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Note 6 - Debt

12 Months Ended

Dec. 31, 2024

Note 6 – Debt

SWK Loan

In November 2019, the Company entered into a credit agreement (the “SWK Credit Agreement”) with SWK which provided for up to $10,000 in debt financing. The Company received proceeds of $5,000 at closing and was able to borrow an additional $5,000 upon the FDA approval of a second product developed by the Company. In March 2020, the Company and SWK amended the SWK Credit Agreement, which provided the Company with the option to immediately draw an additional $2,000 and the ability to borrow up to another $3,000 based upon the FDA approval of EM-100 and ALKINDI SPRINKLE® which subsequently occurred in September 2020. Accordingly, the Company borrowed an additional $2,000 in August 2020. Under the terms of the SWK Credit Agreement, the Company was required to maintain a minimum cash balance of $3,000 and pay 5.5% of the loan principal balance commencing in February 2022 and then every three months thereafter until November 2024 at which time the remaining principal balance is due. In February 2021, the Company notified SWK that it will not require additional borrowing capacity under the SWK Credit Agreement and terminated the additional borrowing capacity with SWK.

In connection with the initial $5,000 borrowed in November 2019, the Company issued warrants to SWK to purchase 51,239 shares of the Company’s common stock with an exercise price of $5.86 per share. The relative fair value of these 51,239 warrants was $226 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions: fair value of the Company’s common stock at issuance of $5.75 per share; seven-year contractual term; 95% volatility; 0% dividend rate; and a risk-free interest rate of 1.8%. In connection with the additional $2,000 borrowed in August 2020, the Company issued warrants for 18,141 shares of its common stock at an exercise price of $6.62 per share. The relative fair value of the 18,141 warrants was $94 and was estimated using the Black-Scholes-Merton option pricing model with the following assumptions: fair value of the Company’s common stock at issuance of $6.85 per share; seven-year contractual term; 95% volatility; 0% dividend rate; and a risk-free interest rate of 0.4%. These warrants (the “SWK Warrants”) are exercisable immediately and have a term of seven years from the date of issuance. The SWK Warrants are subject to a cashless exercise feature, with the exercise price and number of shares issuable upon exercise subject to adjustment in connection with stock splits, dividends, reclassifications and other conditions.

In April 2022, the Company and SWK entered into an amendment to the SWK Credit Agreement which allowed for a deferral of loan principal payments until May 2023 and reduced the interest rate to LIBOR 3-month plus 8.0%, subject to a stated LIBOR floor rate of 2.0%. Because LIBOR was phased out as of June 2023, the Company amended the Credit Agreement in August 2023 to refer to Term SOFR, with an interest rate of Term SOFR plus 8.26%, subject to a stated Term SOFR floor rate of 5.0%.

In September 2024, the Company and SWK entered into an amendment to the SWK Credit Agreement, which was contingent upon the closing of the INCRELEX® Purchase Agreement. Under the terms of the amendment, the Company expanded its existing credit facility by $25.7 million to $30.0 million, extended the facility’s maturity to three years from closing with a loan maturity date of December 17, 2027, and reduced the facility’s annual interest rate to Secured Overnight Financing Rate (“SOFR”) plus 6.75%. In connection with the amendment to the SWK Credit Agreement, the Company issued a warrant to the SWK for the purchase of up to 289,736 shares of common stock at a price of $5.32 per share. The relative fair value of these 289,7369 warrants was $1,170 and was estimated using the BSM with the following assumptions: fair value of the Company’s common stock at issuance of $6.00 per share with an exercise price of $5.32; seven-year contractual term; 63.8% volatility; 0% dividend rate; and a risk-free interest rate of 3.67%.

Interest payments are payable quarterly, with quarterly principal payments of $3,000 beginning in May 2026 with a final principal payment of $9,000 due at maturity in December 2027. The amended SWK Credit Agreement includes a 5.0% exit fee payable at maturity and this exit fee payable will be accreted to interest expense in the Company's Statement of Operations using the effective interest expense method. The amended SWK Credit Agreement contains a mandatory prepayment clause that can compel the Company to partially prepay the loan upon certain triggering events, which the Company has deemed to be remote. Borrowing under the amended SWK Credit Agreement is secured by the Company's assets, contains customary default provisions, which include limits on additional indebtedness. As of December 31, 2024 and 2023, the Company was in compliance with all financial covenants.

The Company recorded interest expense of $2,005, $1,060 and $955 in 2024, 2023 and 2022, respectively, which included $1,109, $117 and $127, respectively, of debt discount amortization. For the year ended December 31, 2024, debt discount included $1,170 which was associated with the issuance of warrants to SWK. The Company had accrued interest of $182 and $332 as of December 31, 2024 and 2023, respectively, which is included in accrued liabilities in the accompanying balance sheets.

The table below reflects the future annual payments for the SWK loan principal as of December 31, 2024.

Year	*Amount*
2025	$	—
2026		9,000
2027		21,000
Total payments		30,000
Less: unamortized discount		(559	)
Plus: accrued exit fees at December 31, 2024		370
Debt, net of unamortized discount and accrued exit fees	$	29,811