Loan and Security Agreements

12 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

Loan and Security Agreements

11. Loan and Security Agreements

K2 HealthVentures LLC

On September 9, 2022 (the Closing Date), the Company entered into a Loan and Security Agreement (the Loan Agreement) with K2 HealthVentures LLC (K2HV), pursuant to which convertible term loans in an aggregate principal amount of up to $60.0 million is available to the Company in three tranches, subject to certain terms and conditions. The Company drew the first tranche of $30.0 million from K2HV on the Closing Date. The Company had the option to draw the second tranche of $10.0 million upon the achievement of certain financial and clinical milestones and an uncommitted third tranche of $20.0 million could be funded by joint agreement of the Company and K2HV. On the Closing Date, the Company paid a facility fee of $0.4 million to K2HV and is subject to an additional 1% of the principal amount of any amount drawn on third tranche.

The term loan was expected to mature on September 1, 2026 (the Maturity Date), and was subject to interest only payments for 24 months, which could be extended to 36 months upon achievement of certain financial and clinical milestones, following which the term loans would amortize in equal monthly installments until maturity. The Company had the ability to repay the loan at any time either in cash or in shares, subject to applicable premiums as specified in the Loan Agreement. The term loans accrued interest at a per annum rate equal to the greater of (i) 8.75% and (ii) the sum of (A) the prime rate (as last quoted in The Wall Street Journal) and (B) 4.75%, subject to a cap of 9.90%.

On September 26, 2024, K2HV confirmed to the Company that the amortization commencement date would be October 1, 2025, thereby extending the interest-only period under the Loan Agreement for 12 months. This extension met the definition of an accounting debt modification in accordance with ASC 470-50 and was accounted for prospectively as a yield adjustment, with no resulting gain or loss recognized.

The lenders could elect at any time following the closing prior to the payment in full of the term loans to convert any portion of the principal amount of the term loans then outstanding into shares of the Company's common stock. The first tranche of the loan was convertible at the option of K2HV at a conversion price of $4.785 per share and future tranches could be convertible as specified in the agreement, provided that, such price shall be subject to the applicable conversion price floor and other adjustments in accordance with the Loan Agreement. The embedded conversion option met the derivative accounting scope exception since the embedded conversion option was indexed to the Company’s own common stock and qualifies for classification within stockholders’ equity.

The Company had the option to prepay all, but not less than all, of the outstanding principal balance of the term loans under the Loan Agreement subject to a prepayment fee ranging from 4% to 1% depending upon when the prepayment occurs. The Company was obligated to pay a final fee equal to 6.00% of the aggregate amount of the term loans funded (the Exit Fee), to occur upon the earliest of (i) the maturity date, (ii) the acceleration of the term loans, and (iii) the prepayment of the term loans. If, upon equity conversion, K2HV received gross proceeds in an amount equal to at least 1.5 multiplied by the principal amount converted from the sale or other disposition of such Conversion Shares (as defined in the Loan Agreement), then as to such principal amount, the Exit Fee would be reduced to zero.

On November 20, 2024, K2HV elected to convert $15.0 million of the outstanding principal balance into 3,134,796 shares of the Company's voting common stock at a price of $4.785, in accordance with the agreement.

On December 20, 2024 the Company repaid the remaining obligation of the debt agreement, which included $15.0 million in remaining principal, a $1.8 million Exit Fee, and a $0.3 million prepayment fee. The Company recognized a loss from extinguishment of $1.1 million.

The Company recorded $3.6 million and $3.8 million in interest expense for the years ended December 31, 2024 and 2023, respectively. The effective interest rate on the Loan Agreement, including the amortization of the debt discount and issuance costs, and accretion of the Exit Fee, was 12.61% upon extinguishment.

Silicon Valley Bank

On December 20, 2024 (the effective date), the Company entered into a Loan and Security Agreement (SVB Loan Agreement) with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (SVB). Under the SVB Loan Agreement, SVB will extend up to $52.5 million in a term loan facility, consisting of a first tranche of $32.5 million fully funded on the Effective Date and a second tranche of $20.0 million to be available to the Company at the Lender’s sole discretion on or prior to June 30, 2026.

The term loans will mature on September 1, 2029, and will be subject to monthly interest only payments until September 30, 2027, provided the Company achieves certain financial and clinical milestones, following which the term loans will amortize in equal monthly installments until maturity. If the Company does not achieve such financial and clinical milestones by June 30, 2026, the maturity date will be September 1, 2028, and the interest only period will end on September 30, 2026, following which the term loans will amortize in equal monthly installments until maturity.

The term loans will accrue interest at a per annum rate equal to the greater of (i) 7.00% and (ii) the prime rate (as last quoted in The Wall Street Journal), minus 0.75%; provided that such interest rate shall not exceed 9.75% per annum. The Company will be liable for a final payment that is due on the earliest to occur of (a) the maturity date, (b) the repayment of the term loans in full, and (c) the date upon which the term loans are accelerated by the Lender, in an amount equal to the aggregate original principal amount of the term loans extended by the Lender to the Company, multiplied by 5.0% (Exit Fee). In addition, the Company will be liable for a prepayment fee equal to (x) 3.0% of the principal amount of term loans prepaid during the first year of the term, (y) 2.0% of the principal amount of term loans prepaid during the second year of the term, and (z) 1.0% of the principal amount of term loans prepaid thereafter. The term loans will automatically accelerate upon the occurrence of a bankruptcy or insolvency event involving the Company or its subsidiaries.

The SVB Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including covenants that limit or restrict the Company’s and its subsidiaries’ ability to, among other things, dispose of assets, make changes to its business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, grant liens on its assets, pay dividends or other distributions, repurchase equity, make investments, and enter into certain transactions with affiliates, in each case subject to certain thresholds and exceptions. The New Loan Agreement does not require the Company to comply with a financial maintenance covenant. As collateral for its obligations under the New Loan Agreement, the Company granted the Lender a first-priority security interest on substantially all of the Company’s assets (other than intellectual property), subject to certain exceptions. The Company’s obligations under the SVB Loan Agreement will be guaranteed by each of the Company’s future direct or indirect subsidiaries, subject to certain exceptions.

The Company recorded $0.1 million in interest expense for the year ended December 31, 2024. The effective interest rate on the SVB Loan Agreement, including the amortization of the debt discount and issuance costs, and accretion of the Exit Fee, was 8.46% at December 31, 2024.

Future principal payments as of December 31, 2024 are as follows (in thousands):

2027	$	4,063
2028		16,250
2029		12,187
Total principal payments		32,500
Plus: Final payment fee		1,625
Less: unamortized debt discount and final fee		(2,053	)
Total debt		32,072