probabilities of scenario achievement of 0.0% – 90.0% and discount rates of 12.3% – 18.7%.

The 2024 Note contained embedded features that provided Samsara the right to receive cash or a variable number of shares upon a change in control or the completion of a capital raising transaction by the Company. These embedded features were required to be bifurcated and accounted for separately as a compound derivative instrument. The embedded features were initially and subsequently measured at fair value, with changes in the fair value recorded as a change in fair value of derivative liabilities – related party in the

condensed consolidated statements of operations. The total fair value at issuance of the derivative instrument issued with the 2024 Note was $2.1 million, including $1.1 million for the convertible promissory note issued in March 2024. The derivative liability created a discount on the advances under the 2024 Note that was amortized using the effective interest rate method over the term of the respective advance and recorded as a non-cash interest expense.

The Company recognized a change in the fair value of derivative liability of $0.5 million in the condensed consolidated statements of operations for the six months ended June 30, 2025. The change in the fair value of derivative liability was immaterial for the three and six months ended June 30, 2024. The 2024 Note was converted into shares of common stock, and the derivative liability expired in connection with the closing of the Merger on March 18, 2025.

There was no interest expense for the 2024 Note for the three months ended June 30, 2025. For the six months ended June 30, 2025, interest expense for the 2024 Note was $0.8 million, consisting of $0.2 million of contractual interest expense and $0.6 million in amortization of debt discount arising from the separation of the derivative instrument. For the three and six months ended June 30, 2024, interest expense for the 2024 Note was $0.5 million and $0.6 million, respectively, including $0.2 million of contractual interest expense and $0.3 million and $0.4 million, respectively, in amortization of debt discount arising from the separation of the derivative instrument. In connection with the closing of the Merger, the $10.0 million aggregate outstanding principal amount and $0.9 million accrued interest of the 2024 Note were converted into 1,757,951 shares of Legacy Kalaris common stock at a conversion price of $6.20 per share. The 2024 Note was no longer outstanding as of June 30, 2025.

2024 and 2025 Bridge Notes

In October 2024, the Company entered into a convertible note purchase agreement with Samsara to sell and issue convertible promissory notes for an aggregate principal amount of up to $25.0 million. In November 2024, the Company amended the agreement and other existing preferred stockholders of the Company joined the agreement. In October 2024, the Company issued to Samsara a convertible promissory note with an aggregate principal amount of approximately $9.0 million (the “October 2024 Note”). In November 2024, the Company issued additional notes with an aggregate principal amount of approximately $1.0 million to Samsara and other investors (the “November 2024 Notes”, and together with the October 2024 Note, the “2024 Bridge Notes”). The October and November 2024 issuance of convertible notes is referred to as the “First Tranche Closing”. The Company had the right to draw up to an additional $15.0 million in three subsequent tranche closings of up to a maximum aggregate principal amount of $5.0 million in each such closing (each, the “Subsequent Tranche Closing”). The 2024 Bridge Notes carried an annual interest rate of 8%, and had an original maturity date of May 2025.

In the event that the Company issued and sold shares of its redeemable convertible preferred stock to investors following the respective issuance date of the 2024 Bridge Notes in a single transaction or a series of related transactions that results in either (i) gross proceeds of at least $10.0 million (excluding conversion of the (a) 2024 Bridge Notes and any other convertible notes or convertible securities issued by the Company and then outstanding and (b) aggregate gross proceeds to the Company yielded by any cash investment by Samsara), or (ii) designated as a qualified financing by Samsara (a “2024 Bridge Notes Qualified Financing”), then the outstanding principal amount of the 2024 Bridge Notes and any unpaid accrued interest would automatically convert into shares of redeemable convertible preferred stock issued in the 2024 Bridge Notes Qualified Financing at a conversion price equal to 80% of the per share price paid by investors for the redeemable convertible preferred stock in the 2024 Bridge Notes Qualified Financing.

Upon a change in control, the 2024 Bridge Notes, at the election of Samsara, would either (i) become due and payable in cash upon the closing of such change in control, in an amount equal to twice the outstanding principal amount plus any unpaid accrued interest, or (ii) convert into shares of the Company’s Series B-2 Stock at a price equal to 100% of the total aggregate consideration to be paid for each share of the Company’s capital stock on an as-converted to common stock basis (including any earn-out amounts) as determined by the board of directors of the Company in its sole discretion, provided that if the conversion occurred due to the closing of the Merger, only clause (ii) would apply to such conversion.

Unless earlier converted or repaid in connection with the 2024 Bridge Notes Qualified Financing or a change in control on or prior to the maturity date, or at any time at Samsara’s option, Samsara could have elected to convert the 2024 Bridge Notes and any unpaid accrued interest into the Company’s common stock at a conversion price equal to the Series B-2 Stock conversion price then in effect (the “2024 Bridge Notes Optional Conversion”).

The 2024 Bridge Notes contained customary representations and warranties and event of default provisions. Upon any event of default, Samsara could declare the principal and unpaid accrued interest under the 2024 Bridge Notes immediately due and payable.

The Company determined that the investors’ right to receive additional convertible promissory notes at a predetermined conversion price under each of the Subsequent Tranche Closing represented freestanding instruments that should be accounted for separately as liabilities, initially recorded and subsequently remeasured at fair value until their exercise or expiration (the “Tranche Liability”). The Tranche Liability was initially recorded at $21.4 million. The change in the fair value of the Tranche Liability was

$21.0 million for the year ended December 31, 2024. As of December 31, 2024, the Tranche Liability fair value was $0.4 million. The decrease in fair value was a result of modification of tranche amounts and parties agreeing to convert each of the subsequent Tranche Closings at a price per share equal to the Company Value Per Share, as defined in the Merger Agreement. The fair value of the Tranche Liability was estimated using the probability weighted scenario analysis discounted to the current period (Note 4).

The 2024 Bridge Notes were issued to Samsara and other existing preferred stockholders of the Company at the estimated fair value of $24.5 million at the issuance dates. The premium of $14.5 million, which was the difference between the fair value at the issuance date and the principal amount of the notes, was recognized as additional paid-in-capital in the consolidated statement of redeemable convertible preferred stock and stockholders’ deficit at the issuance date. The fair value of the notes at issuance was estimated using the probability weighted settlements scenarios model discounted to present value with the following range of assumptions: expected term of 0.4 - 0.6 years, probabilities of scenario achievement of 0% - 60% and a discount rate of 9.5%. The aggregate estimated fair value of the 2024 Bridge Notes and the Tranche Liability was $45.9 million as of the issuance date. The Company recognized the excess of the aggregated fair value over net cash proceeds received as non-pro rata distribution to the stockholders, resulting in a loss of $35.9 million at the issuance date, which was recorded as a loss on issuance of convertible promissory notes in the consolidated statement of operations for the year ended December 31, 2024.

The 2024 Bridge Notes contained embedded features that provided Samsara and other stockholders the right to receive cash or a variable number of shares upon a change in control or the completion of a capital raising transaction by the Company. These embedded features were required to be bifurcated and accounted for separately as a compound derivative instrument. The embedded features were initially and subsequently measured at fair value with changes in the fair value recorded as a change in fair value of derivative liabilities in the condensed consolidated statements of operations. The fair value at issuance of the derivative instrument issued with the 2024 Bridge Notes was $1.0 million. The derivative liabilities created a discount on the advances under the 2024 Bridge Notes that were amortized using the effective interest rate method over the term of the respective advance and recorded as a non-cash interest expense. The change in the fair value of derivative liabilities related to the 2024 Bridge Notes was $0 and $0.5 million for the three and six months ended June 30, 2025, respectively. The 2024 Bridge Notes were converted into shares of common stock and the derivative liability expired in connection with the closing of the Merger on the Closing Date.

Pursuant to the Merger Agreement, the Company was permitted to enter into a series of financings to fund its operations prior to the closing of the Merger in an amount not to exceed $15.0 million in the aggregate on a to be converted post-money basis, with up to $7.5 million to be provided by AlloVir and up to $7.5 million to be provided by Legacy Kalaris’ stockholders.

In January 2025, the Company amended its 2024 Bridge Notes agreement and changed the amounts of Subsequent Tranche Closings from $5.0 million for each tranche to $3.75 million for the first two tranches and $7.5 million for the third tranche. No other changes were made to the terms of the 2024 Bridge Notes. In January 2025, Samsara and other investors funded an aggregate principal amount of $3.75 million in convertible promissory notes (the “2025 Bridge Notes”). The 2025 Bridge Notes’ terms were similar to the 2024 Note's terms. Samsara and other investors agreed that the 2025 Bridge Notes would convert into shares of Series B-2 Stock at a price per share equal to the Company Value Per Share, as defined in the Merger Agreement, at the closing of the Merger.

The 2025 Bridge Notes were issued to Samsara and other existing preferred stockholders of the Company at the estimated fair value of $3.9 million at the issuance dates. The premium of $0.2 million, which was the difference between the fair value at the issuance date and the principal amount of the notes, was recognized as additional paid-in-capital in the condensed consolidated statement of redeemable convertible preferred stock and stockholders’ equity (deficit) at the issuance date. The fair value of the notes at issuance was estimated using the probability weighted settlements scenarios model discounted to present value with the following range of assumptions: expected term of 0.2 - 0.3 years, probabilities of scenario achievement of 20% - 80% and a discount rate of 8.5%. The 2025 Bridge Notes contained embedded features that provided Samsara and other stockholders the right to receive cash or a variable number of shares upon a change in control or the completion of a capital raising transaction by the Company. These embedded features were required to be bifurcated and accounted for separately as a compound derivative instrument. The embedded features were initially and subsequently measured at fair value, with changes in the fair value recorded as a change in fair value of derivative liabilities in the condensed consolidated statements of operations. The fair value at issuance of the derivative instrument issued with the 2025 Bridge Notes was $0.2 million. The derivative liabilities created a discount on the advances under the 2025 Bridge Notes that were amortized using the effective interest rate method over the term of the respective advance and recorded as a non-cash interest expense. The change in the fair value of derivative liabilities related to the 2025 Bridge Notes was $0 and $0.2 million for the three and six months ended June 30, 2025, respectively. The 2025 Bridge Notes were converted into shares of Series B-2 Stock and the derivative liability expired in connection with the closing of the Merger on the Closing Date.

The total interest expense for the 2024 Bridge Notes and 2025 Bridge Notes was $0 and $0.6 million for the three and six months ended June 30, 2025, respectively. For the six months ended June 30, 2025, total interest expense consisted of $0.2 million of contractual interest expense and $0.4 million in amortization of debt discount arising from the separation of the derivative instrument. There was no interest expense for the 2024 Bridge Notes and the 2025 Bridge Notes for the three and six months ended June 30, 2024.

In connection with the closing of the Merger, the $10.0 million aggregate outstanding principal amount and $0.3 million accrued interest of the 2024 Bridge Notes converted into 1,660,888 shares of Legacy Kalaris common stock at a conversion price of $6.20 per share and the 2024 Bridge Notes were no longer outstanding as of June 30, 2025. In connection with the closing of the Merger, the $3.75 million aggregate outstanding principal amount and $0.1 million accrued interest of the 2025 Bridge Notes converted into 794,499 shares of Series B-2 Stock at a price of $4.7851 per share, which then converted on a one-for-one basis into shares of Legacy Kalaris common stock, and subsequently into 160,165 shares of AlloVir common stock.

In March 2025, the Company and other noteholders entered into an acknowledgment of conversion and termination agreement to cancel all unfunded tranches included in the 2024 Bridge Notes. The Company recognized no gain and a gain of $0.4 million in the change in fair value of the tranche liability for the three and six months ended June 30, 2025, respectively.

January 2025 AlloVir Convertible Promissory Note

In January 2025, the Company issued the AlloVir Note under which AlloVir funded a principal amount of $3.75 million. At the closing of the Merger on March 18, 2025, the AlloVir Note was cancelled in accordance with its terms.

As of June 30, 2025, the Company does not have any outstanding convertible promissory notes, derivative liabilities or the tranche liability.