| Notes Payable | 8. Notes Payable Amended Loan and Security Agreement and the First Amendment On December 30, 2021, the Company entered into a Loan and Security Agreement (the "Prior Loan Agreement") with Hercules Capital, Inc. ("Hercules") for the issuance of a term loan facility with an aggregate principal amount of up to $ 20.0 million (the “Prior Term Loan”). On December 22, 2023 (the "Hercules Closing Date"), the Company entered into an amended and restated loan and security Agreement (the "Amended Loan Agreement”), with Hercules, as agent and lender, and the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"). The Amended Loan Agreement amends and restates in its entirety the Prior Loan Agreement. The Amended Loan Agreement provides for a term loan facility of up to $ 50.0 million available in multiple tranches (the “Term Loan”), as follows: (i) an initial term loan advance (the “Tranche 1 Advance”) that was made on the Tranche 1 Advance closing of $ 22.5 million, approximately $ 8.6 million of which was applied to refinance in full the term loans outstanding under the Prior Loan Agreement, (ii) subject to the achievement of the specified Interim Milestone (the “Interim Milestone”), which includes no default or event of default, delivery of written notice to the Lenders that the Company has conducted an analysis of interim efficacy of data from the clinical evaluation of detalimogene in the Phase 2 clinical study, and satisfaction of certain other conditions precedent, a right of the Company to request that the Lenders make additional term loan advances in an aggregate principal amount of up to $ 7.5 million from the date of achievement of the Interim Milestone through the earlier of (x) 60 days following the achievement of the Interim Milestone and (y) March 31, 2025 , and (iii) an uncommitted tranche subject to the Lenders’ investment committee approval and satisfaction of certain other conditions precedent (including payment of a 0.75 % facility charge on the amount borrowed), pursuant to which the Company may request from time to time up to and including the Amortization Date (as defined below) that the Lenders make additional term loan advances to the Company in an aggregate principal amount of up to $ 20.0 million. The Company is required to pay upon the earlier of January 1, 2028 ( the “Maturity Date”) or payment in full of the Term Loan, an end of term fee equal to 5.50 % of the aggregate principal amount of the Term Loan (the “End of Term Charge”). The Company is also required to pay on July 1, 2025 or, if earlier, the date the Company prepays the Term Loan, $ 0.7 million representing the Prior Term Loan End of Term Charge (the "Prior Term Loan End of Term Charge" and "End of Term Charge", collectively the “End of Term Charges”). The Company accounted for the Amended Loan Agreement as an extinguishment of the Prior Term Loan. As a result of the extinguishment, the Company recorded a loss of $ 0.4 million as a component within other income and expense in the Company's consolidated statement of operations during the three months ended January 31, 2024, which represented the difference between the reacquisition price of the debt, including fees and the initial fair value of the warrants paid directly to the lender, and the carrying value of the Prior Term Loan at the time of extinguishment. On December 18, 2024, the Company entered into a First Amendment to Amended and Restated Loan and Security Agreement (the "First Amendment") with the Lenders. The First Amendment modified the Amended Loan Agreement to reallocate the $ 7.5 million previously available under Tranche 2 (as defined in the Amended Loan Agreement), which was not drawn by the Company upon achievement of Interim Milestone, to Tranche 3 (as defined in the Amended Loan Agreement). Pursuant to the First Amendment, the $ 7.5 million advance originally available upon achievement of the Interim Milestone was added to the uncommitted tranche subject to the Lenders' investment committee approval and satisfaction of certain other conditions precedent (including payment of a 0.75 % facility charge on the amount borrowed), pursuant to which the Company may request from time to time that the Lenders make additional loan advances to the Company in an aggregate principal amount of up to $ 27.5 million. The First Amendment did not change the total term loan facility available to the Company of up to $ 50.0 million. The First Amendment further provided for certain administrative changes in accordance with the foregoing. At the Company's option, the Company may elect to prepay all, but not less than all, of the outstanding Term Loan by paying the entire principal balance and all accrued and unpaid interest thereon plus a prepayment charge equal to the following percentage of the principal amount being prepaid: (i) 3.0 % of the principal amount outstanding if the prepayment occurs in any of the first twelve months following the Closing Date (as defined in the Amended Loan Agreement); (ii) 2.0 % of the principal amount outstanding if the prepayment occurs after the first twelve months following the Closing Date but on or prior to twenty-four months following the Closing Date; and (iii) 1.0 % of the principal amount outstanding if prepayment occurs at any time thereafter but prior to the Maturity Date. As of January 31, 2025, the Company had borrowed $ 22.5 million under the Amended Loan Agreement and incurred $ 2.1 million of debt discount and issuance costs inclusive of legal fees and End of Term Charges under the Term Loan. The remaining $ 27.5 million of the uncommitted tranche subject to the Lenders’ investment committee approval and satisfaction of certain other conditions precedent described above remains undrawn and available to the Company. $ 0.7 million representing the End of Term Charges are reflected in current liabilities in the condensed consolidated balance sheet as of January 31, 2025. The Term Loan bears cash interest payable monthly at an annual rate equal to the greater of (a) the prime rate of interest as reported in the Wall Street Journal plus 0.75 % (capped at 9.75 %) and (b) 9.25 %. The Term Loan also bears additional payment-in-kind interest at an annual rate of 1.15 %, which is added to the outstanding principal balance of the Term Loan on each monthly interest payment date. Borrowings under the Amended Loan Agreement, as amended by the First Amendment, are repayable in monthly interest-only payments through the "Amortization Date”, which is either: (y) if the Interim Milestone is achieved and there has been no default, January 1, 2026 , or (z) if the Interim Milestone and certain clinical milestones are achieved and there has been no default, July 1, 2026 . After the Amortization Date, the outstanding Term Loan and interest shall be repayable in equal monthly payments of principal and accrued interest until the Maturity Date. Through January 31, 2025, the Company has achieved the Interim Milestone but has not yet achieved certain clinical milestones. Amounts payable on January 1, 2026 were classified as current liabilities on the condensed consolidated balance sheet for the interim period ended January 31, 2025. The effective interest rate of the Term Loan was 11.63 % as of January 31, 2025. In connection with the Amended Loan Agreement, as amended by the First Amendment, the Company granted Hercules a security interest senior to any current and future debts and to any security interest in all of the Company’s right, title, and interest in, to and under all of the Company’s property and other assets, subject to limited exceptions including the Company’s intellectual property. The Amended Loan Agreement, as amended by the First Amendment, contains negative covenants that, among other things and subject to certain exceptions, could restrict the Company's ability to incur additional liens, incur additional indebtedness, make investments, including acquisitions, engage in fundamental changes, sell or dispose of assets that constitute collateral, including certain intellectual property, pay dividends or make any distribution or payment on or redeem, retire or purchase any equity interests, amend, modify or waive certain material agreements or organizational documents and make payments of certain subordinated indebtedness. The Amended Loan Agreement, as amended by the First Amendment, also contains certain events of default and representations, warranties and non-financial covenants of the Company. The Company is in compliance with the financial covenants at January 31, 2025. Hercules Common Share Warrants In connection with the Amended Loan Agreement, as amended by the First Amendment, the Company also agreed to issue to the Lenders in connection with each advance of Term Loans warrants to purchase that number of the Company’s common shares, as shall be equal to 2 % of the aggregate principal amount of such Term Loan advance divided by the Warrants per share exercise price of $ 7.21 (which exercise price equals the ten-day volume weighted average price for the ten (10) trading days preceding the Hercules Closing Date and is subject to customary adjustments under the terms of the Warrants) (the "Hercules Common Share Warrants"). The Hercules Common Share Warrants are exercisable for a period of seven years from issuance. Under the terms of the Amended Loan Agreement, as amended by the First Amendment, the maximum number of Hercules Common Share Warrants and underlying Common Shares of the Company that could be issued is 138,696 (i.e. 2 % of the $ 50.0 million total commitment amount divided by the exercise price of $ 7.21 price specified in the Closing Date Warrant), assuming no adjustments are made under the terms of the Hercules Common Share Warrants and further assuming the full amount of Term Loans are drawn. On the Hercules Closing Date, the Company issued to the Lenders 62,413 Hercules Common Share Warrants in connection with the Tranche 1 Advance of the Term Loans (the "Closing Date Warrants”). The Closing Date Warrants have been determined to be equity classified as they do not meet the definition of a liability under ASC 480 and are considered indexed to the Company’s common shares as prescribed by ASC 815. Upon entering into the Amended Loan Agreement, $ 0.3 million of the total $ 22.5 million Tranche 1 Advance was allocated to the warrants, on a relative fair value basis, and recorded within additional paid in capital. Subsequently issued Hercules Common Share Warrants shall be substantially in the form of the Closing Date Warrants. As of January 31, 2025 and October 31, 2024, the carrying value of the term loans consisted of the following:
January 31, 2025 October 31, 2024
Note payable, including End of Term Charge $ 24,730 $ 24,663
Debt discount, net of accretion ( 1,525 ) ( 1,673 )
Accrued interest 181 182
Note payable, net of discount $ 23,386 $ 23,172 As of January 31, 2025, the Company classified $ 1.5 million of the note payable as current, which represents the back-end fee associated with the refinancing of the Prior Term Loan and total principal payments due in the next 12 months. As of October 31, 2024 , the Company classified $ 0.7 million of the note payable as current, which represents the back-end fee associated with the refinancing of the Prior Term Loan. During the three months ended January 31, 2025 and 2024, the Company recognized $ 0.8 million and $ 0.6 million of interest expense, respectively, related to the term loans, of which $ 0.1 million was related t o the amortization of the debt discounts. Estimated future principal payments due under the Term Loan, including the contractual End of Term Charges and paid in kind interest are as follows as of January 31, 2025:
Year ending October 31: Note Principal
2025 $ 698
2026 8,417
2027 10,987
2028 5,161
Total principal payments, including End of Term Charge 25,263 As of January 31, 2025 , based on borrowing rates available to the Company for loans with similar terms and consideration of the Company’s credit risk, the carrying value of the Company’s variable interest rate debt, excluding unamortized debt issuance costs, approximates fair value. |
