Loan and Security Agreements |
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Mar. 31, 2025 | |||||||||||||||||||||||||||||||||
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| Loan and Security Agreements | 8. Loan and Security Agreements K2 HealthVentures LLC On September 9, 2022 (the Closing Date), the Company entered into a $60.0 million Convertible Loan and Security Agreement (the K2HV Loan Agreement) with K2HV, upon which the Company drew the first tranche of $30.0 million from K2HV on the Closing Date. 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 entered into the SVB Loan Agreement, terminated the K2HV Loan Agreement and repaid all remaining outstanding loan obligations to K2HV, 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 $1.0 million in interest expense for the three months ended March 31, 2024. 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 through a non-convertible 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 SVB Loan Agreement does not require the Company to comply with a financial maintenance covenant. As collateral for its obligations under the SVB 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 $0.7 million in interest expense for the three months ended March 31, 2025. 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 March 31, 2025. Future principal payments as of March 31, 2025 are as follows (in thousands):
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