NeuroPace Inc

1. The Company

NeuroPace, Inc., or the Company, was incorporated in the state of Delaware on November 19, 1997. The Company is a medical device company that has developed the RNS System, the only commercially available brain-responsive neuromodulation system designed for treating drug-resistant focal epilepsy by delivering personalized, real-time treatment at the seizure source. The Company began commercializing its products in the United States in 2014.

At-the-Market Equity Offering

In November 2022, the Company filed a Registration Statement on Form S-3, or Shelf, with the Securities and Exchange Commission, or the SEC, in relation to the registration of common stock, preferred stock, debt securities, warrants or any combination thereof for up to an aggregate of $150.0 million, of which $50.0 million may be issued and sold pursuant to an at-the-market, or ATM, offering program for sales of the Company’s common stock under a sales agreement, or Sales Agreement, with Leerink Partners LLC, or Leerink (formerly SVB Securities LLC). The Company agreed to pay Leerink up to 3.0% of the gross proceeds of sales of common stock made through the Sales Agreement. The Company’s common stock would be sold at prevailing market prices at the time of the sale and, as a result, prices may vary. In November 2023, the Company sold 933,500 shares of common stock under the Sales Agreement for gross proceeds of $8.1 million, or $7.6 million after deducting sales commissions and offering expenses. During the three months ended September 30, 2024, the Company sold 413,988 shares of common stock under the Sales Agreement for gross proceeds of $3.0 million, or $2.8 million after deducting sales commissions and offering expenses. As of September 30, 2024, the Company has $38.8 million remaining under its ATM program.

Liquidity and Capital Resources

The Company has incurred operating losses and negative cash flows from operations since its inception and has an accumulated deficit of $525.7 million as of September 30, 2024. For the nine months ended September 30, 2024 and 2023, the Company used $13.2 million and $16.4 million, respectively, of cash in its operating activities. As of September 30, 2024, the Company had cash, cash equivalents and short-term investments of $56.8 million. Historically, the Company has funded its operations principally through the sales of its products, issuance of equity securities and debt financing.

The Company’s condensed financial statements have been prepared on the basis of the Company continuing as a going concern for the next 12 months. Management believes that the Company’s cash, cash equivalents and short-term investments will allow the Company to continue its planned operations for at least the next 12 months from the date of the issuance of these unaudited interim condensed financial statements.

In connection with the Term Loan described in Note 6, the Company will need to be in compliance with a minimum annual net revenue covenant determined in accordance with generally accepted accounting principles of$70.0 million in each of the years ending December 31, 2024 and December 31, 2025 and maintain a minimum cash and cash equivalents balance of$5.0 million. If the Company cannot generate sufficient revenue in the future, the Company may not be in compliance with the annual net revenue covenant and the lender may call the debt resulting in the Company immediately needing additional capital and resulting in a going concern. The Company’s ability to raise additional capital may be adversely impacted by global economic conditions and disruptions to, and volatility in, the financial markets in the United States and worldwide. If the Company is unable to raise capital when needed, it will need to delay, limit, reduce or terminate planned commercialization or product development activities in order to reduce costs. As of September 30, 2024, the Company was in compliance with all covenants of the Term Loan.

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim condensed financial statements have been prepared in conformity with generally accepted accounting principles in the United States, or GAAP, as defined by the Financial Accounting Standards Board, or the FASB.

Unaudited Interim Financial Information

The condensed balance sheet as of December 31, 2023 was derived from the Company’s audited financial statements, but does not include all disclosures required by GAAP. The accompanying unaudited condensed financial statements as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023, have been prepared by the Company, pursuant to the rules and regulations of the SEC for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2023 and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 5, 2024. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed financial position as of September 30, 2024 and condensed results of operations for the three and nine months ended September 30, 2024 and 2023 and condensed cash flows for the nine months ended September 30, 2024 and 2023 have been made. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024.

Use of Estimates

The preparation of unaudited interim condensed financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. The Company uses significant judgment when making estimates related to the provision for excess and obsolete inventories. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Fair Value of Financial Instruments

Carrying amounts of certain of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of the short-term nature of these instruments. The Company has a short-term investment in a fixed income mutual fund, which is classified as equity security and carried at fair value based on quoted market prices. Changes in the fair value of the short-term investment are recorded in income or loss. The Company believes that its borrowings bear interest at the prevailing market rates for instruments with similar characteristics; accordingly, the carrying value of this instrument approximates its fair value. The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy which establishes three levels of inputs that may be used to measure fair value (see Note 3).

Concentration of Credit Risk, and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, short-term investments and accounts receivable to the extent of the amounts recorded on the balance sheets. The Company’s cash is invested in major financial institutions in the United States. Deposits in these financial institutions may exceed federally insured limits, and the Company is exposed to credit risk on deposits in the event of default of the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation. The Company’s cash equivalents are invested in money market funds.

The Company’s accounts receivable are due from a variety of health care organizations in the United States. For the three and nine months ended September 30, 2024 and 2023, there were no customers that represented 10% or more of revenue. As of September 30, 2024 and December 31, 2023, no customer represented 10% or more of the Company’s accounts receivable.

The Company is subject to certain risks, including that its devices may not be approved or cleared or continue to be approved or cleared for marketing by governmental authorities or be successfully marketed for expanded indications. There can be no assurance that the Company’s products will achieve widespread adoption in the marketplace, nor can there be any assurance that existing devices or any future devices can be developed or manufactured at an acceptable cost and speed and with appropriate performance characteristics. The Company is also subject to risks common to companies in the medical device industry, including, but not limited to, new technological innovations, dependence on healthcare providers to prescribe initial implants and replacements, dependence upon third-party payors to provide adequate coverage and reimbursement, dependence on key personnel, single-source suppliers and vendors in connection with the manufacture of its products, concentration of comprehensive epilepsy centers, or CECs, and epileptologists, obtaining, maintaining, protecting, enforcing, and defending intellectual property rights and proprietary technology, product liability claims, legal proceedings, and compliance with government regulations.

The Company’s medical devices require approvals or clearances from the U.S. Food and Drug Administration, or the FDA, or international regulatory agencies. In addition, in order to continue the Company’s operations, compliance with various federal and state laws is required. If approvals or clearances were withdrawn by the FDA for the Company’s current products or if such approvals or clearances were denied or delayed for future products, product updates, or expanded indications for use, it would have a material adverse impact on the Company.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company makes estimates on the collectability of customer accounts based primarily on analysis of historical trends and experience, the age of the receivable and changes in customers’ financial condition. The Company uses its judgment, based on the best available facts and circumstances, and records an allowance against amounts due to reduce the receivable to the amount that is expected to be collected. The Company determined that no allowance was required as of September 30, 2024 and December 31, 2023. To date, the Company has not experienced any material credit-related losses.

Remaining Performance Obligation and Contract Liabilities

The Company’s contract liabilities consist of deferred revenue of $0.7 million and $1.1 million as of September 30, 2024 and December 31, 2023, respectively. Revenue recognized during the three and nine months ended September 30, 2024 that was included in the deferred revenue balance at the beginning of the year was immaterial. No such revenue was recognized during the three and nine months ended September 30, 2023.

As of September 30, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations that are unsatisfied or partially unsatisfied was $1.9 million, which the Company expects to recognize as revenue by December 2025 pursuant to customer contract terms.

Government Programs

In May 2021, the Company was awarded a grant by the National Institutes of Health, or NIH, to support research of thalamocortical responsive neurostimulation for the treatment of Lennox-Gastaut Syndrome, a type of epilepsy. The award was issued for afive-year period and has a total budget of over $9.3 million, which includes approximately $5.5 million in funding for subawards to third party academic epilepsy centers that are collaborating on the study and are subinvestigators on the study funded by NIH. The subawardees are determined by NIH. The Company’s responsibility for the subawards is to submit the funding requests on behalf of the subawardees. The funding of subawards does not have any impact on the Company’s condensed financial statements. Initially funding was approved for the first year beginning June 1, 2021 and provides for reimbursement of qualified direct and indirect expenses in the amount of $0.8 million, including $0.4 million for subawards. Approvals of funds for years two through five are subject to the completion of certain milestones. On July 30, 2022, the Company received funding approval for year two in the amount of $2.6 million, which includes $1.6 million for subawards. On May 25, 2023, the Company received funding approval for year three in the amount of $3.0 million, which includes $1.5 million for subawards. On July 22, 2024, the Company received funding approval for year four in the amount of $1.7 million, which includes $1.0 million for subawards.

For funds received under the NIH funding agreement, the Company recognizes a reduction in research and development expenses in an amount equal to the qualifying expenses incurred in each period up to the amount awarded by the NIH. The Company received $0.4 million and $0.5 million in funding during the three months ended September 30, 2024 and 2023, respectively. The Company received $1.4 million and $1.0 million in funding during the nine months ended September 30, 2024 and 2023, respectively. Through September 30, 2024, $3.5 million of qualifying expenses have been incurred and funded by the NIH related to the first to fourth year of funding.

Qualifying expenses incurred by the Company in advance of funding by the NIH are recorded within prepaid expenses and other current assets on the balance sheets. As of September 30, 2024, the Company recorded prepaid expenses and other current assets of $0.3 million related to the fourth year of funding.

Net Loss per Share Attributable to Common Stockholders

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, stock options, common stock subject to repurchase related to early exercise of stock options, and restricted stock units are considered to be potentially dilutive securities. Basic and diluted net loss attributable to common stockholders per share is presented in conformity with the two-class method required for participating securities. The Company considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of the shares issued upon early exercise of stock options subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker, or CODM, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements. This ASU is applicable to the Company beginning with its Annual Report on Form 10-K for the fiscal year ending December 31, 2024. The Company is currently evaluating the impact this standard will have on the disclosures included in the notes to the financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU requires greater disaggregation of information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. This ASU applies to all entities subject to income taxes and is intended to help investors better understand an entity’s exposure to potential changes in jurisdictional tax legislation and assess income tax information that affects cash flow forecasts and capital allocation decisions. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis although retrospective application is permitted. The Company is currently evaluating the impact this standard will have on the disclosures included in the notes to the financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). This ASU is intended to provide more detailed information about specified categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. This ASU may be applied either prospectively to financial statements issued for reporting periods after its effective date or retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact this standard will have on its financial statement disclosures.

The Company continues to monitor new accounting pronouncements issued by the FASB and does not believe any accounting pronouncements issued through the date of this report will have a material impact on the Company’s financial statements.

3. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The following table summarizes the Company’s financial assets (cash equivalents and marketable securities) at fair value as of September 30, 2024 (in thousands):

The following table summarizes the Company’s financial assets (cash equivalents and marketable securities) at fair value as of December 31, 2023 (in thousands):

There wereno liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2024 and December 31, 2023.

The money market funds are highly liquid and primarily invest in short-term fixed income securities issued by the U.S. government and U.S. government agencies.

The Company’s available-for-sale investment comprises a short-term investment in a fixed income mutual fund, which primarily invests in debt securities issued by the U.S. government and U.S. government agencies and corporate bonds and notes. Interest income from short-term investment is recorded in interest income. During the three months ended September 30, 2024 and 2023, the Company recognized $0.2 million and $0.1 million in unrealized gains from its short-term investment, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized $0.3 million and $0.7 million in unrealized gains from its short-term investment, respectively. As of September 30, 2023, the Company’s short-term investment had a cumulative unrealized net loss of $0.4 million, which included an adjustment of $1.1 million unrealized loss recorded in other income (expense), net in the nine months ended September 30, 2023. The adjustment was not material to any previously issued financial statements. The Company’s short-term investment had a cumulative unrealized net gain of $0.2 million as of September 30, 2024, and cumulative unrealized net loss of $0.1 million as of December 31, 2023.

4. Balance Sheet Components

Inventory

Inventories consist of the following (in thousands):

Property and Equipment, net

Property and equipment, net consists of the following (in thousands):

Depreciation expense for the three months ended September 30, 2024 and 2023 was $0.1 million and less than $0.1 million, respectively. Depreciation expense for the nine months ended September 30, 2024 and 2023 was $0.2 million and $0.1 million, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

5. Commitments and Contingencies

Facility Lease

In August 2011, the Company entered into a non-cancelable operating lease for combined office and manufacturing facilities in Mountain View, California. The lease was scheduled to expire in April 2019 and was amended in May 2018 to extend it through June 2024. In August 2022, the Company amended the lease to extend it through June 2030. The second amendment contained a rent-free period from September 2022 through December 2022. The Company has an option to extend the lease for a period offive years, commencing on July 1, 2030 and expiring on June 30, 2035. In conjunction with the original lease agreement, the Company obtained a letter of credit for $0.9 million in lieu of a security deposit. In May 2019, the letter of credit was amended and reduced to $0.7 million. In June 2021, the letter of credit was amended and further reduced to $0.2 million.

The terms of the facility lease provide for rental payments on a graduated scale; however, rent expense is recognized on a straight-line basis over the lease term. Rental payments range from $2.8 million to $3.3 million per year over the extended term of the lease.

The maturities of operating lease liabilities as of September 30, 2024 are as follows (in thousands):

Operating lease cost was $0.7 million and $0.7 million for the three months ended September 30, 2024 and 2023, respectively. Operating lease cost was $2.1 million and $2.1 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the remaining term for the operating lease in Mountain View, California was 5.8 years, and the discount rate used to measure the lease liability for such operating lease upon recognition was 8.5%.

During the nine months ended September 30, 2024 and 2023, cash paid for amounts included in operating lease liabilities of $2.1 million and $2.1 million, respectively, was included in cash flows from operating activities on the condensed statements of cash flows.

Distribution Agreement

In August 2022, the Company entered into an exclusive distribution agreement, or the Distribution Agreement, with DIXI Medical USA Corp, or DIXI Medical, pursuant to which the Company became the exclusive U.S. distributor of DIXI Medical’s stereo electroencephalography product line. The Distribution Agreement has an initial term ofthree years, which expires September 30, 2025, and which may be automatically renewed for additionalone-year terms, unless either party provides written notice to the other party of its intention to not renew at least 180 days prior to the expiration of the then-current term.

To maintain the distribution rights, the Company is committed to purchase a minimum of $2.4 million of DIXI Medical’s products during the twelve months beginning October 2022, and to increase the purchase minimum by 10% for each of the two subsequent years. The Company met the purchase commitment for the firsttwo years.

Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and may provide for indemnification of the counterparty. The Company’s exposure under these agreements is unknown because it involves claims that may be made against it in the future but have not yet been made. The Company may, from time to time, be subject to claims or be required to defend actions related to its indemnification obligations.

The Company indemnifies each of its directors and officers for certain events or occurrences, subject to certain limits, while the director or officer is or was serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period lasts as long as the director or officer may be subject to any proceeding arising out of acts or omissions of such individual in such capacity. The maximum amount of potential future indemnification is unlimited. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of September 30, 2024 and December 31, 2023.

Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. The Company determined thatno accrual related to contingencies was required as of September 30, 2024 and December 31, 2023.

Legal Proceedings

The Company is not involved in any pending legal proceedings that it believes could have a material adverse effect on its business, results of operations, financial condition, or cash flows. From time to time, the Company may pursue litigation to assert its legal rights and such litigation may be costly and divert the efforts and attention of its management and technical personnel which could adversely affect its business. The Company regularly evaluates current information to determine whether any accruals should be adjusted and whether new accruals are required. Such accruals, if any, reflect the estimable and probable costs that the Company may incur from the outcomes of its legal proceedings. Legal costs are expensed as incurred. There wereno contingent liabilities requiring accrual as of September 30, 2024 and December 31, 2023.

6. Debt

Term Loan

In September 2020, the Company entered into a Term Loan Agreement with CRG Partners IV L.P. and its affiliates for total borrowings of up to $60.0 million, or the Term Loan, and borrowed $50.0 million. The remaining $10.0 million of the Term Loan was available to the Company for borrowing until March 31, 2022 if the Company achieved a revenue-based milestone in 2021. The revenue-based milestone was not achieved, and the remaining $10.0 million of the Term Loan expired without being drawn.

The Term Loan initially bore interest at a rate of 12.5% per year. In February 2023, the Term Loan was amended which increased the annual interest rate from 12.5% to 13.5% effective March 1, 2023. The amendment was accounted for as a debt modification in accordance with Accounting Standards Codification - Debt (Topic 470) and the Term Loan’s effective interest rate increased from 15.7% to 16.8%. Payments under the Term Loan are made quarterly with payment dates fixed at the end of each calendar quarter. Through December 2020, the Company had the option to pay the entire interest paid-in-kind, or PIK, by increasing the principal of the Term Loan. From January 2021 through December 2022, the Company had the option to pay interest as follows:7.5% per annum paid in cash and 5.0% per annum PIK by increasing the principal of the Term Loan. From January 2023 through June 2025, the Company had the option to pay interest as follows:8.5% per annum paid in cash and 5.0% per annum PIK by increasing the principal of the Term Loan. For each payment date from April 2022 through June 2024, the Company elected the PIK option, increasing the principal of the Term Loan by $6.0 million.

The Term Loan was interest-only through September 2023, which could be extended through September 2025 at the Company’s option if the Company completed its initial public offering, or IPO, on or prior to September 30, 2023. In connection with closing the IPO in April 2021, the Company extended the interest-only period to September 30, 2025. Following the interest-only period, principal payment was to be due inone installment on September 30, 2025. In May 2024, the Term Loan was amended to extend the final maturity byone year to September 30, 2026 and eliminate the PIK interest option after June 30, 2024. The amendment was accounted for as a troubled debt restructuring in accordance with Accounting Standards Codification - Debt (Topic 470) and no gain or loss was recognized. The Term Loan includes a fee upon repayment of the loan equal to 10% of the aggregate principal amount being prepaid or repaid, or the backend fee. As of September 30, 2024, the Term Loan had an annual effective interest rate of 15.5% per year.

The Term Loan is collateralized by substantially all of the Company’s assets. The Term Loan Agreement contains customary representations and warranties, covenants, events of default and termination provisions. The financial covenants require that the Company achieve minimum annual revenue thresholds commencing in 2021 and maintain a minimum balance of cash and cash equivalents (see Note 1). In February 2023, the Term Loan was amended to reduce the minimum annual net revenue covenant to $45.0 millionfor the year ended December 31, 2023.

The Company paid $1.0 million in fees to the lender and third parties which is reflected as a discount on the loan and is being accreted over the life of the loan using the effective interest method. Also, the Company issued warrants to the lender for a total of 346,823 shares of Series B’ redeemable convertible preferred stock. The warrants had a fair value of $0.6 million as of the issuance date, which was accounted for as debt issuance costs.

During the three months ended September 30, 2024 and 2023, the Company recorded interest expense related to debt discount and debt issuance costs of the Term Loan of less than $0.1 million and $0.1 million, respectively. During the nine months ended September 30, 2024 and 2023, the Company recorded interest expense related to debt discount and debt issuance costs of the Term Loan of $0.2 million and $0.2 million, respectively.

Interest expense on the Term Loan was $2.2 million and $2.2 million during the three months ended September 30, 2024 and 2023, respectively. Interest expense on the Term Loan was $6.6 million and $6.3 million during the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, future minimum payments for the Term Loan are as follows (in thousands):

7. Common Stock

The Company’s Amended and Restated Certificate of Incorporation authorizes the Company to issue 200,000,000 shares of $0.001 par value common stock.

The holders of common stock are entitled to receive dividends whenever funds and assets are legally available and when declared by the Board of Directors. As of September 30, 2024 and December 31, 2023, no dividends had been declared.

As of September 30, 2024 and December 31, 2023, the Company had reserved common stock for future issuance pursuant to its equity plans as follows:

8. Stock-Based Incentive Compensation Plans

A summary of shares available for grant under the Company’s 2021 Equity Incentive Plan, or the 2021 Plan, is as follows:

A summary of stock option activity for the nine months ended September 30, 2024 is set forth below:

Early Exercise of Stock Options

Certain of the Company’s outstanding options are early exercisable pursuant to their terms. The shares of common stock issued from the early exercise of unvested stock options are restricted and continue to vest over the original implied service period. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees and non-employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. The cash received in exchange for exercised and unvested shares related to stock options granted is recorded as a liability for the early exercise of stock options in accrued liabilities on the accompanying balance sheet and will be transferred into common stock and additional paid-in capital as the shares vest. As of September 30, 2024 and December 31, 2023, there were 0 and 30,211 shares of common stock, respectively, issued pursuant to early exercised options and subject to repurchase.

Employee Stock Purchase Plan

In April 2021, the Company adopted the 2021 Employee Stock Purchase Plan, or ESPP. The Company allows eligible employees to purchase shares of the Company's common stock through payroll deductions at a price equal to 85% of the lesser of the fair market value of the stock as of the first date or the ending date of each offering period, which is typicallysix months. There were 580,000 shares of common stock initially reserved for issuance under the ESPP. In January 2024, the number of shares of common stock available for issuance under the ESPP was increased by 278,234 shares as a result of the automatic increase provision in the ESPP.

As of September 30, 2024,583,289 shares under the ESPP remain available for purchase. The Company issued 94,743 and 164,710 shares under the ESPP during the nine months ended September 30, 2024 and 2023, respectively. The offering period and purchase period is determined by the board of directors. A new offering period ofsix months began June 7, 2024 and will end December 6, 2024.

Restricted Stock Units

Activity with respect to restricted stock units was as follows:

Stock-Based Compensation

The Company recognized stock-based compensation as follows (in thousands):

The above stock-based compensation expense related to the following equity-based awards (in thousands):

As of September 30, 2024, the total unrecognized stock-based compensation expense related to unvested stock options and restricted stock units was $16.9 million, which will be amortized on a straight-line basis over a weighted average remaining period of 2.2 years.

As of September 30, 2024, the Company had unrecognized stock-based compensation expense relating to the ESPP awards of $0.1 million, which is expected to be recognized over a weighted-average period of 0.2 years.

9. Income Taxes

The Company didnot record a federal or state income tax provision or benefit for the three and nine months ended September 30, 2024 and 2023 as it has incurred net losses since inception. In addition, the net deferred tax assets generated from net operating losses are fully offset by a valuation allowance as the Company believes it is not more likely than not that the benefit will be realized.

The Company accounts for the uncertainty in income taxes by utilizing a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken or are expected to be taken on an income tax return. There has been no change in the estimated uncertain tax benefits recorded as of December 31, 2023.

10. Net Loss per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except for share and per share amounts):

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding because such securities have an antidilutive impact due to the Company’s net loss, in common stock equivalent shares: