Term Loans

9 Months Ended

Sep. 30, 2025

Debt Disclosure [Abstract]

Term Loans

Note 7 – Term Loans

2025 Loan with Trinity Capital

On August 7, 2025 (the “Trinity Refinance Date”), the Company entered into a Loan and Security Agreement (the “2025 Trinity Term Loan Agreement”), by and among the Company, the lenders party thereto from time to time (the “2025 Trinity Lenders”) and Trinity Capital Inc., as administrative agent and collateral agent for the 2025 Trinity Lenders (“Trinity”). The 2025 Trinity Term Loan Agreement provides for (i) on the Trinity Refinance Date, $50.0 million aggregate principal amount of term loans (“Tranche A”), (ii) from the Trinity Refinance Date until March 31, 2028 an additional $25.0 million term loan facility contingent on delivering evidence satisfactory to Trinity that the Company has submitted a biologics license application (“BLA”) to the FDA for TSHA-102 in Rett Syndrome (“Tranche B”), (iii) from the Trinity Refinance Date until March 31, 2029, an additional $25.0 million term loan facility contingent on delivering evidence satisfactory to Trinity that the Company has received BLA approval from the FDA for TSHA-102 in Rett Syndrome (collectively, the “2025 Trinity Term Loans”). The Company drew $50.0 million in term loans on the Trinity Refinance Date. The existing 2023 Trinity Term Loan Agreement was terminated and the existing 2023 Trinity Term Loans were repaid concurrently with entry into the 2025 Trinity Term Loan Agreement and the draw of Tranche A.

The interest rate applicable to the 2025 Trinity Term Loans is the greater of (a) the WSJ Prime Rate plus 4.00% or (b) 11.50% per annum. The 2025 Trinity Term Loans are interest only from the Trinity Refinance Date through 48 months from the Trinity Refinance Date, which may be extended to 60 months from the Trinity Refinance Date upon the satisfaction of certain milestones set forth in the 2025 Trinity Term Loan Agreement, after which the Company is required to pay equal monthly installments of principal through August 1, 2030 (the “New Maturity Date”). As of September 30, 2025, $50.0 million was outstanding on the 2025 Trinity Term Loan, recorded as Term Loan, net on the condensed consolidated balance sheet.

Future principal debt payments on the 2025 Trinity Term Loan Agreement as of September 30, 2025 are as follows (in thousands):

Year Ending December 31,
2025	$	—
2026		—
2027		—
2028		—
2029		11,969
2030		38,031
Total principal payments	$	50,000

On the Trinity Refinance Date, the Company paid a commitment fee of $0.1 million to Trinity. Upon any future draw of 2025 Trinity Term Loans, the Company is required to pay an additional commitment fee of 1.00% of the aggregate principal amount of such 2025 Trinity Term Loans.

The 2025 Trinity Term Loans may be prepaid in full (i) from the Trinity Refinance Date through August 7, 2026, with payment of a 3.00% prepayment premium, (ii) from August 8, 2026 through August 7, 2027, with payment of a 2.00% prepayment premium, and (iii) from August 8, 2027 through, but excluding, the New Maturity Date, with payment of a 1.00% prepayment premium. Upon repayment in full of the 2025 Trinity Term Loans, the Company will pay to Trinity an end of term payment equal to 5.00% of the original principal amount of the 2025 Trinity Term Loans.

The obligations under the 2025 Trinity Term Loan Agreement are secured by a perfected security interest in all of the Company’s assets except for certain customarily excluded property pursuant to the terms of the 2025 Trinity Term Loan Agreement. There are no financial or minimum cash balance covenants and no warrants associated with the 2025 Trinity Term Loan Agreement. The 2025 Trinity Term Loan Agreement contains various covenants that limit the Company’s ability to engage in specified types of transactions without the consent of Trinity and the New Trinity Lenders which include, among others, incurring or assuming certain debt; merging, consolidating or acquiring all or substantially all of the capital stock or property of another entity; changing the nature of the Company’s business; changing the Company’s organizational structure or type; licensing, transferring or disposing of certain assets; granting certain types of liens on the Company’s assets; making certain investments; and paying cash dividends.

The 2025 Trinity Term Loan Agreement contains customary representations and warranties, affirmative and negative covenants and events of default, including payment default, breach of covenants, change of control, and material adverse effects. Upon the occurrence of an event of default, a default interest rate of an additional 5.00% per annum may be applied to the outstanding loan balances, and the New Trinity Lenders may declare all outstanding obligations immediately due and payable and exercise all of its rights and remedies as set forth in the 2025 Trinity Term Loan Agreement and under applicable law.

The Company assessed the terms and features of the 2025 Trinity Term Loans and determined that the 2025 Trinity Term Loan constituted a debt modification under ASC 470-50, Debt - Modifications and Extinguishments (“ASC 450”). As such, the 2025 Trinity Term Loans are accounted for as a continuation of the original debt, and no gain or loss on extinguishment was recognized. The Company continues to apply the fair value option under ASC 825, Financial Instruments (“ASC 825”) which was initially elected at the time of the 2023 Trinity Term Loan Agreement.

Under the fair value option, the 2025 Trinity Term Loans are measured at fair value on a recurring basis, with changes in fair value recognized in other income (expense) in the condensed consolidated statements of operations. The Company has not elected to present interest expense separately from changes in fair value and therefore will not present interest expense associated with the 2025 Trinity Term Loans. Any changes in fair value attributable to instrument-specific credit risk are presented in other comprehensive income or loss, if material. Under the fair value option, debt issuance costs are expensed as incurred. The Company incurred $1.1 million of debt issuance costs, of which $0.1 million were paid to Trinity and $1.0 were paid to third parties associated with the 2025 Trinity Term Loans. The debt issuance costs were recorded within general and administrative expense in the condensed consolidated statements of operations for the nine months ended September 30, 2025.

In connection with the 2025 Trinity Term Loan Agreement, the Company entered into a Success Fee Agreement with Trinity which specifies the terms regarding a fee in the amount of $0.5 million plus 5% of the principal amount of the funded 2025 Trinity Term Loans under Tranche B (the “2025 Success Fee”). The 2025 Success Fee is payable upon the achievement of certain corporate development value-inflection milestones. The 2025 Success Fee survives the termination of the 2025 Trinity Term Loans and expires on the earlier of ten years from the Trinity Refinance Date, or payment in full in cash of the 2025 Success Fee. The Company determined that the 2025 Success Fee represents a freestanding financial instrument and should be accounted for as a derivative

liability under ASC 815, Derivatives and Hedging (“ASC 815”) and recorded a liability within other non-current liabilities on the consolidated balance sheet, at fair value on the Trinity Refinance Date and will be marked-to-market at the end of each reporting period with gains and losses recognized as a component of other income (expense) in the condensed consolidated statements of operations.

The proceeds from the 2025 Trinity Term Loans were allocated to the 2025 Success Fee and 2025 Trinity Term Loans based on their respective fair values on the Trinity Refinance Date. The fair values were determined utilizing a probability-weighted income approach, including variables for the timing of a success event and other probability estimates.

The Company determined the fair value of the 2025 Trinity Term Loans and the 2025 Success Fee using a probability-weighted income approach and recorded the loan at fair value of $49.8 million and the 2025 Success Fee liability at fair value of $0.2 million in the condensed consolidated balance sheet at issuance. The Company calculated the discounted cash flows of the 2025 Trinity Term Loans using a discount rate of 13.86% and adjusted for the probability of various repayment scenarios. The Company calculated the discounted cash flows of the 2025 Success Fee liability, using a discount rate of 13.86% then adjusted for the probability of achievement of certain corporate development value-inflection milestones.

2023 Loan with Trinity Capital

On November 13, 2023 (the “Trinity Closing Date”), the Company entered into a Loan and Security Agreement (the “2023 Trinity Term Loan Agreement”), by and among the Company, the lenders party thereto from time to time (the “Trinity Lenders”) and Trinity Capital Inc., as administrative agent and collateral agent for the Trinity Lenders (“Trinity”). The 2023 Trinity Term Loan Agreement provided for, on the Trinity Closing Date, $40.0 million aggregate principal amount of term loans (collectively, the “2023 Trinity Term Loans”). The Company drew the Trinity Term Loans in full on the Trinity Closing Date.

The interest rate applicable to the 2023 Trinity Term Loans was the greater of (a) the Wall Street Journal (“WSJ”) Prime Rate plus 4.50% or (b) 12.75% per annum. The 2023 Trinity Term Loans were interest only from the Trinity Closing Date through 36 months from the Trinity Closing Date, which could have been extended to 48 months from the Trinity Closing Date upon the satisfaction of certain milestones set forth in the 2023 Trinity Term Loan Agreement, after which the Company was required to pay equal monthly installments of principal through November 13, 2028 (the “Maturity Date”).

The 2023 Trinity Term Loans could have been prepaid in full (i) from the Trinity Closing Date through November 13, 2024, with payment of a 3.00% prepayment premium, (ii) from November 13, 2024 through November 13, 2025, with payment of a 2.00% prepayment premium, and (iii) from November 13, 2025 through, but excluding, the Maturity Date, with payment of a 1.00% prepayment premium. On the Trinity Closing Date, the Company paid to Trinity a commitment fee of 1.00% of the original principal amount of the 2023 Trinity Term Loans. Upon repayment in full of the 2023 Trinity Term Loans, the Company paid to Trinity an end of term payment equal to $0.6 million.

The obligations under the 2023 Trinity Term Loan Agreement were secured by a perfected security interest in all of the Company’s assets except for certain customarily excluded property pursuant to the terms of the 2023 Trinity Term Loan Agreement.

The Company assessed the terms and features of the 2023 Trinity Term Loans and determined that the Company was eligible to elect the fair value option under ASC 825. The 2023 Trinity Term Loans contain various embedded features and the election of the fair value option allowed the Company to bypass analysis of potential embedded derivatives and further analysis of bifurcation of any recognized financial liabilities. Under the fair value option, the financial liability is initially measured at its fair value on the issue date and subsequently remeasured at estimated fair value on a recurring basis at each reporting date. Changes in the fair value of the 2023 Trinity Term Loans, which include accrued interest, if any, are recorded as a component of other expense (income) in the condensed consolidated statements of operations. The Company did not elect to present interest expense separately from changes in fair value and therefore did not present interest expense associated with the 2023 Trinity Term Loans. Any changes in fair value caused by instrument-specific credit risk were presented separately in other comprehensive income or loss if material.

In connection with the 2023 Trinity Term Loans, the Company entered into a Success Fee Agreement with Trinity which specifies the terms regarding a fee in the amount of 10% of the principal amount of the funded 2023 Trinity Term Loans (the “2023 Success Fee”). The 2023 Success Fee is payable upon the achievement of certain corporate development value-inflection milestones. The 2023 Success Fee survives the termination of the 2023 Trinity Term Loans and expires on the earlier of ten years, or payment in full in cash of the Success Fee. The 2023 Success Fee remains in effect after the termination of the 2023 Trinity Term Loans upon entry into the 2025 Trinity Term Loan Agreement and the draw of Tranche A.

The Company determined that the Success Fee represents a freestanding financial instrument and should be accounted for as a derivative liability under ASC 815 and recorded a liability within other non-current liabilities on the consolidated balance sheet, at

fair value on the Trinity Closing Date and will be marked-to-market at the end of each reporting period with gains and losses recognized as a component of other income (expense) in the condensed consolidated statements of operations.

Fair Value

The 2025 Trinity Term Loans are accounted for as a continuation of the original debt in accordance with ASC 450, and the Company continues to apply the fair value option under ASC 825, which was initially elected at the time of the 2023 Trinity Term Loan Agreement. The Company remeasured the 2025 Trinity Term Loans, 2025 Success Fee and 2023 Success Fee as of September 30, 2025 using a probability weighted income approach. The Company calculated the discounted cash flows of the 2025 Trinity Term Loans using a discount rate of 13.43% and adjusted for the probability of various repayment scenarios. The Company calculated the discounted cash flows of the 2023 Success Fee and 2025 Success Fee, (the “Success Fees”), using a discount rate of 13.43% then adjusted for the probability of achievement of certain corporate development value-inflection milestones. As of September 30, 2025, the Company recorded the Tranche A Loan at a fair value of $50.9 million and the Success Fees at $1.5 million in the consolidated balance sheet.

The following table reconciles the change in fair value of the 2023 Trinity Term Loans and 2025 Trinity Term Loans, (the “Trinity Term Loans”), during the nine months ended September 30, 2025 (in thousands):

Trinity Term Loans
Beginning fair value balance as of January 1, 2025	$	43,942
Repayment of 2023 Term Loan		(40,612	)
Beginning fair value balance of 2025 Trinity Term Loan on August 7, 2025		49,783
Change in fair value reported in statements of operations		627
Change in fair value reported in comprehensive loss		(2,888	)
Ending fair value balance as of September 30, 2025	$	50,852

The following table reconciles the change in fair value of the Trinity Term Loans during the three months ended September 30, 2025 (in thousands):

Trinity Term Loans
Beginning fair value balance as of July 1, 2025	$	41,051
Repayment of 2023 Term Loan		(40,612	)
Beginning fair value balance of 2025 Trinity Term Loan on August 7, 2025		49,783
Change in fair value reported in statements of operations		186
Change in fair value reported in comprehensive loss		444
Ending fair value balance as of September 30, 2025	$	50,852

During the three and nine months ended September 30, 2025, the Company recorded $1.3 million and $3.9 million, respectively, of interest expense within change in fair value of term loans, all of which was paid as of September 30, 2025. During the three and nine months ended September 30, 2024, the Company recorded $1.3 million and $3.9 million, respectively, of interest expense within change in fair value of term loans, all of which was paid as of September 30, 2024.

The following table reconciles the change in fair value of the Success Fees liability during the nine months ended September 30, 2025 (in thousands):

Success Fees
Beginning fair value balance as of January 1, 2025	$	930
Beginning fair value balance of 2025 Success Fee on August 7, 2025		217
Change in fair value of Success Fees		372
Ending fair value balance as of September 30, 2025	$	1,519

The following table reconciles the change in fair value of the Success Fees liability during the three months ended September 30, 2025 (in thousands):

Success Fees
Beginning fair value balance as of July 1, 2025	$	1,229
Beginning fair value balance of 2025 Success Fee on August 7, 2025		217
Change in fair value of Success Fees		73
Ending fair value balance as of September 30, 2025	$	1,519