Term Loan

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

Term Loan

7. Term Loan

On March 9, 2018, the Company entered into the Loan Agreement with Pacific Western Bank (“PWB”) to initially borrow $8.0 million, which was further amended on September 30, 2019 (the "First Amendment"), January 22, 2020 (the "Second Amendment"), December 30, 2020 (the “Third Amendment”), and December 20, 2021 (the "Fourth Amendment").

On September 22, 2023, the Company entered into another amendment to the Loan Agreement (the "Fifth Amendment"), in which PWB extended the maturity date of the loan to September 30, 2027, subject to further extension to September 30, 2028 upon receipt by the Company on or before December 31, 2024 of at least $50.0

million of cash proceeds from the sale of its equity securities and/or non-refundable upfront strategic partnership proceeds. Repayment of the loan began on September 30, 2023, with monthly principal payments of $0.3 million plus interest, along with a closing payment of $4.0 million on September 30, 2027 if the maturity date is not extended to September 30, 2028. Interest will continue to be determined at a floating annual rate equal to the greater of (i) 0.50% above the prime rate then in effect and (ii) 5.50%. The Company incurred $15 thousand of debt issuance costs, which was recorded as a direct reduction against the additional term loan and will be amortized over the life of the associated term loan as a component of interest expense using the effective interest method. Under the terms of the Fifth Amendment, the Company is required to pay a success fee of $0.1 million pursuant to the Fifth Amendment, in addition to the $0.2 million success fee obligation pursuant to the Fourth Amendment. The success fees are contingent on achieving specified liquidity events. The Company determined that the success fee obligation represented a freestanding financial instrument, and it was classified as a liability on the Company’s consolidated balance sheet and initially recorded at fair value, with changes in fair value for each reporting period recognized in other expense, net in the consolidated statements of operations and comprehensive loss. The fair value of such obligation is remeasured at the end of each reporting period until the liability is settled.

In addition, pursuant to the Fifth Amendment, the Company agreed to maintain with PWB, at all times, a balance of at least $5.0 million of unrestricted cash, subject to termination upon the Company’s prepayment of outstanding loans in an aggregate amount of at least $5.0 million or if the principal balance of the loans is less than $10.0 million.

Borrowings under the Loan Agreement, as amended, are collateralized by substantially all of the Company’s personal property, other than its intellectual property. There are no financial covenants associated with the Loan Agreement, as amended; however, the Company is subject to certain affirmative and negative covenants to which the Company will remain subject until maturity.

As of December 31, 2023, $4.0 million of the net carrying amount of the term loan was classified as short-term and $14.9 million was classified as long-term based on the repayment start date. The Company’s outstanding term loan balance was comprised of the following (in thousands):

	December 31,
	2023			2022
Principal	$	19,000		$	20,000
Unamortized debt discount		(115	)		(64	)
Net carrying amount	$	18,885		$	19,936

The Company determined that the expected life of the debt was equal to the term on the term loan. The effective interest rate on the liability component ranged from 5.53% to 9.26% for the period from the date of issuance through December 31, 2023. The following table sets forth total interest expense recognized related to the term loan (in thousands):

	Year Ended December 31,
	2023		2022
Contractual interest expense	$	1,748	$	1,229
Amortization of debt issuance costs and debt discount		53		67
Total interest expense	$	1,801	$	1,296

At December 31, 2023 and December 31, 2022, accrued interest on the term loan was $147 thousand and $121 thousand, respectively.

The Company is required to repay the following principal amounts in connection with its term loan (in thousands):

2024	$	4,000
2025		4,000
2026		4,000
2027		7,000
Total	$	19,000