In April 2020, the Company entered into a Loan and Security Agreement, (the “Loan Agreement”) with the lenders referred to therein, and Silicon Valley Bank (“SVB”), as collateral agent. The Loan Agreement as amended in May 2021 (the “2021 Loan Agreement”) provided for (i) a secured term A loan facility (the “Term A Loan Facility”) of up to $20.0 million and (ii) a secured term B loan facility (the “Term B Loan Facility”) of up to $5.0 million. The Term A Loan Facility of $20.0 million was fully drawn as of December 2022 and the Term B Loan Facility expired unused.

In January 2023, the Company executed a loan and security agreement with new lenders (the “2023 Loan Agreement”) and from the proceeds repaid $21.4 million in outstanding principal, final payment fee, prepayment fee and interest due under the 2021 Loan Agreement. Repayment of the 2021 Loan Agreement was accounted for as an extinguishment as the 2023 Loan Agreement was with new lenders. The Company recorded a loss on extinguishment of $1.2 million, which was recognized as a component of interest expense on the Company’s condensed consolidated statements of operations and comprehensive loss.

In January 2023, the Company executed the 2023 Loan Agreement with the lenders referred to therein, K2 HealthVentures LLC (“K2HV”) as administrative agent and Ankura Trust Company, LLC as collateral agent. The 2023 Loan Agreement provides for up to $100.0 million in aggregate principal in term loans, consisting of a first term loan of $25.0 million that was funded at closing, two subsequent term loans totaling $25.0 million that may be funded upon the achievement of certain time-based, clinical and regulatory milestones, and a fourth term loan of up to $50.0 million that may be funded upon discretionary approval by the lenders. As of September 30, 2023, the second term loan of $15.0 million expired unused.

The term loans are secured by substantially all of the assets of the Company, excluding the Company’s intellectual property. The 2023 Loan Agreement contains customary representations and warranties, restricts certain activities and includes customary events of default, including payment default, breach of covenants, change of control, and material adverse effects. In addition, starting January 1, 2024, the Company is required to maintain minimum unrestricted cash and cash equivalents equal to 5.0 times the average change in cash and cash equivalents measured over the trailing three-month period.

The term loans mature on January 1, 2027 and provide for interest-only payments until February 1, 2025. Consecutive equal payments of principal and interest are due once the interest-only period has elapsed. The term loans bear interest equal to the greater of (i) 8.45% and (ii) the sum of (a) the Prime Rate as reported in The Wall Street Journal plus (b) 2.25%. The interest rate on the term loan was 9.75% at inception and 10.75% as of September 30, 2023. In addition, a final payment fee of 5.95% of the principal amount of the term loans is due upon the earlier of prepayment or maturity of the term loans. The Company has the option to prepay the entire outstanding balance of the term loans subject to a prepayment fee ranging from 3.0% to 1.0% depending on the timing of such prepayment. A commitment fee equal to 0.6% of the principal amount of the fourth term loan is also payable should such loan be funded.

At any time prior to full repayment of the term loans, the lenders may elect to convert up to an aggregate of $7.5 million of the principal amount of the term loans then outstanding into shares of the Company's common stock at a conversion price of $12.6943 per share. The embedded conversion option qualifies for a scope exception from derivative accounting because it is both indexed to the Company’s own stock and meets the conditions for equity classification.

Total debt issuance costs related to the first term loan were $0.8 million, including the fair value of the warrant related to the first term loan (discussed below) were recorded as a debt discount since the first term loan was funded at inception. The debt discount, together with the final payment fee, are recognized as interest expense using the effective interest method over the term of the loan.

The expected repayments of principal amount due on the term loans as of September 30, 2023 are as follows (in thousands):


Remainder of 2023	$	—
2024		—
2025		10,774
2026		13,036
2027		1,190
Total principal repayments		25,000
Final payment fee		285
Total principal repayments and final payment fee		25,285
Unamortized debt discount		(648	)
Total term loan, non-current, net	$	24,637

In January 2023, in connection with the 2023 Loan Agreement, the Company issued the lenders a warrant to purchase up to an aggregate of 204,815 shares of the Company’s common stock at an exercise price of $9.7649 per share (the “warrant shares”) that expires in January 2033. The warrant shares become exercisable upon the funding of each term loan. In connection with the first term loan that was funded at closing, 51,204 of the warrant shares became exercisable. The warrant shares cannot be settled for cash and include a cashless exercise feature allowing the holder to receive shares net of shares withheld in lieu of the exercise price. The warrant shares also provide for automatic cashless exercise under certain specific conditions and settlement is permitted in unregistered shares. The 51,204 warrant shares meet the requirements for equity classification.

The Company determined the fair value of the 51,204 warrant shares issued using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of 3.9%, no dividends, expected volatility of 93.8% and expected term of 10.0 years.

Of the remaining 153,611 warrant shares (the “contingent warrants”), 122,839 warrant shares are contingently exercisable upon the funding of each subsequent term loan and have the same exercise price and contractual term and 30,722 warrant shares associated with the second term loan were forfeited as of September 30, 2023. The contingent warrants did not meet the derivative scope exception or equity classification criteria and were accounted for as a derivative liability. The initial fair value and the fair value as of September 30, 2023 of the contingent warrants was insignificant. The contingent warrants derivative liability is remeasured each reporting period until settled or extinguished with subsequent changes in fair value recorded as interest expense in the condensed consolidated statements of operations and comprehensive loss. The initial fair value of the contingent warrants derivative liability was determined using a probability weighted Black-Scholes option pricing model based on the same input assumptions above.