6. Loan Payable and Warrant Liability

On June 15, 2022, the Company entered into a Loan and Security Agreement (“Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), for an aggregate principal amount of $100,000 (“Term Loan”). Pursuant to the Loan Agreement, the Term Loan is available to the Company in four tranches, subject to certain terms and conditions.

Under the terms of the Loan Agreement, the Company received $10,000 upon closing, $15,000 was borrowed in March of 2023 and $30,000 remains available to the Company to borrow at its sole discretion until March 15, 2024. An additional $45,000 may become available to the Company at Hercules' sole discretion.

The Term Loan will mature on January 1, 2027 (the “Maturity Date”). The Term Loan bears interest at a variable annual rate equal to the greater of (a) 7.65% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 3.65% (the “Interest Rate”). The Company may make payments of interest only through July 1, 2025 (the “interest-only period”). After the interest-only period, the principal balance and related interest will be required to be repaid in equal monthly installments and continuing until the Maturity Date.

The Loan Agreement contains customary closing fees, events of default, and representations, warranties and covenants, including a financial covenant requiring the Company to maintain a minimum cash balance in relation to the outstanding principal balance of the Term Loan. The Loan Agreement is secured by most of the Company's assets, including its bank and investment accounts. The Loan Agreement provides for a prepayment charge equal to 3% of the outstanding principal balance of the Term Loan if prepayment is made within the first twelve months after closing, 2% if within the second twelve months after closing and 1% thereafter. In addition, the Loan Agreement provides for an End of Term Charge that will be the greater of 5.85% of the outstanding principal balance or $1,463, which is recognized as a debt discount and is being accreted into the amortization of debt issuance costs and discount using the effective interest rate method over the term of the loan payable.

Upon closing, the Company issued warrants to Hercules to purchase shares of the Company’s common stock, par value $0.0001 per share ("common stock"). The amount of shares that may be purchased for the Warrants will not exceed 1.5% multiplied by the greater of Tranche I and the aggregate original amount of the term loan advances, divided by the exercise price of the Warrants.

The Company was in compliance with all covenants of the Loan Agreement as of December 31, 2023.

The Company determined in accordance with ASC 480-10 that the initial tranche one advance of $10,000, the additional Term Loan advances available under tranches one, two, three and four and the warrants issued upon closing shall be accounted for as freestanding financial instruments as they are legally detachable and separately exercisable. The Company also determined in accordance with ASC 815-10 that the additional Term Loan advances available under tranches one, two, three and four do not qualify as derivative instruments and that the value associated with these commitments is immaterial.

Upon closing, the Company issued to Hercules warrants to purchase 36,718 shares of Company’s common stock and recognized the initial warrants at their relative fair value of $227 in shareholders equity. In accordance with ASC 815-40, the additional remaining warrants to purchase shares of the Company’s common stock at the closing of the Loan Agreement were recognized at their fair value of $41 as warrant liabilities given the variable settlement amount of the warrant shares. The additional remaining warrants under the Loan Agreement are considered an outstanding instrument at close of the Loan Agreement. The total fair value of $268 associated with these equity and liability classified warrants, is recognized as a debt discount and is being accreted into the amortization of debt issuance costs and discount using the effective interest rate method over the term of the loan payable. The Company reassesses the fair value of the warrant liability at the end of each prospective reporting period.

In March 2023, the Company borrowed an additional $15,000 and issued warrants to Hercules to purchase an additional 9,180 shares of Company's common stock. The fair value associated with these additional warrants of $330 were reclassified from warrant liability to additional paid in capital.

The warrant liabilities were valued at $54 and $305 as of December 31, 2023 and 2022, respectively. The change in fair value of the warrant liability of $79 from December 31, 2022 to December 31, 2023 arising from remeasurement was recorded in the statements of operations.