Debt

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Debt

Debt

On June 30, 2023, the Company entered into the Loan Agreement with Hercules, which provided for aggregate maximum borrowings of up to $50.0 million, consisting of (i) a term loan of $30.0 million, which was funded on the Effective Date, (ii) subject to the Company achieving certain performance milestones and available until December 15, 2024, an additional term loan of $10.0 million, and (iii) subject to the approval of Hercules’ investment committee in its sole discretion, and available during the interest-only period, an additional term loan of $10.0 million.

The term loan will mature on July 1, 2027. The outstanding principal balance of the term loan bears interest at an annual rate equal to the greater of either (i) the prime rate as reported in The Wall Street Journal plus 1.50% or (ii) 9.75%. Accrued interest is payable monthly following the funding of each term loan. In addition to accrued interest, payment-in-kind (PIK) interest of 1.40% will be added to the balance of the loan.

The Company incurred fees and transaction costs totaling $3.3 million associated with the initial term loan, which are recorded as a reduction to the carrying value of the long-term debt in the condensed consolidated balance sheets. These fees included $0.4 million of facility fees, $0.8 million of company fees, $0.7 million in warrants, and $1.4 million of end of term charges. The fees, transaction costs, and the end of term charge are amortized to interest expense through the maturity date using the effective interest method. The effective interest rate of the Loan Agreement was 15.1% as of June 30, 2024.

The Company issued warrants to Hercules to purchase a number of the Company’s Ordinary Shares equal to the quotient derived by dividing (i) the amount equal to (a) 2.5% times (b) the aggregate principal amount of term loan advances made and funded under the Loan Agreement by (ii) the exercise price of the warrants.

The Loan Agreement includes a financial covenant requiring us to maintain a minimum level of $22.5 million of cash starting July 1, 2024. If the Company meets the performance milestones, the minimum cash covenant will not apply if its market capitalization is at least $750.0 million. The Company was in compliance with all covenants of the Loan Agreement as of June 30, 2024.

Long-term debt consisted of the following (in thousands):

	June 30,		December 31,
	2024		2023
Term loan payable	$	30,000	$	30,000
End of term charge	1,425		1,425
Future principal payments and end of term charge	$	31,425	$	31,425
PIK interest payable	431		216
Unamortized debt issuance costs	(2,422)		(2,884)
Carrying value of long-term debt	$	29,434	$	28,757

Future principal payments, including End of Term Charge, are as follows (in thousands):

December 31, 2024	—
December 31, 2025	6,572
December 31, 2026	14,166
December 31, 2027	10,687
Total	$	31,425

Interest expense associated with the Loan Agreement for the six months ended June 30, 2024 and 2023 was $2.2 million and nil, respectively.